Exam 6: The Governmental Fund Accounting Cycle

(Journal entries to record a capital lease transaction) A town enters into a lease-purchase agreement with Trucks,Inc.to acquire four garbage trucks.The agreement provides that the town pay $100,000 at the end of each year for four years.Upon full payment,the trucks become town property.The agreement is based on an interest rate of 7%.(The present value of an annuity of $1 for 4 periods at 7% is 3.3872. )The lease agreement is accounted for in the General Fund. Required: Prepare journal entries for the General Fund to record (a)the lease agreement and the lease payment (b)at the end of the first year and (c)at the end of the second year.

The largest dollar amount of resources flowing into a capital projects fund normally will come from

A state issues long-term debt to finance a major construction project.The first installment of debt service requires payment of principal of $75,000 and interest of $100,000.Which of the following statements is true on the day that payment for principal and interest is legally due?

A state constructs an office building.The construction is financed with: (1)a transfer of $1 million from the General Fund; (2)a grant of $2 million from the federal government; (3)bond proceeds of $7 million;and (4)earnings of $100,000 from temporary investment of bond proceeds.All transactions occur in one year. -Based on the preceding set of facts,how much should be reported as Other financing sources in the Capital Projects Fund?

A city acquired two vehicles in a particular year: (1)a sedan for $20,000 that was paid for through the General Fund and (2)a sanitation truck for $125,000 that was paid for through the Capital Projects Fund.How should the assets be reported in the city's fund-level financial statements?

What is the purpose of a Debt Service Fund?

At what point should interest be recognized as an expenditure in a Debt Service Fund?

How should a fixed asset acquired through a capital lease agreement be recorded in a General Fund?

The largest dollar amount of resources flowing into a general obligation debt service fund normally will come from

A city keeps its books on a calendar year basis.On April 1,2013,the city sold $500,000 of 6% general obligation bonds,payable in semi-annual installments.The first installment,due October 31,2013 covered interest of $15,000 and principal of $25,000.For the year ended December 31,2013,how much should the Debt Service Fund report as expenditures?

A city sells $15 million of general obligation bonds on October 1,2013.The bonds mature at the rate of $1 million a year each September 30,starting September 30,2014.The amount due September 30,2014 is paid.How much should the city report as outstanding debt in the Debt Service Fund in its year-end fund level financial statements on December 31,2014?

A state constructs an office building.The construction is financed with: (1)a transfer of $1 million from the General Fund; (2)a grant of $2 million from the federal government; (3)bond proceeds of $7 million;and (4)earnings of $100,000 from temporary investment of bond proceeds.All transactions occur in one year. -Based on the preceding set of facts,how much should be reported as Revenues in the Capital Projects Fund?

A government may have arbitrage when:

A city sells $5 million of 6% ten-year general obligation bonds on April 1,2013.The first installment of debt principal ($250,000)is due to be paid on September 30,2013.What entry should the city make on September 30,2013 in the Debt Service Fund regarding the bond principal?

Which of the following fund types is most likely to have the shortest "life"?

What type of fund is most likely used to account for the spending of income earned by a Permanent Fund?

A state constructs an office building.The construction is financed with: (1)a transfer of $1 million from the General Fund; (2)a grant of $2 million from the federal government; (3)bond proceeds of $7 million;and (4)earnings of $100,000 from temporary investment of bond proceeds.All transactions occur in one year. -Based on the preceding set of facts,what should be reported in the financial statements of the General Fund for the year?