Test bank of Accounting for governmental and nonprofit entities, 14e chapter 4 to chapter 6

Ch4-6 Student: _ Furniture used by the city attorney's office should be accounted for in the General Fund True General funds and special revenue funds are entitled to record legally approved revenue budgets as receivables and legally approved appropriations as payables True False The payment of liabilities by the General Fund or a special revenue fund requires the expenditure of an appropriation True False If the actual liability for goods or services ordered in the current year differs from the estimated liability, the Encumbrances account should be credited in the amount of the actual liability True False When purchase orders or contracts are issued for legally authorized purposes a record must be kept, but no entries in the General Fund or special revenue fund accounts are necessary True False In order to account correctly for the receipt of goods or services ordered in a prior fiscal year it is necessary to know which appropriations were affected when the encumbrance documents were issued True False Governments that are temporarily short of cash but that have levied taxes expected to be collectible during the fiscal year are generally able to borrow on short-term notes known as "tax anticipation notes payable" True False Assuming all legal requirements have been met, the revenues budget total should be credited to the Estimated Revenues control account; the appropriations budget total should be debited to Appropriations and the difference should be debited or credited to Fund Balance True False False Under the modified accrual basis of accounting applicable to governmental fund types, Revenues is credited for the total amount of property tax bills prepared True False 10 Under the modified accrual basis of accounting applicable to governmental fund types, revenue from sources such as fines and forfeits is accrued and recorded at net realizable value True False 11 Under current GASB standards the revenue from property taxes should be recorded in the period and in the amounts in which taxes are collected True False 12 If property taxes are not collected by the date specified by law, additional revenue is generally earned by the fund of the government for which the taxes were levied True False 13 Correction of errors in recording revenues or expenditures of the current year must be recorded both in the proper general ledger control account (Revenues or Expenditures) and in each subsidiary ledger account affected True False 14 A government that uses the encumbrance method for purchases of goods and services is not required to use encumbrance accounting for its payrolls True False 15 Governments, unlike business organizations, generally not incur expenditures/expenses for the employer's share of FICA taxes and for contributions to other retirement plans established by law True False 16 An interim balance sheet for the General Fund reflects balances of budgetary control accounts and balances of operating statement control accounts, as well as assets, liabilities, and fund equity True False 17 A statement comparing the detailed budgeted revenues with actual revenues to the date of the interim balance sheet should accompany the interim balance sheet in order to disclose the detail of amounts shown in summary in the resources section of the balance sheet True False 18 A statement comparing the detail of appropriations, expenditures, and encumbrances should accompany an interim balance sheet in order to disclose the detail of the amount shown in summary in the appropriations subdivision of the fund equity section of the interim balance sheet True False 19 Whenever a tax or other revenue source is authorized by a legislative body to be used for a specified purpose only, a special revenue fund should be established True False 20 Interfund transactions that would result in the recognition of revenues, expenditures, or expenses, if one of the parties were external to the government, should be reported as fund revenues, expenditures, or expenses True False 21 Although a governmentally owned utility may receive police and fire protection and other services from governmental departments financed by "governmental" funds, such a utility is exempt from taxes and should not pay the General Fund anything for services received True False 22 A payment made by a city-owned utility to the General Fund of the city in lieu of taxes is an example of an "internal exchange transaction." True False 23 Interfund loans and advances should be eliminated from the accounts of the debtor fund and from the accounts of the creditor fund so the annual financial statements of the government will show only receivables from and payables to external individuals or organizations True False 24 If one fund is both a debtor and creditor of a second fund, both funds must report the full amounts receivable and payable in their year-end balance sheets True False 25 As a general rule, revenues, expenditures, and expenses should be reported as such only once in the funds of a government True False 26 Regular periodic transfers of resources raised by one fund to another fund that is to use the resources are classified as "interfund transfers." True False 27 A transfer of General Fund assets to create an internal service fund that is not expected to repay the assets is an example of an interfund transfer True False 28 Which of the following is properly reported as a liability of the General Fund? A General obligation bonds payable B Accounts payable C Tax anticipation notes payable D Both B and C are correct 29 When a vehicle is ordered by a government, the purchase order should be recorded in the General Fund as a debit to A Appropriations B Equipment C Encumbrances D Expenditures 30 In an interim balance sheet of a governmental fund, the fund equity section would not include A Reserve for encumbrances B Contributed capital C Reserve for inventory D Available appropriations 31 The Town of Woodhaven levied property taxes in the amount of $800,000 The Town estimates that percent will be uncollectible The journal entry to record the tax levy will include A A debit to cash for $792,000 B A credit to revenues for $792,000 C A debit to estimated uncollectible current taxes for $8,000 D A debit to estimated revenues for $800,000 32 An interfund transfer should be reported in a governmental fund operating statement as a (an) A Revenue or expenditure B Due from or due to other funds C Change in fund balance D Other financing source or use 33 The City of Oldetown purchased a vehicle for the police department If the operations of the police department are financed by general revenues, the purchase would be recorded in which funds and/or activities? A General Fund: Yes; Governmental Activities: No B General Fund: No; Governmental Activities: No C General Fund: Yes; Governmental Activities: Yes D General Fund: No, Governmental Activities: Yes 34 The General Fund has transferred cash to the appropriate fund for eventual retirement of term bonds maturing in 10 years Which funds would record this transaction? A General Fund: Yes; Capital Projects Fund: No; Debt Service Fund: Yes B General Fund: No; Capital Projects Fund: No; Debt Service Fund: Yes C General Fund: Yes; Capital Projects Fund: No; Debt Service Fund: No D General Fund: Yes; Capital Projects Fund: Yes; Debt Service Fund: Yes 35 Using the information below, what amount should be accounted for in a special revenue fund or funds? A $1,800,000 B $2,100,000 C $3,300,000 D $5,350,000 36 Which of the following would be considered an internal exchange or quasi-external transaction? A The General Fund transfers $200,000 to establish a Central Supplies Fund; this amount will not be repaid B The General Fund transfers $125,000 to the Debt Service Fund for payment of currently due bond interest payments C The General Fund receives supplies from the Central Supplies Fund in the amount of $9,000 D The Capital Projects Fund completes a library building project and transfers the remaining cash to the Debt Service Fund 37 Which of the following would be reflected in the operating statement of a governmental fund? A Incurrence of a liability for vacation leave for employees B Amortization expense C Depreciation expense D Revenue related to prior periods 38 The General Fund recorded a liability to the city-owned electric utility (an enterprise fund of the city) for electricity used during the prior month The journal entry for the General Fund will include A A debit to Encumbrances B A debit to Interfund Transfers Out C A debit to Expenditures D None of the above 39 Which of the following accounts appears on both the interim and year-end balance sheets of the General Fund? A Revenues B Reserve for encumbrances C Encumbrances D Appropriations 40 On May 1, Yuca City was notified of approval of a $300,000 federal operating grant, payable on a reimbursement basis as the city expends resources for the intended purpose of the grant As of May 1, no expenditures had been made for grant purposes The journal entry to record approval of this grant will include A A credit to revenues in the amount of $300,000 B A credit to deferred revenues in the amount of $300,000 C A debit to grants receivable in the amount of $300,000 D No journal entry will be made until eligibility requirements are met by expending resources for the authorized purpose(s) 41 Which of the following best describes the proper treatment for uncollectible amounts of tax revenue? A Report bad debt expense B Report revenue net of uncollectible amounts C Report bad debt expenditures D Report deferred revenue 42 The Revenues account of a government is debited when A The budget is recorded at the beginning of the year B Property taxes are recorded C The account is closed out at the end of the year D Property taxes are collected 43 Fund balance of the General Fund will be increased by the closing entry when A Appropriations are more than expenditures and vouchers payable B Appropriations are more than expenditures and encumbrances C Appropriations are less than expenditures and encumbrances D Appropriations are less than estimated revenues 44 The following items were among Birch Village's capital expenditures during the year ended December 31: Equipment for village tax collector's office: $40,000 Vehicles for village electric utility: $60,000 What amounts should have been recorded in the General Fund and enterprise fund for the increase in equipment during the year ended December 31, assuming the electric utility is accounted for in an enterprise fund? A General Fund: $0; Enterprise Fund: $0 B General Fund: $0; Enterprise Fund: $60,000 C General Fund: $40,000; Enterprise Fund: $60,000 D General Fund: $100,000; Enterprise Fund: $0 The city of Grand Marais' fiscal year ends on June 30 Grand Marais uses encumbrance accounting On May 6, a purchase order was approved and issued for supplies in the amount of $6,000 Grand Marais received these supplies on June 2, and the $6,000 invoice was approved for payment 45 What General Fund journal entry should Grand Marais make on May 6, to record the approved purchase order? A Item A B Item B C Item C D Item D 46 What General Fund journal entry or entries should Grand Marais make on June 2, upon receipt of the supplies and approval of the invoice? A Item A B Item B C Item C D Item D 47 The General Fund received $200,000 in lieu of taxes from the city owned water utility, an Enterprise Fund This is an example of a (an) A Interfund transfer B Interfund loan C Reimbursement D Internal exchange or quasi-external transaction 48 Liabilities incurred, such as for accrued payroll, but still unpaid at year-end, should be recorded in the General Fund by a debit to which of the following accounts? A Expenditures B Encumbrances C Expenses D Appropriations 49 Which of the following will require a debit to fund balance of a governmental fund when closing entries are prepared, assuming the original budget entry was not reversed? A Revenues exceed expenditures and reserve for encumbrances B Appropriations exceed estimated revenues C Estimated revenues exceed revenues D Revenues exceed estimated revenues 50 The Reserve for Encumbrances account is properly termed a A Fixed liability B Reservation of fund equity C Budgetary account D Current liability if paid within a year; otherwise, long-term debt 51 On July 1, the first day of its fiscal year, Elsie City levied a $1,000,000 property tax which is payable in full on December of the same year On September 15, the city decided to borrow $200,000 in 90 day tax anticipation notes to cover operating expenditures until the tax revenues are collected The journal entry on September 15 to record the issuance of tax anticipation notes will include A A credit to proceeds of tax anticipation notes B A credit to tax anticipation revenue C A credit to tax anticipation notes payable D Either B or C is acceptable if consistently applied 52 Which of the following journal entries should be made to close the encumbrances account at the end of the fiscal year? A Debit Reserve for Encumbrances and credit Encumbrances B Debit Encumbrances and credit Reserve for Encumbrances C Debit Fund Balance and credit Encumbrances D None The account is only closed when no encumbrance documents are outstanding 53 During January 2009 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $2,000 were received at an actual cost of $2,200 The entry to record this transaction will require a debit to A Expenditures 2009 in the amount of $2,200 B Expenditures 2008 in the amount of $2,000 C Expenditures 2009 in the amount of $200 D Both B and C are correct 54 When a fire truck purchased from General Fund revenues was received, the appropriate journal entry was made in the governmental activities general journal What account, if any, should have been credited in the General Fund? A No journal entry should have been made in the General Fund B Expenditures C Encumbrances D Capital Assets 55 Which of the following accounts would not be closed at the end of each fiscal year? A Fund balance B Estimated revenues C Interfund transfers out D Expenditures 56 If state law requires that local governments prepare General Fund and special revenue fund budgets on a basis that differs from the basis of accounting required by GAAP, then the budgetary comparison schedule or statements should A Not be included in the general purpose external financial statements B Be included with budget figures adjusted to the GAAP basis and presented only in the general purpose external financial statements C Be included with the actual figures presented on the budget basis and then reconciled to the GAAP basis D None of the above 57 In fiscal year 2009 the "Expenditures 2008" account represents A Excess expenditures in 2008 that will be offset against appropriations for 2009 B Goods or services received in 2008 which the government has no record of ordering C Amount of expenditures for goods ordered in 2008 that were received in 2009 and chargeable to appropriations of 2008 D The amounts of purchase orders issued in 2008 that were intended to be paid from in full from appropriations for 2009 58 What would be the effect on the General Fund fund balance in the current fiscal year of recording a $6,000 expenditure for a new computer server, for which a $5,800 encumbrance had been recorded in the General Fund in the previous fiscal year? A Reduce the General Fund fund balance $6,000 B Reduce the General Fund fund balance $5,800 C Have no effect on the General Fund fund balance D Reduce the General Fund fund balance $200 59 Which of the following transactions is classified as an exchange transaction rather than a nonexchange transaction? A Property taxes B Fees charged by a municipal airport C Bequest left to the city by a wealthy citizen D State grant to conduct an after school program for children 60 The City of Beauchamp received 100 acres of land located in the city limits as a gift from a local property owner for use as a city recreation park The debit for the entry to record this event in the General Fund should be to A General capital assets B Land C Expenditures D None of the above no entry required in General Fund 61 Equipment acquired several years ago by a capital projects fund and reported in the governmental activities was sold The receipts were considered to be unrestricted revenue Entries are necessary in the A General Fund, capital projects fund, and governmental activities B General Fund and governmental activities C General Fund, capital projects fund, and enterprise fund D None of the above Based on the following selected General Fund account balances and other information for Turner City at the end of the first quarter of the current fiscal year 62 The amount of Turner City's total assets as of the end of the first quarter is A $120,000 B $150,000 C $70,000 D Some other amount 63 Assuming there were no reservations of fund equity at the end of the previous fiscal year and none currently other than reserve for encumbrances, Turner City's fund balance at the end of the previous fiscal year and at the end of the first quarter was (is) _ and _, respectively A $50,000 and $10,000 B $50,000 and $70,000 C $70,000 and $50,000 D $50,000 and $60,000 64 Which of the following journal entries should a government use to record $475,000 for police department salaries and wages during a particular month? A Item A B Item B C Item C D Item D 65 Which of the following assets could appear in the governmental fund balance sheet? A Capital assets B Inventories C Deferred charges for debt issuance costs D Goodwill 66 If a government issues debt to finance capital acquisition by another government and the proceeds of the debt are delivered directly to the intended beneficiaries, how should the related long-term debt be reflected in a governmental fund? A Other financing source and other financing use B Revenue and expenditure C Other financing source and expenditure D Not reported because there are no actual flows of financial resources 67 Which of the following would be reflected in the operating statement of a governmental fund? A Depreciation expense B Incurrence of a liability for vacation leave C Amortization expense D Revenue related to prior periods 10 162 Since the debt of a government is subject to a legal debt limit, there cannot be any legal overlapping debt FALSE Property ordinarily lies in many different taxing jurisdictions simultaneously Although each jurisdiction may be subject to a legal debt limit, the property is taxed to service the debt of all units within which it is located Content: Concept Level: Easy Wilson - Chapter 06 #7 163 Disclosures about long-term liabilities should be included in a CAFR to provide users with information about authorization of new debt issues, sale of previously authorized issues, and retirement and refunding of debt during the year TRUE Creditors, potential creditors, and other users of financial reports are presumed to find this information helpful Content: Concept Level: Medium Wilson - Chapter 06 #8 164 Notes to the financial statements of a state or local government should include a schedule, or summary, of annual debt service requirements (principal and interest payments) for the year following the balance sheet date and for all subsequent years until the final maturity of debt outstanding on balance sheet date TRUE This provision of GASB standards is quoted in Chapter Content: Concept Level: Easy Wilson - Chapter 06 #9 165 Debt service funds exist to accumulate resources to pay tax supported bond issues at maturity Interest on such bonds is paid from General Fund appropriations, not from debt service fund appropriations FALSE Debt service funds are created to account for interest expenditures, and revenues raised therefore, as well as for principal repayment Content: Concept Level: Medium Wilson - Chapter 06 #10 38 166 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 FALSE Debt service funds should be used to account for revenues or other financing sources used to provide debt service, and the related expenditures of these resources for debt service However, the long-term debt itself should be accounted for in the governmental activities accounts Content: Concept Level: Medium Wilson - Chapter 06 #11 167 The debt service activity of a government may be properly accounted for within the General Fund unless law mandates the use of a debt service fund TRUE Only those funds required by law or by sound financial management are needed Bond covenants or ordinances are usually interpreted, however, as requiring the use of a debt service fund, and it generally is good financial management to report assets held for debt service separately from assets available for salaries, etc Content: Concept Level: Easy Wilson - Chapter 06 #12 168 Taxes for debt service are always levied by the General Fund and transferred to a debt service fund FALSE Taxes may be levied for a debt service fund directly, or debt service activity may be accounted for by the General Fund Content: Concept Level: Medium Wilson - Chapter 06 #13 169 Debt service funds use the same budgetary procedures as the General Fund and special revenue funds FALSE Debt service funds, like the General and special revenue funds, use estimated revenues and appropriations accounts However, unlike those funds, debt service funds not use encumbrance accounts Content: Concept Level: Easy Wilson - Chapter 06 #14 39 170 The liability for matured bonds payable should be recorded by a debt service fund only if a legal appropriation for that purpose exists in the proper amount TRUE Even though bonds (and interest) may mature, a debt service fund may pay matured bonds only if a legal appropriation exists However, the bond indenture normally contains wording which contractually obligates the issuer to make principal and interest payments when due Content: Concept Level: Medium Wilson - Chapter 06 #15 171 If all financial resource inflows have been collected, and all debt interest and principal legally due has been paid, a regular serial bond debt service fund may have no assets, no liabilities, and no fund balance at year-end TRUE Regular serial bond debt service funds commonly raise only the amount of revenue that will have to be expended each year If collections equal disbursements there is nothing to report in a balance sheet Content: Concept Level: Easy Wilson - Chapter 06 #16 172 At year-end, budgetary and operating statement accounts of a debt service fund are closed in the same manner as is true for a General Fund or for special revenue funds TRUE This is illustrated in Chapter Content: Concept Level: Easy Wilson - Chapter 06 #17 173 Installments of special assessments to be collected within one year are recorded as Assessments Receivable Current; installments due at times in excess of one year are recorded as Assessments Receivable Deferred TRUE The manner of accounting for assessment receivables is illustrated in Chapter Content: Concept Level: Medium Wilson - Chapter 06 #18 40 174 In a debt service fund the offsetting credit to debits for assessments receivable current could be to assessments receivable deferred TRUE The credit in the initial year should be to revenues; however, the suggested entry does occur in subsequent years to reclassify deferred revenues to current At the same time deferred revenues are reclassified to revenues Content: Journal Entry Level: Medium Wilson - Chapter 06 #19 175 Expenditures for interest on tax supported long-term debt are accrued because debt service funds are accounted for on the modified accrual basis FALSE Chapter defines the modification to the accrual basis specified for recognition of debt service expenditures under current GAAP Content: Concept Level: Medium Wilson - Chapter 06 #20 176 If all financial resources recognized as assets and as revenues of a debt service fund have not been collected in cash and/or have not been disbursed for payment of debt service as of the end of a fiscal year it is necessary that a debt service fund balance sheet be prepared for inclusion in a government's annual report TRUE If a debt service fund has assets and/or liabilities, a balance sheet must be prepared Content: Concept Level: Medium Wilson - Chapter 06 #21 177 Debt service funds for term bonds of necessity include sinking fund investments TRUE Bond indentures for term bonds generally require assets be set aside as sinking fund investments for ultimate retirement of the debt In contrast, no sinking fund is necessary for regular serial bonds since revenues are usually raised each year in the amount of interest and principal falling due in that year; indeed one rationale for the use of regular serial bonds is to avoid the need for a sinking fund Content: Compute Level: Medium Wilson - Chapter 06 #22 41 178 Term bond debt service funds should always be accounted for on the assumption that they are operated on an actuarial basis FALSE It is common for term bond debt service funds to be operated on a basis less sophisticated than a true actuarial basis Content: Compute Level: Medium Wilson - Chapter 06 #23 179 Premium or discount on bonds purchased as investments is accounted for in the same manner as discount on bonds payable sold FALSE Investments generally would not be adjusted for amortization of any premiums or discounts because GASBS 31 requires fair value accounting Premiums and discounts on bonds payable are amortized in the governmental activities accounts at the government-wide level Content: Concept Level: Medium Wilson - Chapter 06 #24 180 Capital lease payments should be recorded by a debt service fund rather than the fund using the leased asset TRUE Payments required by capital leases are merely installment payments of general long-term debt and interest on the unpaid debt; it is logical to record such payments in a debt service fund rather than in the fund using the leased assets Content: Concept Level: Medium Wilson - Chapter 06 #25 181 Expenditures for capital lease payments consist of two elements: payment of interest on the lease obligation, and payment on the obligation itself TRUE Chapter presents an example illustrating how the two elements are calculated and recorded in the debt service fund Content: Concept Level: Easy Wilson - Chapter 06 #26 42 182 Ordinarily, a statement of changes in debt service fund balance should be combined with the statement of revenues and expenditures for the debt service fund TRUE Current standards require preparation of a statement of revenues, expenditures, and changes in fund balance for debt service funds Content: Concept Level: Easy Wilson - Chapter 06 #27 183 Basic financial statements are often supplemented by schedules of securities held at balance sheet date, and other schedules detailing securities transactions during the year TRUE Supporting schedules are often needed to provide information desired by financial report users, or, in some cases, required by law, or by GASB standards Content: Concept Level: Easy Wilson - Chapter 06 #28 184 The issuance of general long-term bonds requires recognition by the fund receiving the proceeds and by the business-type activities FALSE Governmental funds not record long-term debt; it is recorded in the governmental activities accounts at the government-wide level Content: Concept Level: Easy Wilson - Chapter 06 #29 185 Which of the following are properly accounted for in the governmental activities accounts? A B C D Tax-supported general obligation bonds Obligations under capital leases used to finance general capital assets The long-term portion of judgments and claims All of the above Content: Concept Level: Easy Wilson - Chapter 06 #30 186 The liability for special assessment bonds that carry a secondary pledge of a city's general credit, if reported in conformity with GAAP, should be reported in the balance sheet(s) of A B C D A debt service fund An agency fund The governmental activities accounts An agency fund and disclosed in the notes to the financial statements Content: Concept Level: Medium Wilson - Chapter 06 #31 43 187 General obligation bonds issued for the benefit of enterprise funds, with the intent of paying bond principal and interest from revenues of the enterprise fund, should be reported as a liability in the balance sheet of the A B C D Enterprise fund Governmental activities Both the enterprise fund and the governmental activities accounts Enterprise fund and a note to the financial statements explaining the contingent liability of the general government if enterprise funds are insufficient to pay principal and interest Content: Concept Level: Medium Wilson - Chapter 06 #32 188 Immediately after making its annual $20,000 lease payment on June 30, 2008, the last day of its fiscal year, a certain city had an unpaid capital lease obligation of $95,000 The interest rate applicable to the lease is 10 percent When the $20,000 lease payment due on June 30, 2009 is made, the journal entry for the governmental activities accounts will include A B C D A debit to Capital Lease Obligation Payable in the amount of $10,500 A debit to Capital Lease Obligation Payable in the amount of $20,000 A debit to Cash in the amount of $20,000 Both B and C are correct Content: Journal Entry Level: Medium Wilson - Chapter 06 #33 189 A debt service fund is a (an) A B C D Nonexpendable fund Governmental fund Fiduciary fund Proprietary fund Content: Concept Level: Easy Wilson - Chapter 06 #34 190 Which of the following resource inflows would be recorded as a revenue of a debt service fund? A B C D Property taxes levied by the debt service fund for debt service purposes Receipt of the premium on a new bond issue Taxes collected by the General Fund and transferred to the debt service fund Transfer of the residual equity of a capital project from a capital projects fund to the debt service fund Content: Concept Level: Medium Wilson - Chapter 06 #35 191 On the due date for bond interest, the debt service fund journal entry (or entries) will include A B C D A debit to Appropriations A debit to Interfund Transfers In A debit to Expenditures Bond Interest A debit to Interest Expense Content: Journal Entry Level: Medium Wilson - Chapter 06 #36 44 192 For which of the following would bond discount or premium be amortized? A B C D Bonds Issued: No; Bonds Held as Investments: No Bonds Issued: No; Bonds Held as Investments: Yes Bonds Issued: Yes; Bonds Held as Investments: No Bonds Issued: Yes; Bonds Held as Investments: Yes Content: Concept Level: Medium Wilson - Chapter 06 #37 193 Under GASBS 34, combining financial statements would be prepared A B C D For all nonmajor governmental funds For all internal service funds For each fund-type A and B Content: Concept Level: Medium Wilson - Chapter 06 #38 194 Which of the following budgetary accounts is typically used by a debt service fund? A B C D Encumbrances Appropriations Both A and B None of above Content: Concept Level: Easy Wilson - Chapter 06 #39 195 Interest expenditures on bonds payable should be recorded in a debt service fund 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 paid D When legally payable Content: Concept Level: Medium Wilson - Chapter 06 #40 45 196 Special assessments levied for debt service of bonds issued for a special assessment capital project will be accounted for by a debt service fund under which of the following situations? A B C D Item A Item B Item C Item D Content: Concept Level: Medium Wilson - Chapter 06 #41 197 Which of the following debt service fund accounts would not be closed at the end of each fiscal year? A B C D Estimated Revenues Fund Balance Revenues Expenditures Bond Interest Content: Journal Entry Level: Easy Wilson - Chapter 06 #42 198 Based on the information below, what amount should be accounted for in a debt service fund? A B C D $200,000 $1,800,000 $1,900,000 None of the above Content: Compute Level: Medium Wilson - Chapter 06 #43 46 199 Valencia Village issued the following bonds during the year ended June 30, 2008: For installation of street lights, to be assessed against properties benefited, but secondarily backed by the village: $600,000 For construction of public golf course, bonds to be paid from pledged fees collected from golf course users: $800,000 How much should be accounted for through debt service funds for payments of principal over the life of the bonds? A B C D $0 $600,000 $800,000 $1,400,000 Content: Compute Level: Medium Wilson - Chapter 06 #44 200 The liability for general obligation bonds should be recorded in A B C D General Fund Capital projects fund Governmental activities journal Debt service fund Content: Concept Level: Medium Wilson - Chapter 06 #45 201 On the due date for bond interest, the debt service fund journal entry (or entries) will include a debit to A B C D Expenditures bond interest Transfers in Appropriations Interest expense Content: Concept Level: Medium Wilson - Chapter 06 #46 202 When bonds are sold at a premium for a capital project, the premium amount generally A B C D Increases the cash available to the capital projects fund Is transferred to the debt service fund Is transferred to the General Fund Is ignored by both the capital projects fund and any other fund Content: Concept Level: Medium Wilson - Chapter 06 #47 203 Proceeds from general obligation bonds should be recorded in the A B C D Debt service fund General obligation bond fund Permanent fund Capital projects fund Content: Concept Level: Medium Wilson - Chapter 06 #48 47 204 Which of the following is true for debt service funds? 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 All of the above statements are true Content: Concept Level: Medium Wilson - Chapter 06 #49 205 Which of the following statements is not true for debt service funds? A Special assessment debt for which the government has some obligation is paid through the debt service fund B Matured interest payable is reported as a liability of the debt service fund C Bond principal is shown as a liability of the debt service fund only when that principal is due and payable D All tax-supported bond principal is shown as a liability of the debt service fund Content: Concept Level: Medium Wilson - Chapter 06 #50 206 If a government issues debt to finance capital acquisition by another government and the proceeds of the debt are delivered directly to the intended beneficiaries, how should the related long-term debt be reflected in a governmental fund? A B C D Other financing source and other financing use Other financing source and expenditure Revenue and expenditure Not displayed on the face of the financial statements because there are no actual flows of financial resources; however, disclosed in the notes to the financial statements Content: Concept Level: Hard Wilson - Chapter 06 #51 207 Which of the following financing sources used to redeem (or refund) bonds would not result in a debit to an expenditure account in the debt service fund when the liability for the redeemed (or refunded) bonds is removed from the governmental activities accounts? A B C D Proceeds of Refunding Bonds Assets previously accumulated in the debt service fund Interfund Transfer from the General Fund None of the above; that is, all of the above sources would result in a debit to an expenditure account Content: Concept Level: Medium Wilson - Chapter 06 #52 208 Debt service funds are used to account for which of the following A B C D Payment of interest only on general long-term debt Payment of principal only on general long-term debt Payment of principal and interest on general long-term debt Payment of principal and interest on all debt of the government, including that of enterprise funds Content: Concept Level: Easy Wilson - Chapter 06 #53 48 209 Premiums received on tax-supported bonds are generally transferred to what fund? A B C D Capital projects Debt service General Special revenue Content: Concept Level: Easy Wilson - Chapter 06 #54 210 Which of the following assets would not be found in the balance sheet of a debt service fund? A B C D Cash with fiscal agent Investments Equipment Interest Receivable Content: Concept Level: Medium Wilson - Chapter 06 #55 211 The city of Sparr's fiscal year ends on December 31 On July 1, 2008, the city issued $1,000,000 of 6%, 10-year term bonds with semi-annual interest payments due on July and January each year, beginning on January 1, 2009 What amount of expenditures should the city recognize in its debt service fund for the years 2008 and 2009? A B C D $30,000 in 2008; $60,000 in 2009 $60,000 in 2008; $60,000 in 2009 $3,000 in 2008; $6,000 in 2009 $0 in 2008; $60,000 in 2009 Content: Compute Level: Medium Wilson - Chapter 06 #56 212 Which of the following debt service funds would normally have the largest balance in its fund balance account? A B C D Serial bond debt service fund Deferred serial bond debt service fund Irregular serial bond debt service fund Term bond debt service fund Content: Concept Level: Medium Wilson - Chapter 06 #57 213 If a city has an unpaid capital lease obligation at the beginning of its fiscal year, the journal entry in the debt service fund to record the lease payment at the end of that fiscal year will include A B C D A debit to Capital Lease Obligations Payable A credit to Expenditures Principal of Capital Lease Obligation A debit to expenditures Principal of Capital Lease Obligation None of the above Content: Journal Entry Level: Medium Wilson - Chapter 06 #58 49 214 On June 1, 2009, Brooktown levied special assessments in the amount of $500,000, payable in 10 equal annual installments beginning on June 30, 2009 The assessment installments are intended to pay principal and interest on special assessment bonds for which the town has pledged its full faith and credit should assessments be insufficient Assuming no allowance for uncollectible receivables, the journal entry in the debt service fund on June 1, 2009 would include: A B C D A debit to Assessments Receivable Current for $500,000 A debit to Assessments Receivable Current for $50,000 A credit to Deferred Revenues for $450,000 Both B and C are correct Content: Journal Entry Level: Medium Wilson - Chapter 06 #59 215 Which of the following is a true statement regarding in-substance defeasance of bonds? A The government must place cash or other assets in an irrevocable trust sufficient to pay all future interest and principal payments for the debt being defeased B The government must agree to maintain sufficient cash and investment balances in its debt service fund to cover all interest and principal payments for the debt being defeased C The government must pledge to transfer amounts to an escrow agent prior to the due date for each interest and principal payment for the debt being defeased D Any of the above approaches are acceptable under GAAP Content: Concept Level: Medium Wilson - Chapter 06 #60 216 Modified accrual accounting is used for debt service funds in which of the following ways? A B C D It is used without exception It is not used in any transaction It is used to account for interest, with the exception that interest is paid when due It is used for revenue transactions Content: Concept Level: Easy Wilson - Chapter 06 #61 217 Debt service funds are used to record A B C D Both principal and interest payments of debt issues Only interest payments on debt issues Only principal payments of debt issues Neither principal nor interest payments of debt issues Content: Concept Level: Easy Wilson - Chapter 06 #62 218 When the debt service fund makes a payment of principal and interest on an outstanding long-term debt, the governmental activities accounts A B C D Reflect the principal payment only Reflect the interest payment only Has no record of the transaction Reflects both principal and interest payments Content: Concept Level: Medium Wilson - Chapter 06 #63 50 219 The city of Superior's fiscal year ends on December 31 On July 1, 2008 Superior issues $1,000,000 of 8%, 10-year term bonds with semi-annual interest payments due on July and January each year The General Fund transferred $100,000 to the debt service fund on July 1, 2008 to pay for interest to bondholders for the year The debt service fund invests the money at an annual rate of 10% What is the amount of total assets in the debt service fund at the end of 2008? A B C D $ 65,000 $ 105,000 $ 965,000 $1,005,000 Content: Compute Level: Medium Wilson - Chapter 06 #64 220 Which of the following financial statements contains a column for the total of all debt service funds? A B C D Statement of cash flows Statement of revenues, expenditures, and changes in governmental fund balances Statement of revenues, expenses, and changes in proprietary net assets None of these statements does Content: Concept Level: Medium Wilson - Chapter 06 #65 221 Revenue bonds sold by a water utility fund, upon sale, would be recorded A B C D In the governmental activities accounts as a liability In an enterprise fund as "proceeds of bonds." In an enterprise fund as a liability In an enterprise fund as a revenue Content: Concept Level: Medium Wilson - Chapter 06 #66 222 Which of the following is not true? A The debt service activity of a government may be properly accounted for within the General Fund unless law mandates the use of a debt service fund B Debt service funds, unlike the General Fund and special revenue funds, not use budgetary accounting procedures C Expenditures for interest on tax supported long-term debt are not accrued, even though debt service funds are accounted for on the modified accrual basis D At year-end, budgetary and operating statement accounts of a debt service fund are closed in the same manner as is true for a General Fund or for special revenue funds Content: Concept Level: Medium Wilson - Chapter 06 #67 51 Ch4-6 Summary Category # of Questions Content: Compute 10 Content: Concept 172 Content: Journal Entry 40 Level: Easy 61 Level: Hard Level: Medium 158 Wilson - Chapter 04 83 Wilson - Chapter 05 75 Wilson - Chapter 06 67 ... fiscal year and at the end of the first quarter was (is) _ and _, respectively A $50,000 and $10,000 B $50,000 and $70,000 C $70,000 and $50,000 D $50,000 and $60 ,000 64 Which of the following... The city of Grand Marais' fiscal year ends on June 30 Grand Marais uses encumbrance accounting On May 6, a purchase order was approved and issued for supplies in the amount of $6, 000 Grand Marais... debit to cash for $15,000 B A debit to accumulated depreciation of $30,000 C A credit to equipment for $40 ,000 D All of the entries above will be made 121.Which of the following funds of a government