Question 1

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.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is true for debt service funds?

Accepted Answer

A)  A legally required budget should be recorded in the accounts. 
B)  A combining balance sheet may not be prepared for a comprehensive annual financial report (CAFR)when more than one debt service fund exists. 
C)  Encumbrance accounting is often used. 
D)  GAAP requires that a separate debt service fund be established for each bond issue.

Question 4

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.

Question 5

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:
  Note: The city has no general obligation liability for the revenue bonds or the industrial development bonds.
3)Total assessed valuation of property within Mountain City is $200,000,000.

Accepted Answer

The answer of Compute the legal debt margin for Mountain...

Question 6

The issuance of general long-term bonds requires recognition by the fund receiving the proceeds and by the business-type activities.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following debt service fund accounts would not be closed at the end of each fiscal year?

Accepted Answer

A)  Estimated Revenues. 
B)  Fund Balance. 
C)  Revenues. 
D)  Expenditures-Bond Interest.

Question 8

Pollution remediation obligations should be recognized if which of the following obligating events has occurred?

Accepted Answer

A)  A violation of a pollution prevention permit has occurred. 
B)  The government is named or will be named as the responsible or potentially responsible party to a remediation. 
C)  The government is compelled to take remediation action due to imminent endangerment to the public health. 
D)  All of the above items are obligating events that would require recognition of a pollution remediation obligation.

Question 9

Bonds and other debt of enterprise funds may legally,at least contingently,have the status of tax-supported debt.In the event that enterprise fund resources are insufficient for debt service on such debt,why might the government as a whole find it necessary or desirable to assume responsibility for debt service? How would assumption of responsibility for such debt by the government as a whole be accounted for in the governmental activities accounts in the enterprise fund?

Accepted Answer

The answer of Bonds and other debt of enterprise funds...

Question 10

Debt backed by both special assessments and the full faith and credit of a government should be reported in the government-wide statement of net position in the Business-type Activities column.

Accepted Answer

A) True 
 B)False

Question 11

General long-term liabilities are those that arise from the activities of a government.

Accepted Answer

A) True 
 B)False

Question 12

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.

Question 13

At year-end,budgetary and operating statement accounts of a debt service fund are closed in the same manner as are those of a General Fund or special revenue funds.

Accepted Answer

A) True 
 B)False

Question 14

If general capital assets are being acquired by a government under a capital lease agreement,describe the entries that should be recorded in a governmental fund (logically,a debt service fund)for each lease payment.

Accepted Answer

The answer of If general capital assets are being acquired...

Question 15

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).

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  Encumbrances. 
B)  Appropriations. 
C)  Estimated Uncollectible Accounts. 
D)  Encumbrances Outstanding.

Question 17

"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?

Accepted Answer

The answer of "The entire debt arising from the acquisition...

Question 18

Typically,proceeds from general obligation bonds will be recorded in the

Accepted Answer

A)  Debt service fund. 
B)  General obligation bond fund. 
C)  Permanent fund. 
D)  Capital projects fund.

Question 19

All long-term debt,including bonds,notes or warrants,and various other long-term obligations,intended to be repaid from tax levies or special assessments are accounted for in debt service funds.

Accepted Answer

A) True 
 B)False

Question 20

In many jurisdictions,the statutory debt limit is relatively low,but overlapping debt is not prohibited.From the standpoint of the property owner and taxpayer,how does that situation compare with a relatively high total statutory debt limit?

Accepted Answer

The answer of In many jurisdictions,the statutory debt limit is...

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

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

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

Which of the following is true for debt service funds?

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

The issuance of general long-term bonds requires recognition by the fund receiving the proceeds and by the business-type activities.

Which of the following debt service fund accounts would not be closed at the end of each fiscal year?

Pollution remediation obligations should be recognized if which of the following obligating events has occurred?

Debt backed by both special assessments and the full faith and credit of a government should be reported in the government-wide statement of net position in the Business-type Activities column.

General long-term liabilities are those that arise from the activities of a government.

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

At year-end,budgetary and operating statement accounts of a debt service fund are closed in the same manner as are those of a General Fund or special revenue funds.

If general capital assets are being acquired by a government under a capital lease agreement,describe the entries that should be recorded in a governmental fund (logically,a debt service fund)for each lease payment.

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).

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

Typically,proceeds from general obligation bonds will be recorded in the

All long-term debt,including bonds,notes or warrants,and various other long-term obligations,intended to be repaid from tax levies or special assessments are accounted for in debt service funds.

In many jurisdictions,the statutory debt limit is relatively low,but overlapping debt is not prohibited.From the standpoint of the property owner and taxpayer,how does that situation compare with a relatively high total statutory debt limit?