Question 1

With respect to Debt Service Funds,which of the following is true?

Accepted Answer

A)  Payments under capital lease obligations may be reported in debt service funds 
B)  Debt service funds use accrual accounting 
C)  Each separate long-term obligation must be accounted for in a separate debt service fund 
D)  All of the above are true

Question 2

A government entered into a capital lease agreement to acquire equipment for the general government on January 1, 2014. Five payments of $8,000 each are to be made, beginning on December 31, 2014. Discounting is at 6%, computed annually. The present value of the five payments is $33,699.
-The following are sources of funds for the debt service fund except:

Accepted Answer

A)  Tax levies specifically designed for debt service. 
B)  General taxes levied by the General Fund and transferred to the debt service fund. 
C)  Special assessments levied against property. 
D)  All of the above are sources of funds for the debt service fund.

Question 3

Investments of permanent funds should be reported at fair value,if determinable,and unrealized gains reported along with realized gains as "Investment Income-Net Increase in Fair Value of Investments."

Accepted Answer

A) True 
 B)False

Question 4

Net assets represented by supplies and prepaid expenses are classified in governmental funds as Nonspendable Fund balance.

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer the next four questions:
On April 1, 2014, the City of Southern Ponds issued $4,000,000 in 4% general obligation, tax supported bonds at 101 for the purpose of constructing a new police station. The premium was transferred to a debt service fund. A total of $3,990,000 was used to construct the police station, which was completed before December 31, 2014, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2014, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $200,000 is due April 1, 2015.
-What amount would be reported as debt service expenditures for 2015?

Accepted Answer

A)  $356,000. 
B)  $352,000. 
C)  $354,000. 
D)  $360,000.

Question 6

A government entered into a capital lease agreement to acquire equipment for the general government on January 1, 2014. Five payments of $8,000 each are to be made, beginning on December 31, 2014. Discounting is at 6%, computed annually. The present value of the five payments is $33,699.
-Which of the following would be true as of January 1,2014?

Accepted Answer

A)  An entry would be made debiting Expenditures and crediting Other Financing Sources-Capital Leases in a governmental fund, both in the amount of $40,000. 
B)  An entry would be made debiting Equipment and crediting Capital Leases Payable in a governmental fund, both in the amount of $33,699. 
C)  An entry would be made debiting Capital Expenditure and crediting Capital Leases Payable in a governmental fund, both in the amount of $33,699. 
D)  An entry would be made debiting Expenditures and crediting Other Financing Sources-Capital Leases in a governmental fund, both in the amount of $33,699.

Question 7

Private-purpose Trust Funds benefit individuals,private organizations,or other governments.

Accepted Answer

A) True 
 B)False

Question 8

If a government has debt service due no more than one month after the end of a fiscal year and has the resources available,then it is permitted to accrue expenditures and a fund liability for the debt service.

Accepted Answer

A) True 
 B)False

Question 9

The City of Presho had the following transactions related to the construction of a new courthouse.
(a)1/2/2014:
 20 year 4% General Obligation Serial Bonds with a face value of $5,000,000 are issued at 102.Interest and principle payments are made on Jan.1 and July 1 of each year.The premium was transferred into the Debt Service Fund.The General Fund will fully fund each payment as they become due.
(b)3/1/2014:
 Land is purchased for a new courthouse at a cost of $ 300,000.
(c)3/1/2014:
 A contract is signed for construction of the new courthouse in the amount of $ 4,300,000.
(d)6/15/2014:
 Cash ($ 225,000)sufficient to cover interest and principal payments for the year less the premium is transferred from the General Fund.
(e)7/1/2014:
 Interest ($100,000)and principal ($125,000)are paid on the courthouse fund serial bonds.
(f)12/1/2014:
 Receive an invoice for progress completed to date on the courthouse construction project in the amount of $3,700,000.
(g)12/27/2014:
 $97,500 is transferred from the General Fund for the 1/1/2015 interest payment due on the courthouse fund serial bonds.Interest is accrued as of 12/31/2014,following the exception permitted by GASB.
Required:
 Prepare a Statement of Revenues,Expenditures and Changes in Fund Balance for the Capital Projects and Debt Service Funds.Assume this is the first year for each fund (beginning fund balances are zero)and the City has no other long-term debt than that described above.Use separate columns for the two funds

Accepted Answer

The answer of The City of Presho had the following...

Question 10

A transfer from the General Fund to a debt service fund to make annual payments on principal and interest would be recorded in the debt service fund as a (an):

Accepted Answer

A)  Other Financing Source. 
B)  Revenue. 
C)  Direct addition to Fund Balance. 
D)  Other Financing Use.

Question 11

With respect to Permanent Funds,which of the following is not true?

Accepted Answer

A)  The principal is classified as Nonspendable Fund balance 
B)  Permanent Funds are created when resources are provided by private donation. 
C)  Permanent Funds use the current financial resources measurement focus. 
D)  Earnings in excess of expenditures must be added to principal corpus.

Question 12

Governmental funds,other than the General Fund,are considered major if:
I.Total Assets,Liabilities,Revenues,or Expenditures of that individual governmental fund are at least 10% of the corresponding total (assets,liabilities,and so forth)for all governmental funds.
II.Total Assets,Liabilities,Revenues,or Expenditures of the individual governmental fund are at least 5% of the corresponding total for all governmental and enterprise funds combined.

Accepted Answer

A)  I only. 
B)  II only. 
C)  Either I or II, but need not be both. 
D)  Both I and II.

Question 13

What is the difference between a current refunding and advance refunding?

Accepted Answer

The answer of What is the difference between a current...

Question 14

Write yes or no in each box to indicate whether each property applies to the following funds:

Accepted Answer

The answer of Write yes or no in each box...

Question 15

Capital Projects funds recognize encumbrances and expenditures,not expenses.

Accepted Answer

A) True 
 B)False

Question 16

Budgets are typically not recorded for capital projects,debt service,and permanent funds.

Accepted Answer

A) True 
 B)False

Question 17

Interest revenues should be accrued at year-end on investments held by a permanent fund.

Accepted Answer

A) True 
 B)False

Question 18

When a government acquires general fixed assets under a capital lease agreement,the asset should be recorded in the General Fund's fund basis financial statements:

Accepted Answer

A)  As a capital asset and lease obligation at the inception of the lease agreement at the lesser of the present value of the minimum lease payments or the fair market value of the property 
B)  as an expenditure when payments are made 
C)  As a capital asset and lease obligation at the inception of the lease agreement for the total lease payments 
D)  as an expense when payments are made

Question 19

The portion of a permanent fund which is spendable should be reported as Unassigned Fund Balance.

Accepted Answer

A) True 
 B)False

Question 20

Use the following to answer the next four questions:
On April 1, 2014, the City of Southern Ponds issued $4,000,000 in 4% general obligation, tax supported bonds at 101 for the purpose of constructing a new police station. The premium was transferred to a debt service fund. A total of $3,990,000 was used to construct the police station, which was completed before December 31, 2014, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2014, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $200,000 is due April 1, 2015.
-In addition to reporting a $4,000,000 liability and a $40,000 bond premium in the government-wide Statement of Net Assets,how would the bond sale be reported?

Accepted Answer

A)  As a $4,000,000 liability in the government-wide Statement of Net Assets and as a $4,000,000 other financing source in the debt service fund. 
B)  As a $4,040,000 liability in the government-wide Statement of Net Assets, as a liability of $ 4,040,000 in the capital projects fund, and as an other financing source of $4,040,000 in the capital projects fund. 
C)  A $4,040,000 other financing source in the capital projects fund, a $40,000 other financing use in the capital projects fund, and a $40,000 other financing source in the debt service fund. 
D)  The $4,000,000 liability in the government-wide Statement of Net Assets and the $40,000 would also be recorded as a bond premium in the Statement of Net Assets.

Exam 5: Accounting for Other Governmental Fund Types: Capital Projects, Debt Service, and Permanent

With respect to Debt Service Funds,which of the following is true?

Investments of permanent funds should be reported at fair value,if determinable,and unrealized gains reported along with realized gains as "Investment Income-Net Increase in Fair Value of Investments."

Net assets represented by supplies and prepaid expenses are classified in governmental funds as Nonspendable Fund balance.

Private-purpose Trust Funds benefit individuals,private organizations,or other governments.

If a government has debt service due no more than one month after the end of a fiscal year and has the resources available,then it is permitted to accrue expenditures and a fund liability for the debt service.

A transfer from the General Fund to a debt service fund to make annual payments on principal and interest would be recorded in the debt service fund as a (an) :

With respect to Permanent Funds,which of the following is not true?

What is the difference between a current refunding and advance refunding?

Write yes or no in each box to indicate whether each property applies to the following funds:

Capital Projects funds recognize encumbrances and expenditures,not expenses.

Budgets are typically not recorded for capital projects,debt service,and permanent funds.

Interest revenues should be accrued at year-end on investments held by a permanent fund.

When a government acquires general fixed assets under a capital lease agreement,the asset should be recorded in the General Fund's fund basis financial statements:

The portion of a permanent fund which is spendable should be reported as Unassigned Fund Balance.