Question 1

At the inception of a capital lease agreement for a piece of equipment used in governmental operations,

Accepted Answer

A)  A liability is incurred and reported in the governmental fund's balance sheet. 
B)  A liability is incurred and reported in the government-wide financial statements. 
C)  An expenditure is recorded in the governmental fund. 
D)  Both B and C.

Question 2

Which of the following statements is false?

Accepted Answer

A)  All of the governmental funds use the modified accrual basis of accounting 
B)  Debt service funds are required to report accrued interest payable as current liabilities. 
C)  General fixed assets that are acquired with governmental fund resources are recorded as expenditures in the governmental funds but are displayed as capital assets in the governmental-wide financial statements 
D)  Permanent funds reflect resources that are legally restricted so that principal may not be expended and earnings are used to benefit the government or its citizenry

Question 3

Fund balances of debt service funds are classified among the categories identified in GASB Statement 54 as Restricted and Unrestricted.

Accepted Answer

A) True 
 B)False

Question 4

General fixed assets that are acquired with governmental fund resources are reported as assets in the:

Accepted Answer

A)  General Fund. 
B)  Capital Projects Fund. 
C)  General Fund or Capital Projects Fund, depending upon which fund provided the resources. 
D)  None of the above.

Question 5

What amount would be reported as debt service expenditures in the year ended June 30,2015?

Accepted Answer

A)  $ -0-. 
B)  $ 80,000. 
C)  $160,000. 
D)  $360,000.

Question 6

When a payment is due to a contractor from capital projects fund resources,the debit would be to:

Accepted Answer

A)  A capital asset account. 
B)  Encumbrances Control. 
C)  Expenditures-Capital Outlay. 
D)  None of the above, no entry is made until payment.

Question 7

Capital assets are not reported in governmental funds.

Accepted Answer

A) True 
 B)False

Question 8

The General Fund is always considered to be a major fund. When are other governmental funds considered major?

Accepted Answer

The answer of The General Fund is always considered to...

Question 9

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 10

Use the following to answer the next six questions:
During the fiscal year ended December 31, 2015, the City of Johnstown issued 6% general obligation serial bonds in the amount of $2,000,000 at 102 ($2,040,000) and used $1,980,000 of the proceeds to construct a fire station. The $40,000 premium was transferred to a debt service fund. The $20,000 left in the capital projects fund at the end of the project was later transferred to the debt service fund. The bonds were dated April 1, 2015 and paid interest on October 1 and April 1. The first of 10 equal annual principal payments was due on April 1, 2016.
-What would be the amount of expenditures recorded by the debt service fund for the fiscal year ended December 31,2015?

Accepted Answer

A)  $320,000. 
B)  $120,000. 
C)  $ 90,000. 
D)  $ 60,000.

Question 11

If a sinking fund is required by creditors or law,the unexpended resources would be classified as Restricted Fund Balance.

Accepted Answer

A) True 
 B)False

Question 12

Use the following to answer the next four questions:
On April 1, 2015, the City of Southern Ponds issued $3,500,000 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 $3,490,000 was used to construct the police station, which was completed before December 31, 2015, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2015, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $175,000 is due April 1, 2016.
-What amount would be reported as debt service expenditures for 2016?

Accepted Answer

A)  $245,000. 
B)  $315,000. 
C)  $318,150. 
D)  $351,750.

Question 13

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 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

Premiums generated from the issuance of bonds for a capital projects fund are generally transferred to the Debt Service Fund.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following fund(s)should be used if resources are provided by a donor with the stipulation that they be used for the benefit of the citizenry?

Accepted Answer

A)  Special revenue fund. 
B)  Permanent fund. 
C)  Private purpose fund. 
D)  Either A or B, depending upon whether the principal must be maintained.

Question 17

If taxes are levied specifically for payment of interest and principal on long-term debt,those taxes are:

Accepted Answer

A)  Included as a liability of the General Fund. 
B)  Recorded as operating transfers to the debt service fund. 
C)  Included as revenues of the debt service fund. 
D)  Both A and B are correct.

Question 18

Which of the following is not true regarding permanent funds?

Accepted Answer

A)  Permanent funds are considered governmental funds. 
B)  Permanent funds use the current financial resources measurement focus and modified accrual basis of accounting. 
C)  Permanent funds are appropriate when a gift must be invested and the proceeds used to benefit individuals or organizations. 
D)  Major permanent funds would be reported in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances.

Question 19

Debt service funds are used to account for the payment of principal and interest of both general and enterprise related long-term debt of a state or local governmental unit.

Accepted Answer

A) True 
 B)False

Question 20

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.

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

At the inception of a capital lease agreement for a piece of equipment used in governmental operations,

Which of the following statements is false?

Fund balances of debt service funds are classified among the categories identified in GASB Statement 54 as Restricted and Unrestricted.

General fixed assets that are acquired with governmental fund resources are reported as assets in the:

What amount would be reported as debt service expenditures in the year ended June 30,2015?

When a payment is due to a contractor from capital projects fund resources,the debit would be to:

Capital assets are not reported in governmental funds.

The General Fund is always considered to be a major fund. When are other governmental funds considered major?

The following are sources of funds for the debt service fund except:

If a sinking fund is required by creditors or law,the unexpended resources would be classified as Restricted Fund Balance.

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:

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

Premiums generated from the issuance of bonds for a capital projects fund are generally transferred to the Debt Service Fund.

Which of the following fund(s) should be used if resources are provided by a donor with the stipulation that they be used for the benefit of the citizenry?

If taxes are levied specifically for payment of interest and principal on long-term debt,those taxes are:

Which of the following is not true regarding permanent funds?

Debt service funds are used to account for the payment of principal and interest of both general and enterprise related long-term debt of a state or local governmental unit.

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) :