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

Question 1

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

Answer 1

False
Explanation: Bond refunding is issuing new debt to replace old debt. New debt is issued and the proceeds are used to call the existing debt.

Question 2

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

Answer 2

True
Explanation: If a sinking fund is required by creditor or law, the unexpended resources of its debt service fund would be classified as restricted.

Question 3

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

Answer 3

True
Explanation: If a governmental fund has unused supplies or prepaid expenses, those resources would be classified as nonspendable fund balance.

Question 4

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

Question 5

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

Question 6

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

Question 7

All of the governmental funds except permanent funds use the modified accrual basis of accounting.

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

Capital Projects funds recognize expenses, but not encumbrances.

Question 13

Any governmental fund may have a positive Unassigned Fund Balance.

Question 14

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.

Question 15

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

Question 16

Fund balances of debt service funds are classified among the categories of Restricted and Unrestricted.

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

When accounting for interest expenditures through debt service funds, interest is required to be accrued at year-end.

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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 27

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 28

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 29

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

Question 30

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 31

Capital assets are not reported in governmental funds.

Question 32

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 33

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

Question 34

Capital outlay expenditures of capital projects funds will typically result in additions to the general fixed assets reported in the governmental fund Balance Sheet.

Question 35

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

Question 36

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 37

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 38

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

Question 39

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

Question 40

Capital projects funds are always included in the Budgetary Comparison Schedule.

Question 41

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 42

A major source of funding for Capital Project Funds include the issuance of long term debt.

Question 43

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 44

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 45

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

Question 46

Encumbrance accounting is typically not used for Permanent Funds.

Question 47

Budgets are typically recorded for capital projects, debt service, and permanent funds.

Question 48

Permanent funds reflect resources that are restricted so that principal may not be expended and earnings are used to benefit the government or its citizenry.

Question 49

Capital project funds have indefinite lives.

Question 50

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 51

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

Question 52

If taxes 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 53

General Funds and special revenue funds typically record budgets.

Question 54

Permanent funds may spend both earnings and principal.

Question 55

Budgets are typically not recorded for Special Revenue Funds.

Question 56

Since long-term liabilities are not recorded in the governmental funds, payments of debt principal are recorded as expenditures, rather than reductions of outstanding liabilities.

Question 57

Budgets are typically recorded for Capital Projects Funds.

Question 58

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 revenue fund.

Question 59

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

Question 60

Budgets are typically recorded for Debt Service 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 residual classification for funds other than the General Fund is Assigned.
C) If a bond sinking fund is required by creditors or law, the unexpended resources would be classified as Restricted.
D) The corpus principal) from a permanent fund should be classified as Nonspendable.

Question 62

Budgets are typically recorded for which of the following:

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

Question 63

Debt service funds may be required to account for resources used for interest and principal payments on term and serial bonds, notes, capital , or warrants

Question 64

Debt service funds are created for debt issues where the activities of proprietary funds generate sufficient cash to make interest and principal payments.

Question 65

Debt service funds are used to account for financial resources that are intended to provide payments of principal only as they come due.

Question 66

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 67

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 68

Taxes or other revenues raised specifically for a capital project are recorded as transfers in in the capital projects fund.

Question 69

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 70

Which of the following is a 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.

Question 71

Grants, entitlements, or shared revenues received by a capital projects fund from another governmental unit are considered revenues of the capital projects fund, as is interest earned on temporary investments of the capital projects fund.

Question 72

Capital outlay expenditures of a capital projects fund result in additions to the general fixed assets reported in the government-wide Statement of Net Position.

Question 73

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 74

Encumbrance accounting is only typically used for

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

Question 75

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 Control.

Question 76

Expenditures of capital projects funds are reported in the capital outlay character classification in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances.

Question 77

When taxes 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 Other Financing Sources 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 revenues in the debt service fund.

Question 78

If taxes are levied specifically for payment of interest and principal on long-term debt, those taxes are recognized as transfers in for the debt service fund.

Question 79

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 80

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.