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

Question 1

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

Answer 1

True

Question 2

Fixed assets are not capitalized in governmental funds.

Answer 2

True

Question 3

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.

Answer 3

False

Question 4

Interest revenue s accrued at year-end on investments held by a permanent fund.

Question 5

When using debt service accounting, long term interest 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 6

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

Question 7

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

Question 8

Capital project funds only exist for the duration of the project for which it is created.

Question 9

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 10

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

Question 11

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 12

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

Question 13

When governments construct projects that are financed with special assessment debt, to be paid back by affected property owners, those projects would never be accounted for in capital projects funds.

Question 14

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 15

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 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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 21

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

Question 22

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

Question 23

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 24

General funds and special revenue funds typically record budgets.

Question 25

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 26

Proceeds of debt issues should be recognized by a Capital Projects fund at the time the debt is authorized.

Question 27

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 28

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 29

Budgets are typically recorded for Special Revenue Funds.

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

Budgets are typically not recorded for Capital Projects Funds.

Question 35

Budgets are typically not recorded for Debt Service Funds.

Question 36

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 37

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

Question 38

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 39

Encumbrance accounting is typically used for Permanent Funds.

Question 40

With respect to Capital Projects Funds, GASB standards require the accrual basis of accounting.

Question 41

When a governmental unit is primarily or secondarily liable for the debt, debt proceeds for special assessments levied for the construction phase of a capital improvement project should be reported in which of the following fund types?

A) Capital projects
B) General
C) Agency
D) Debt service

Question 42

Which of the following would be accounted for as a permanent fund?

A) A gift of $500,000 to a city, to be invested permanently, with the proceeds to be used to maintain the city cemetery
B) A gift of $500,000 to a city, to be invested permanently, with the proceeds to be distributed as scholarships
C) A gift of $500,000 to a city, to be invested permanently, with one half of the proceeds added to principle each year and the remainder to be used for low income housing
D) A gift of $500,000 to a city to be used for a new caretaker's residence at the local cemetery

Question 43

Which of the following projects would normally be accounted for in a capital projects fund?

A) The construction of a parking lot for use by employees of the City Water Utility
B) The construction of a police station addition
C) Payment of interest on bonds issued to finance the construction of a new city hall
D) Both A and B would be accounted for in a capital projects fund

Question 44

Siler City receives a trust donation for the purpose of maintaining flower beds in city parks, but the donor does not specify that the principal must be maintained. This type of trust would be most appropriately accounted for in a:

A) Permanent Fund
B) Special Revenue Fund
C) Private Purpose Trust Fund
D) General Fund

Question 45

In addition to a capital asset in the government-wide Statement of Net Assets, how would the construction costs of $2,950,000 be reported at year-end?

A) As an expenditure of the capital projects fund only
B) As a capital asset in the Statement of Net Assets only
C) As an expenditure of the capital projects fund and a capital asset in the government-wide Statement of Net Assets
D) As an expenditure of the capital projects fund and an expense in the Statement of Activities

Question 46

Which two governmental funds are commonly used to acquire capital assets?

A) General Fund & Capital Projects Fund
B) General Fund & Debt Service Fund
C) Permanent Fund & Capital Projects Fund
D) Capital Projects Fund & Debt Service Fund

Question 47

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.

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

Question 48

What would be the amount of debt service expenditures reported in the fiscal year ended June 30, 2010?

A) $330,000
B) $325,500
C) $321,000
D) $180,000

Question 49

If taxes and/or special assessments are levied by the General Fund and then are subsequently transferred to the debt service fund, they are:

A) Recorded as revenues of the debt service fund
B) Included in the revenues budget of the general fund and are also budgeted by that fund as transfers out to the debt service fund
C) Included as transfers out in the General Fund but are not budgeted as revenue in that fund
D) Recorded as an expense and voucher payable by the general fund and are recorded as a revenue and receivable by the debt service fund

Question 50

Proceeds of tax supported bonds are recognized in a capital projects fund as a(an):

A) Revenue
B) Liability
C) Other Financing Use
D) Other Financing Source

Question 51

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

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 52

When a purchase order is issued under a Capital Projects fund, how should the transaction be recorded?

A) Debit Encumbrances Control and credit Vouchers payable
B) Debit Encumbrances Control and credit Reserve for encumbrances
C) Debit Expenditures and credit Vouchers payable
D) Debit Expenditures and credit Reserve for encumbrances

Question 53

In addition to a $3,000,000 liability in the government-wide Statement of Net Assets, how would the bond sale be reported?

A) As a $3,000,000 other financing source in the capital projects fund, a $60,000 other financing source in the debt service fund and as a $3,000,000 liability in the debt service fund
B) As a $3,060,000 other financing source in the capital projects fund, a $ 60,000 other financing used in the capital projects fund, a $60,000 other financing source in the debt service fund
C) As a $3,000,000 revenue in the capital projects fund, a $60,000 revenue in the debt service fund and a $3,000,000 expenditure in the debt service fund
D) As a $2,950,000 revenue in the capital projects fund and a $50,000 revenue in the debt service fund

Question 54

Which of the following lease criteria would not qualify a lease as a capital lease?

A) The lease transfers ownership of the property to the lessee by the end of the lease term
B) The lease contains an option to purchase the leased property at its fair market value
C) The lease term is equal to or greater than 75% of the estimated economic life of the leased property
D) The present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased property

Question 55

How would the government account for the unused bond proceeds?

A) As a revenue in the debt service fund and as an expenditure in the capital projects fund
B) As an other financing source in the capital projects fund and as an other financing use in the debt service fund
C) As an other financing source in the government-wide Statement of Activities
D) As an other financing source in the debt service fund and as an other financing use in the capital projects fund

Question 56

If the amount of annual principal repayment is scheduled to increase each year by approximately the same amount that interest payments decrease, this type of bond would be what kind of serial bond?

A) Regular
B) Deferred
C) Annuity
D) Irregular

Question 57

Where should a government report special assessment debt that the government is not liable for in any way?

A) Capital projects fund
B) Debt service fund
C) Government-wide statements (not in a fund)
D) None of the above

Question 58

In which fund type is interest on Long Term Debt typically not accrued, yet is recognized as an expenditure in the year in which interest is legally due?

A) Debt service fund
B) Internal Service Fund
C) Enterprise Fund
D) Pension Fund

Question 59

What amount would be reported as debt service expenditures in the year ended June 30, 2009?

A) $0
B) $90,000
C) $180,000
D) $330,000

Question 60

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

A) General Fund
B) Capital Projects Fund
C) General Fund or Capital Projects Fund
D) None of the above

Question 61

What would be the amount of expenditures recorded by the debt service fund for the fiscal year ended December 31, 2010?

A) $480,000
B) $471,000
C) $390,000
D) $180,000

Question 62

How would the $3,000,000 bond sale be recorded?

A) As a liability in the debt service fund
B) As a liability in the capital projects fund
C) As an other financing source in the capital projects fund
D) As an other financing use in the debt service fund

Question 63

Which of the following is true regarding accounting for investments of permanent funds?

A) Investments with determinable fair values must be reported at fair value
B) Gains and losses on investments would not be reported in the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances until realized by sale
C) Both of the above are true
D) Neither of the above is true

Question 64

If bonds issued to fund a capital project are sold at a premium, the additional money received is:

A) Recorded as Other Financing Sources - Premium on Bonds in the capital projects fund
B) Transferred from the capital projects fund to the debt service fund
C) Transferred from the capital projects fund to the General Fund
D) Both A and B are correct

Question 65

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?

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

Question 66

Which of the following is true regarding the governmental fund financial statements?

A) The General Fund is always a major fund and other governmental funds are considered major if total assets, liabilities, revenues or expenditures are at least 10 percent of the corresponding totals of governmental funds and 5 percent of the corresponding totals for governmental and enterprise funds combined
B) Nonmajor funds are reported in aggregate in a discrete column
C) Both of the above are true
D) Neither of the above is true

Question 67

Which of the following should be accounted for in a permanent fund?

A) A gift of $100,000 to a school board, to be given out $10,000 a year to the class valedictorian as a college scholarship
B) A gift of $100,000 to a city, to be expended next year to purchase books for the city library
C) A gift of $1,000,000 to a city, to be invested permanently, with the proceeds to be used to distribute to various nonprofit groups
D) 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

Question 68

Which of the following is not true regarding permanent funds?

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

Question 69

Debt service funds should use the same measurement focus and basis of accounting as:

A) Special revenue funds
B) Internal service funds
C) Both (a) and (b)
D) None of the above

Question 70

Which of the following would be accounted for as a permanent fund?

A) A gift of $100,000 to a city to be used to make up a shortfall in next year's budget
B) A gift of $100,000 to a city to be invested permanently, with the proceeds to be used to buy books for the city library
C) A gift of $100,000 to a school district, to be invested permanently, with the proceeds to be awarded as college scholarships to graduating seniors
D) A gift of $100,000 to a school district, to be used for landscaping improvements

Question 71

When a capital project has been constructed entirely with bond proceeds and funds are left over at the end of the project, which of the following would normally take place?

A) The funds would be transferred to a debt service fund; the capital projects fund would debit Other Financing Uses-Transfers Out and the debt service fund would credit Other Financing Sources-Transfers In.
B) The funds would be transferred to a debt service fund; the capital projects fund would debit Expenditures and the debt service fund would credit Revenues.
C) The funds would be transferred to the General Fund and expended for any purpose desired by the management of the government.
D) The funds would be returned to the bondholders.

Question 72

Grant proceeds received from the state for a capital project would be recorded in a capital projects fund of a city government as a (an):

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

Question 73

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

A) A capital asset account
B) Capital expenditures
C) Capital Expense
D) Encumbrances Control

Question 74

How would the government account for the unused bond proceeds?

A) As a revenue in the debt service fund and as an expenditure in the capital projects fund
B) As an other financing source in the capital projects fund and as an other financing use in the debt service fund
C) As a special item in both the debt service and capital project funds
D) As an other financing source in the debt service fund and as an other financing use in the capital projects fund

Question 75

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):

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

Question 76

Which of the following is true regarding capital projects funds?

A) Capital projects funds are considered to be governmental funds
B) Capital projects funds use the economic resources measurement focus and accrual basis of accounting
C) Encumbrance accounting is not used
D) Fixed assets are depreciated in capital projects funds

Question 77

The amount of capital outlay expenditures reported by the capital projects fund would be:

A) $3,060,000
B) $3,030,000
C) $3,000,000
D) $2,970,000

Question 78

Cash provided by the General Fund for a capital project would be recorded in a capital projects fund as a (an):

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

Question 79

How would the $30,000 premium be accounted for?

A) As an other financing source in the debt service fund
B) Amortized to interest expenditure in the debt service fund
C) Both (a) and (b) above
D) None of the above

Question 80

What would be the amount of expenditures recorded by the debt service fund for the fiscal year ended December 31, 2009?

A) $480,000
B) $180,000
C) $120,000
D) $ 90,000