Exam 6: Accounting for Capital Projects and Debt Service

Six years ago Hill City issued $10 million of 6 percent term bonds, due 30 years from the date of issue.Interest on the bonds is payable semi-annually on January 1 and July 1.Hill City has a September 30 fiscal year-end.The amount of interest payable that should be included on the balance sheet for the debt service fund of Hill City at September 30 is

When bonds are issued for capital projects, premiums are generally not accounted for as the mirror image of discounts.Why not?

Sue City has outstanding $5 million in general obligation term bonds used to finance the construction of the new City Library.Sue City has a June 30 fiscal year-end.Interest at 6 percent is payable each January 1 and July 1.The principal of the bonds is due 10 years in the future.The city budgeted the July 1, 2015 interest payment in the budget for the fiscal year ended June 30, 2015.On June 30, cash was transferred from the general fund to the debt service fund to make the required payment.The maximum amount of interest payable that may be included on the balance sheet of the debt service fund of Sue City at June 30 is

Assuming that the government is not obligated in any manner, the debt service transactions of a special assessment bond issue should be reported in a(n)

The amount of interest payable (assuming an outstanding balance of $4,000,000 of bonds)that should be included on the balance sheet for the debt service fund of the City of Russell at June 30, 2015 is

The citizens of a defined geographical area of Eagle City authorized a special assessment to be levied on their properties to finance the reconstruction of the sewer system infrastructure that serves the area.The city will solicit bids, oversee reconstruction, issue the debt in the name of the city, and service the debt.The city is NOT obligated in any manner for the debt but will collect the special assessments and make principal and interest payments to the bondholders.Discuss the appropriate accounting for the construction phase and the debt service phase of this project.Justify the required accounting and financial reporting for these two phases of this project.

Previously Atomic City had issued bonds with a face value of $10 million to construct a new city hall.Because the money will not be needed for several months, the city invested the bond proceeds in U.S.Government securities.Assume that the city maintains its books and records in a manner that facilitates the preparation of fund financial statements.What is the appropriate entry when the city receives interest on the investments?

Nongovernmental not-for-profits must account for defeasances differently than governments do.

In the capital projects fund

The entry in the capital projects fund to record the receipt of the bond proceeds should be

In the debt service fund

Which bonds should be reported on the government-wide statement of net position?

The capital projects fund of a government is accounted for using which of the following bases of accounting?

Special assessments are imposed nonexchange transactions, similar to property tax levies.

The debt service fund of a government is accounted for using which of the following bases of accounting?

Avon City issued bonds for the purpose of financing a major capital improvement.Which fund is the most appropriate fund in which to record the receipt of the bond proceeds?

Previously Rose City issued bonds with a face value of $10 million to construct a new city maintenance facility.Assume that the city maintains its books and records in a manner that facilitates the preparation of fund financial statements.What is the appropriate entry when the city receives a progress billing from the contractor?

Governments are required to integrate budgetary account information in their debt service and capital projects funds only when control cannot readily be established by means other than a budget.

Adams County has outstanding $10 million in bonds issued to construct a sewer system in a specific area of the county.The taxpayers in that area voted for the construction and the bonds and agreed to assess themselves to pay the principal and interest on the bonds.The county contracted for the construction and issued the bonds but assumed no legal or moral obligation for the bonds.If the special assessment payments are not sufficient to make the required principal and interest payments, the county will not make up the difference.The liability for the $10 million of bonds should appear in which fund financial statements?

When bonds are issued at a discount, the debt service fund usually transfers an amount to the capital projects fund to make up for the deficiency.