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

Question 1

Only the General Fund has a positive Unassigned Fund Balance

Answer 1

True

Question 2

Unmatured principal installments and accrued interest which is due shortly after year end are required to be reported as liabilities in the debt service fund at year end.

Answer 2

False

Question 3

The fund balance of permanent funds should be classified as Nonspendable,Spendable and Committed.

Answer 3

False

Question 4

Unexpended intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are likely to be classified as Restricted Fund Balance

Question 5

Debt service funds should accrue interest and report principle payments due within the next12 months following year end.

Question 6

If a bond sinking fund is required by creditors or law,the unexpended resources would be classified as Assigned.

Question 7

The residual classification for governmental funds other than the General Fund is Assigned.

Question 8

Special assessments may be levied to finance construction projects or to provide current services.

Question 9

A special assessment tax is a tax levy that is assessed against only those taxpayers who are deemed to benefit from the service or project paid for by the proceeds of the special assessment levy.

Question 10

The principal of permanent funds is classified as Nonspendable Fund Balance.

Question 11

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

Question 12

Because debt service and permanent funds use modified accrual accounting,these funds would typically record encumbrances.

Question 13

Unexpended resources transferred to the debt service fund from the General Fund would typically be classified as Restricted Fund Balance.

Question 14

Because capital project,debt service and permanent funds use modified accrual accounting,these funds would typically record budgets.

Question 15

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

Question 16

Positive fund balances of capital projects funds are classified as restricted,committed assigned or unassigned.

Question 17

Capital Projects funds recognize encumbrances and expenditures,not expenses.

Question 18

All of the governmental funds use the modified accrual basis of accounting

Question 19

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

Question 20

Unexpended intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are likely to be classified as Committed Fund Balance

Question 21

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.

Question 22

Under governmental accounting principles for capital and operating leases; expenditures are recorded each period for the amount of the annual lease payment for all leases,but the expenditures are classified differently for capital and operating leases.

Question 23

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."

Question 24

When governments construct projects that are financed with special assessment debt,to be paid back by affected property owners,those projects could be accounted for in capital projects funds.

Question 25

An encumbrance in a capital project fund is created when the contract for the work is signed or issued.

Question 26

When bonds are sold to construct a capital asset through a capital projects fund,an entry would be made to debit Cash and credit Bonds Payable in the capital projects fund.

Question 27

The current and long-term portions of General Long-term Debt are normally reported in a debt service fund.

Question 28

Bond refunding is repurchasing bonds from bondholders using residual money left over after a capital project has been completed.

Question 29

Funds whose earnings benefit individuals,private organizations,or other governments are reported in permanent funds.

Question 30

Capital projects funds use the financial resources measurement focus and accrual basis of accounting.

Question 31

When a government receives a gift that must be invested permanently and the investment proceeds are used to benefit the government or its citizens,it would be appropriate to account for that gift in a private purpose trust fund.

Question 32

Capital outlay expenditures of capital projects funds will typically result in additions to the general fixed assets reported in the government-wide Statement of Net Assets.

Question 33

When accounting for interest expenditures through debt service funds,interest is normally recorded as an expenditure when due and payable; it is not required to be accrued at year-end.

Question 34

If a government issues new debt,and places the proceeds in an escrow account pending the maturity date of existing debt,the existing debt is said to be defeased.

Question 35

A special assessment tax is assessed against all tax payers regardless of who benefits.

Question 36

In a Statement of Revenues,Expenditures,and Changes in Fund Balances,Transfers In are reported within Total Revenues.

Question 37

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

Question 38

Capital projects funds are not normally included in the Budgetary Comparison Schedule.

Question 39

The principal of permanent funds must be classified as Nonspendable Fund Balance.

Question 40

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

Question 41

Budgets are typically not recorded for Debt Service Funds.

Question 42

Permanent funds account for resources that are donor restricted to the extent earnings (but not principal)may be used to support government programs.

Question 43

A gift of $1,000,000 to a city,to be invested permanently,with the proceeds to be used to maintain the city war memorials should be accounted for in a permanent fund.

Question 44

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

Question 45

Capital assets are not reported in governmental funds.

Question 46

Capital project funds exist for the duration of the project for which it is created and are then closed.

Question 47

Fixed assets of completed projects are recorded in the accounts of capital projects funds.

Question 48

If taxes and/or special assessments are levied specifically for payment of interest and principal on long-term debt,those taxes are recognized as revenues of the debt service fund.

Question 49

A non-expendable trust which benefits a government or its citizenry and which stipulates that earnings only (not principal)may be used for its prescribed purpose would be reported in a Special Revenue Fund.

Question 50

Major sources of funding for Capital Project Funds include the issuance of long term debt and grants from other governmental units.

Question 51

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

Question 52

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

Question 53

A Special Projects Fund is a fund type that is used to account for revenues and other financing sources that are intended to service debt.

Question 54

Fund basis financial statements in which capital projects funds are reported are the Governmental Funds Balance Sheet and the Governmental Funds Statement of Revenues,Expenditures,and Changes in Fund Balances.

Question 55

An annuity serial bond is one where the amount of the principal increases each year by the same amount that the interest payments decrease.

Question 56

Budgets are typically recorded for Special Revenue Funds.

Question 57

Encumbrance accounting is typically used for Permanent Funds.

Question 58

When using debt service accounting,interest on long term debt is not to be accrued unless the payment is due in no more than one month and the government has resources available for payment.

Question 59

General Funds and special revenue funds typically record budgets.

Question 60

Budgets are typically not recorded for Capital Projects Funds.

Question 61

Which of the following statements is false?

A) Unexpended intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are likely to be classified as Assigned Fund Balance
B) The corpus (principal) from a permanent fund should be classified as Nonspendable.
C) The residual classification for funds other than the General Fund is Assigned.
D) If a bond sinking fund is required by creditors or law, the unexpended resources would be classified as Restricted.

Question 62

Budgets are typically recorded for which of the following:

A) Capital Projects Funds.
B) Special Revenue Funds.
C) Debt Service Funds.
D) None of the above

Question 63

Encumbrance accounting is only typically used for

A) Permanent Funds.
B) Debt Service Funds.
C) Capital Projects Funds.
D) None of the above.

Question 64

When taxes and/or special assessments are levied specifically for payment of interest and principal on long-term debt,those taxes are recognized:

A) As revenues in the General Fund with transfers made to the debt service funds for payments.
B) As revenues in the debt service fund.
C) As revenues in the capital projects fund with transfers made to the debt service funds for payments.
D) As Other Financing Sources in the debt service fund.

Question 65

Which of the following statements is true?

A) Fund balances of debt service funds are classified as Restricted and Unrestricted.
B) The fund balance of permanent funds should be classified as Nonspendable, Spendable and Committed.
C) The principal of permanent funds are classified as Nonspendable Fund Balance.
D) Any governmental fund may have an Unassigned Fund Balance

Question 66

What is the correct debit or credit for the following scenario: A contract was issued for the major part of work to be done by a private contractor in the amount of $1,200,000 for a new County court house?

A) Debit: Budgetary Fund Balance -- Reserve for Encumbrances.
B) Debit: Construction expenditures.
C) Credit: Cash.
D) Debit: Encumbrances.

Question 67

An encumbrance in a capital project fund is created

A) When the project is paid for in full.
B) When the work on the project begins.
C) When the work on the project is finished.
D) When a contract is signed or issued.

Question 68

Which of the following statements is false?

A) Debt service funds are required to report accrued interest payable as current liabilities.
B) All of the governmental funds use the modified accrual basis of accounting
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 69

If a trust is to be used for the benefit individuals,private organizations or other governments,the following fund(s)should be used:

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 70

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?

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 71

With respect to Debt Service Funds,which of the following is not correct?

A) Typically, resources are provided through transfers from the General or other funds.
B) There are two types of debt service expenditures: interest and principal
C) In most cases, interest and principal payments are not recorded until payment is due.
D) Encumbrances are recorded to reflect principal payments that are expected to come due within the current accounting period.

Question 72

Which of the following funds typically record budgets?

A) General Funds, special revenue funds, capital projects, debt service, and permanent.
B) Only General Funds.
C) General Funds and permanent funds.
D) General Funds and special revenue funds.

Question 73

With respect to Capital Projects Funds,which of the following is correct?

A) These funds commonly account for resources provided by long-term debt issues or dedicated taxes.
B) Capital assets appear in both the government-wide and the fund basis financial statements
C) A and B are both correct
D) Neither A or B is correct

Question 74

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:

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 75

Capital project funds

A) Receive all of their money from tax revenues.
B) Exist only for the duration of the project for which they are created.
C) Record debt issuances as revenues.
D) all of the above.

Question 76

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.

Question 77

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

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 78

A gift of $1,000,000 to a city,to be invested permanently,with the proceeds to be used to maintain the city war memorials should be accounted for in a special projects fund.

Question 79

Which of the following statements is false?

A) Resources representing supplies and prepaid items are classified in governmental funds as Nonspendable Fund balance.
B) Capital Projects, debt service and permanent funds do not typically record budgets.
C) Debt service and permanent funds do not record encumbrances.
D) Principal of permanent funds is classified as Committed Fund Balance

Question 80

Which of the following is a major source of funding for capital projects funds?

A) Gifts from individuals and corporations.
B) Proceeds from issuance of Long-term debt.
C) Grants.
D) All of the above.