Question 1

Governments should account for special assessment debt service transactions in a debt service fund,even if they are not obligated to pay the debt.

Accepted Answer

A) True 
 B)False  False

Question 2

Use of a debt service fund is required.

Accepted Answer

A)  When financial resources are being accumulated for the purpose of paying for capital asset acquisition.
B)  When financial resources are being accumulated for the purpose of paying principal and interest when it matures.
C)  For all bonded debt service payments.
D)  For all debt service payments. B

Question 3

The entry in the capital projects fund to record the additional funding for the construction should be

Accepted Answer

A)  Debit Due from general fund $0.5 million;Credit Other financing sources-nonreciprocal transfer-in $0.5 million.
B)  Debit Due from general fund $0.5 million;Credit Revenue $0.5 million.
C)  Debit Cash $0.5 million;Credit Due to general fund $0.5 million.
D)  Debit Other financing sources $0.5 million;Credit Due to general fund $0.5 million. A

Question 4

In the debt service fund

Accepted Answer

A)  Debit Cash $50,000;Credit Revenues $50,000;no other entries required.
B)  Debit Cash $50,000;Credit Other financing sources-nonreciprocal transfer-in $50,000;no other entries required.
C)  Debit Other financing sources-nonreciprocal transfer-out $50,000;credit Cash $50,000.
D)  No entry in the debt service fund.

Question 5

Harbor City issued 6 percent tax-exempt bonds and used the proceeds to acquire federal government securities yielding 7 percent.After paying the interest on the tax-exempt bonds,the city cleared 1 percent.This is an example of

Accepted Answer

A)  An illegal act.
B)  Poor fiscal management.
C)  Arbitrage.
D)  Debt refunding.

Question 6

In contrast to the accounting for debt service fund expenditures,the interest revenue on bonds held as investments should be accrued in the period the revenue is earned.

Accepted Answer

A) True 
 B)False

Question 7

Sister City was notified by the state that it has been awarded a $5 million grant to aid in the construction of a senior citizens center.At the time of the notification what is the appropriate entry in the capital projects fund? Assume that the city has met all eligibility requirements and maintains its books and records in a manner to facilitate the preparation of fund financial statements.

Accepted Answer

A)  No entry at the time of the notification.
B)  Debit Grants receivable $5 million;Credit Revenue $5 million.
C)  Debit Grants receivable $5 million;Credit Deferred inflow of resources $5 million.
D)  Debit Grants receivable $5 million;credit Other financing sources-nonreciprocal transfer-in $5 million.

Question 8

Cascade County issued $1 million of 6 percent term bonds at 101.These bonds will be used to finance the construction of highways.The entry in the debt service fund to record the receipt of cash should be

Accepted Answer

A)  Debit Cash $10,000;Credit Revenue,$10,000.
B)  Debit Cash $10,000;Credit Other financing sources-nonreciprocal transfer-in,$10,000.
C)  Debit Cash $1,010,000;Credit Bonds payable $1,000,000 and premium on bonds $10,000.
D)  Debit Cash $1,010,000;Credit Other financing sources-nonreciprocal transfer-in $1,010,000.

Question 9

In the statement of revenues,expenditures,and changes in fund balance of a debt service fund,the fund balance amount should be reported as restricted for debt service.

Accepted Answer

A) True 
 B)False

Question 10

Sound fiscal policy dictates that the maturity of debt should be no longer than the life of the assets it is used to finance.

Accepted Answer

A) True 
 B)False

Question 11

The proceeds of the bond issue should be recorded in which fund of the City of Arlington?

Accepted Answer

A)  Agency fund.
B)  Special assessment fund.
C)  Capital projects fund.
D)  Debt service fund.

Question 12

When the city collects the special assessment,it should be accounted for in which fund of the City of Arlington?

Accepted Answer

A)  Agency fund.
B)  Special assessment fund.
C)  Capital projects fund.
D)  Debt service fund.

Question 13

In the capital projects fund

Accepted Answer

A)  Debit Cash $50,000;Credit Revenues $50,000;no other entries required.
B)  Debit Cash $50,000;Credit Other financing sources-nonreciprocal transfer-in $50,000;no other entries required.
C)  Debit Cash $50,000;Credit Revenues;ALSO Debit Other financing uses-nonreciprocal transfer-out $50,000;Credit Cash $50,000.
D)  Debit Cash $50,000;Credit Other financing sources-Bond premium $50,000;ALSO

Question 14

Sugar City issued $2 million of bonds to fund the construction of a new city office building.The bonds have a stated rate of interest of 5 percent and were sold at 101.Which of the following entries should be made in the capital projects fund to record this event?

Accepted Answer

A)  Debit Cash $2.02 million;Credit Bonds payable $2 million and Premium on bonds payable $0.02 million.
B)  Debit Cash $2.02 million;Credit Bonds payable $2 million and Other financing sources $0.02 million.
C)  Debit Cash $2.02 million;Credit Other financing sources $2.02 million.
D)  Debit Cash $2.02 million;Credit Other financing sources $2 million and Revenue $0.02 million.

Question 15

Arbitrage is the process of negotiating resolution of conflicts between the federal government and municipalities over the applicability of federal regulations.

Accepted Answer

A) True 
 B)False

Question 16

When the city collects the special assessment,it should be accounted for in which fund of the City of Arlington?

Accepted Answer

A)  Agency fund.
B)  Special assessment fund.
C)  Capital projects fund.
D)  Debt service fund.

Question 17

In which fund type would a government's debt service fund be found?

Accepted Answer

A)  Governmental fund type.
B)  Proprietary fund type.
C)  Fiduciary fund type.
D)  Governmental activities.

Question 18

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

Accepted Answer

A)  Debit Cash $7.5 million;Credit Bonds payable $7.5.
B)  Debit Cash $7.5 million;Credit Other financing sources $7.5.
C)  Debit Cash $7.5 million and Expenditures $0.5 million;Credit Bonds payable $8 million.
D)  Debit Cash $7.5 million and Expenditures $0.5 million;Credit Other financing sources $8 million.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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?

Accepted Answer

A)  Capital projects fund.
B)  Special assessment fund.
C)  Debt service fund.
D)  The bond liability should not appear in the fund financial statements of Adams County.

Exam 6: Accounting for Capital Projects and Debt Service

Governments should account for special assessment debt service transactions in a debt service fund,even if they are not obligated to pay the debt.

Use of a debt service fund is required.

The entry in the capital projects fund to record the additional funding for the construction should be

In the debt service fund

Harbor City issued 6 percent tax-exempt bonds and used the proceeds to acquire federal government securities yielding 7 percent.After paying the interest on the tax-exempt bonds,the city cleared 1 percent.This is an example of

In contrast to the accounting for debt service fund expenditures,the interest revenue on bonds held as investments should be accrued in the period the revenue is earned.

Cascade County issued $1 million of 6 percent term bonds at 101.These bonds will be used to finance the construction of highways.The entry in the debt service fund to record the receipt of cash should be

In the statement of revenues,expenditures,and changes in fund balance of a debt service fund,the fund balance amount should be reported as restricted for debt service.

Sound fiscal policy dictates that the maturity of debt should be no longer than the life of the assets it is used to finance.

The proceeds of the bond issue should be recorded in which fund of the City of Arlington?

When the city collects the special assessment,it should be accounted for in which fund of the City of Arlington?

In the capital projects fund

Sugar City issued $2 million of bonds to fund the construction of a new city office building.The bonds have a stated rate of interest of 5 percent and were sold at 101.Which of the following entries should be made in the capital projects fund to record this event?

Arbitrage is the process of negotiating resolution of conflicts between the federal government and municipalities over the applicability of federal regulations.

When the city collects the special assessment,it should be accounted for in which fund of the City of Arlington?

In which fund type would a government's debt service fund be found?

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

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