Exam 6: Accounting for General Long-Term Liabilities and Debt Service

The liability for special assessment bonds that carry a secondary pledge of a city's general credit,if reported in conformity with GAAP,should be reported in the balance sheet(s)of

Which of the following resource inflows would be recorded as a revenue of a debt service fund?

The debt service activity of a government may be properly accounted for within the General Fund unless law mandates the use of a debt service fund.

Which of the following financing sources used to redeem (or refund)bonds would not result in a debit to an expenditure account in the debt service fund when the liability for the redeemed (or refunded)bonds is removed from the governmental activities accounts?

Which of the following is a true statement regarding in-substance defeasance of bonds?

General obligation bonds issued for the benefit of enterprise funds,with the intent of paying bond principal and interest from revenues of the enterprise fund,should be reported as a liability in the balance sheet of the

Debt margin is the difference between the debt limit and the amount of outstanding debt subject to the debt limitation.

Which of the following budgetary accounts is typically used by a debt service fund?

"The entire debt arising from the acquisition of general capital assets under a capital lease agreement should be reported as debt of the fund that accounts for the activities of the department or function using the leased asset.Only debt arising from the lease of equipment used by a number of departments should be reported in the governmental activities accounts,rather than a fund." Do you agree? Why or why not?

Compute the legal debt margin for Mountain City given the following information regarding its bonded debt. 1)The legal debt limit is 10 percent of total assessed valuation. 2)Bonds outstanding and bonds authorized are:

Premiums received on tax-supported bonds are generally transferred to what fund?

Based on the information below,what amount should be accounted for in a debt service fund?

The premium or discount on bonds purchased as investments is accounted for in the same manner as a premium or discount on bonds sold (i.e.,bond payable).

When a capital lease payment of $20,000 is legally due,an entry is made in the debt service fund to record the expenditure of $20,000,and an entry is made in the governmental activities accounts to reduce Capital Lease Obligations Payable by $20,000.

Both general capital assets acquired or constructed from the proceeds of special assessment debt,and the related long-term liability are recorded in the governmental fund.

Notes to the financial statements of a state or local government should include a schedule,or summary,of annual debt service requirements (principal and interest payments)for the year following the balance sheet date and for all subsequent years until the final maturity of debt outstanding on the balance sheet date.

On July 1,the first day of its fiscal year,the city of Morgan sold bonds with a face value of $10,000,000 at 102 percent of par.The bonds bear annual interest at 6 percent; interest is payable semiannually.The bonds will mature in equal installments over 20 years.(The bond premium must be used for eventual bond redemption and is deposited directly in the debt service fund.)Assuming the bonds are tax-supported bonds sold to finance the construction of a sports complex,the operations of which will be financed by a special revenue fund when the complex is completed: 1)Name the type of fund and/or activity in which each of the following should be recorded.(If any of the following should not be recorded at all,enter "none" on the appropriate line.) (a)The cash received for the sale of the bonds. (b)The liability of $10,000,000 for bonds payable. (c)The cost of the sports complex. (d)Capitalization of bond interest paid or accrued during the period of construction. (e)Amortization of premium on bonds sold. 2)Show in general journal form all entries that should be made to record the sale of the bonds.For each entry,indicate the fund or group in which the entry is made.

Expenditures for capital lease payments consist of two elements: payment of interest on the lease obligation,and payment on the obligation itself.

Immediately after making its annual $20,000 lease payment on June 30,2011,the last day of its fiscal year,a certain city had an unpaid capital lease obligation of $95,000.The interest rate applicable to the lease is 10 percent.When the $20,000 lease payment due on June 30,2012 is made,the journal entry for the governmental activities accounts will include

In a particular debt service fund journal entry the offsetting credit to debits for Assessments Receivable-Current could be to Assessments Receivable-Deferred.