Question 1

Debt service funds for term bonds would generally include sinking fund investments.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following assets would not be found in the balance sheet of a debt service fund?

Accepted Answer

A) Cash with fiscal agent. 
B) Investments. 
C) Equipment. 
D) Interest Receivable. 
A) Cash with fiscal agent. 
B) Investments. 
C) Equipment. 
D) Interest Receivable.

Question 3

If a city has an unpaid capital lease obligation at the beginning of its fiscal year,the journal entry in the debt service fund to record the lease payment at the end of that fiscal year will include

Accepted Answer

A) A debit to Capital Lease Obligations Payable. 
B) A credit to Expenditures-Principal of Capital Lease Obligation. 
C) A debit to Expenditures-Principal of Capital Lease Obligation. 
D) A debit to Interest Expense on Capital Leases. 
A) A debit to Capital Lease Obligations Payable. 
B) A credit to Expenditures-Principal of Capital Lease Obligation. 
C) A debit to Expenditures-Principal of Capital Lease Obligation. 
D) A debit to Interest Expense on Capital Leases.

Question 4

Which of the following would result in the amortization of a bond discount or premium?

Accepted Answer

A) Bonds are issued: No; Bonds are held as investments: No 
B) Bonds are issued: No; Bonds are held as investments: Yes 
C) Bonds are issued: Yes; Bonds are held as investments: No 
D) Bonds are issued: Yes; Bonds are held as investments: Yes 
A) Bonds are issued: No; Bonds are held as investments: No 
B) Bonds are issued: No; Bonds are held as investments: Yes 
C) Bonds are issued: Yes; Bonds are held as investments: No 
D) Bonds are issued: Yes; Bonds are held as investments: Yes

Question 5

Interest expenditures on bonds payable should be recorded in a debt service fund

Accepted Answer

A) At the end of the fiscal period if the interest due date does not coincide with the end of the fiscal period. 
B) When bonds are issued. 
C) When the interest is paid. 
D) When the interest is legally payable. 
A) At the end of the fiscal period if the interest due date does not coincide with the end of the fiscal period. 
B) When bonds are issued. 
C) When the interest is paid. 
D) When the interest is legally payable.

Question 6

A government is planning a sinking fund to retire $10,000,000 of term bonds that mature in 20 years.Semiannual additions will be made to the sinking fund for the next 20 years at the end of each period.It is estimated that a net return of 6 percent per annum,compounded semiannually,can be realized on the average.
a)Compute the necessary periodic additions for debt repayment (the amount of an annuity of $1 compounded at 3 percent (the semiannual rate)for 40 periods is 75.4012597).
b)What information would you need,in addition to the results of your computation in part a,in order to be able to prepare the revenue budget for debt service for the term bond issue?

Accepted Answer

a)The semiannual addition is $132,623.78

Question 7

When the debt service fund makes a payment of principal and interest on an outstanding long-term debt,the governmental activities accounts

Accepted Answer

A) Reflect the principal payment only. 
B) Reflect the interest payment only. 
C) Has no record of the transaction. 
D) Reflects both principal and interest payments. 
A) Reflect the principal payment only. 
B) Reflect the interest payment only. 
C) Has no record of the transaction. 
D) Reflects both principal and interest payments.

Question 8

"All taxes raised for payment of interest and principal on general long-term debt are recognized as other financing sources of the debt service fund." Do you agree? Why or why not?

Accepted Answer

It depends on which fund raised the taxe

Question 9

The sale of revenue bonds by a water utility fund would be recorded

Accepted Answer

A) In the governmental activities accounts as a liability. 
B) In an enterprise fund as "Proceeds of Bonds." 
C) In an enterprise fund as a liability. 
D) In an enterprise fund as a revenue. 
A) In the governmental activities accounts as a liability. 
B) In an enterprise fund as "Proceeds of Bonds." 
C) In an enterprise fund as a liability. 
D) In an enterprise fund as a revenue.

Question 10

Which of the following basic financial statements contains a column for the total of all debt service funds?

Accepted Answer

A) Statement of cash flows. 
B) Statement of revenues,expenditures,and changes in governmental fund balances. 
C) Statement of revenues,expenses,and changes in proprietary net assets. 
D) No basic financial statement contains a column for the total of all debt service funds. 
A) Statement of cash flows. 
B) Statement of revenues,expenditures,and changes in governmental fund balances. 
C) Statement of revenues,expenses,and changes in proprietary net assets. 
D) No basic financial statement contains a column for the total of all debt service funds.

Question 11

When bonds are sold at a premium for a capital project,the premium amount generally

Accepted Answer

A) Increases the cash available to the capital projects fund. 
B) Is transferred to the debt service fund. 
C) Is transferred to the General Fund. 
D) Is ignored by both the capital projects fund and any other fund. 
A) Increases the cash available to the capital projects fund. 
B) Is transferred to the debt service fund. 
C) Is transferred to the General Fund. 
D) Is ignored by both the capital projects fund and any other fund.

Question 12

On July 15,2011,the city of Higgins Lake issued tax-supported term bonds having a face value of $10,000,000 and maturing in 20 years.The bonds are dated July 15,2011,and pay interest of 6 percent semiannually on January 15 and July 15 of each year.The bonds were sold at a price of 102 and were intended to finance construction of a new city jail.The premium on sale of the bonds was recorded directly in the debt service fund and was immediately invested for eventual retirement of the debt.
For the fiscal year ending June 30,2011,the city council approved a budget for the newly established term bond debt service fund in the amount of $444,500,which includes $432,500 that will be transferred from the General Fund as follows: (1)$300,000 on January 14,2012 for the January 15,2012 interest payment due and (2)$132,500 on June 30,2012 for investment in the debt service fund for retirement of principal,and $12,000 of estimated revenue for interest on investment of premium.
Required: Make all journal entries,including the budget entry and closing entry,required in the term bond debt service fund for the fiscal year ending June 30,2012.Investment revenue during the year was $11,800,all of which added to the investment balance.

Accepted Answer

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Question 13

Which of the following is not true?

Accepted Answer

A) 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. 
B) Debt service funds,unlike the General Fund and special revenue funds,do not use budgetary accounting procedures. 
C) Expenditures for interest on tax supported long-term debt are not accrued,even though debt service funds are accounted for on the modified accrual basis. 
D) At year-end,budgetary and operating statement accounts of a debt service fund are closed in the same manner as is true for a General Fund or special revenue funds. 
A) 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. 
B) Debt service funds,unlike the General Fund and special revenue funds,do not use budgetary accounting procedures. 
C) Expenditures for interest on tax supported long-term debt are not accrued,even though debt service funds are accounted for on the modified accrual basis. 
D) At year-end,budgetary and operating statement accounts of a debt service fund are closed in the same manner as is true for a General Fund or special revenue funds.

Question 14

The following key terms from Chapter 6 relate to accounting for general long-term liabilities and debt service:
A.Legal defeasance
B.Regular serial bonds
C.In-substance defeasance
D.Irregular serial bonds
E.Debt limit
F.Annuity serial bonds
G.Debt margin
For each of the following definitions,indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition.

Accepted Answer

The answer of The following key terms from Chapter 6...

Question 15

Which of the following is not properly recorded in the governmental activities accounts?

Accepted Answer

A) Tax-supported general obligation bonds. 
B) Obligations under capital leases used to finance general capital assets. 
C) The long-term portion of judgments and claims. 
D) Revenue bonds issued by an enterprise fund. 
A) Tax-supported general obligation bonds. 
B) Obligations under capital leases used to finance general capital assets. 
C) The long-term portion of judgments and claims. 
D) Revenue bonds issued by an enterprise fund.

Question 16

Debt service funds use the same budgetary procedures as the General Fund and special revenue funds.

Accepted Answer

A) True 
 B)False

Question 17

Valencia Village issued the following during the year ended June 30,2011: (1)$600,000 in bonds for the installation of street lights,to be assessed against properties benefited,but secondarily backed by the village; (2)$800,000 in bonds for construction of a Parks and Recreation Department public golf course to be paid from pledged fees collected from golf course users.How much should be accounted for through debt service funds for payments of principal over the life of the bonds?

Accepted Answer

A) $0. 
B) $600,000. 
C) $800,000. 
D) $1,400,000. 
A) $0. 
B) $600,000. 
C) $800,000. 
D) $1,400,000.

Question 18

Debt service funds are used to account for which of the following?

Accepted Answer

A) Payment of only interest on general long-term debt. 
B) Payment of only principal on general long-term debt. 
C) Payment of principal and interest on general long-term debt. 
D) Payment of principal and interest on all debt of the government. 
A) Payment of only interest on general long-term debt. 
B) Payment of only principal on general long-term debt. 
C) Payment of principal and interest on general long-term debt. 
D) Payment of principal and interest on all debt of the government.

Question 19

Ordinarily,the statement of changes in fund balance for a debt service fund is combined with the statement of revenues and expenditures for the debt service fund.

Accepted Answer

A) True 
 B)False

Question 20

Since the debt of a government is subject to a legal debt limit,there cannot be any legal overlapping debt.

Accepted Answer

A) True 
 B)False

Debt service funds for term bonds would generally include sinking fund investments.

Which of the following assets would not be found in the balance sheet of a debt service fund?

If a city has an unpaid capital lease obligation at the beginning of its fiscal year,the journal entry in the debt service fund to record the lease payment at the end of that fiscal year will include

Which of the following would result in the amortization of a bond discount or premium?

Interest expenditures on bonds payable should be recorded in a debt service fund

When the debt service fund makes a payment of principal and interest on an outstanding long-term debt,the governmental activities accounts

"All taxes raised for payment of interest and principal on general long-term debt are recognized as other financing sources of the debt service fund." Do you agree? Why or why not?

The sale of revenue bonds by a water utility fund would be recorded

Which of the following basic financial statements contains a column for the total of all debt service funds?

When bonds are sold at a premium for a capital project,the premium amount generally

Which of the following is not true?

Which of the following is not properly recorded in the governmental activities accounts?

Debt service funds use the same budgetary procedures as the General Fund and special revenue funds.

Debt service funds are used to account for which of the following?

Ordinarily,the statement of changes in fund balance for a debt service fund is combined with the statement of revenues and expenditures for the debt service fund.

Since the debt of a government is subject to a legal debt limit,there cannot be any legal overlapping debt.

Introduction to Accounting and Financial Reporting for Governmental and Not-For-Profit Entities

Principles of Accounting and Financial Reporting for State and Local Governments

Governmental Operating Statement Accounts; Budgetary Accounting

Accounting for Governmental Operating Activitiesillustrative Transactions and Financial Statements

Accounting for General Capital Assets and Capital Projects

Accounting for the Business-Type Activities of State and Local Governments

Accounting for Fiduciary Activities Agency and Trust Funds

Financial Reporting of State and Local Governments

Analysis of Governmental Financial Performance

Auditing of Governmental and Not-For-Profit Organizations

Budgeting and Performance Measurement

Accounting for Not-For-Profit Organizations

Not-For-Profit Organizations Regulatory, taxation, and Performance Issues

Accounting for Colleges and Universities

Accounting for Health Care Organizations

Accounting and Reporting for the Federal Government

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

Debt service funds for term bonds would generally include sinking fund investments.

Which of the following assets would not be found in the balance sheet of a debt service fund?

If a city has an unpaid capital lease obligation at the beginning of its fiscal year,the journal entry in the debt service fund to record the lease payment at the end of that fiscal year will include

Which of the following would result in the amortization of a bond discount or premium?

Interest expenditures on bonds payable should be recorded in a debt service fund

When the debt service fund makes a payment of principal and interest on an outstanding long-term debt,the governmental activities accounts

"All taxes raised for payment of interest and principal on general long-term debt are recognized as other financing sources of the debt service fund." Do you agree? Why or why not?

The sale of revenue bonds by a water utility fund would be recorded

Which of the following basic financial statements contains a column for the total of all debt service funds?

When bonds are sold at a premium for a capital project,the premium amount generally

Which of the following is not true?

Which of the following is not properly recorded in the governmental activities accounts?

Debt service funds use the same budgetary procedures as the General Fund and special revenue funds.

Debt service funds are used to account for which of the following?

Ordinarily,the statement of changes in fund balance for a debt service fund is combined with the statement of revenues and expenditures for the debt service fund.

Since the debt of a government is subject to a legal debt limit,there cannot be any legal overlapping debt.

Introduction to Accounting and Financial Reporting for Governmental and Not-For-Profit Entities

Principles of Accounting and Financial Reporting for State and Local Governments

Governmental Operating Statement Accounts; Budgetary Accounting

Accounting for Governmental Operating Activitiesillustrative Transactions and Financial Statements

Accounting for General Capital Assets and Capital Projects

Accounting for the Business-Type Activities of State and Local Governments

Accounting for Fiduciary Activities Agency and Trust Funds

Financial Reporting of State and Local Governments

Analysis of Governmental Financial Performance

Auditing of Governmental and Not-For-Profit Organizations

Budgeting and Performance Measurement

Accounting for Not-For-Profit Organizations

Not-For-Profit Organizations Regulatory, taxation, and Performance Issues

Accounting for Colleges and Universities

Accounting for Health Care Organizations

Accounting and Reporting for the Federal Government

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