Question 1

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

Accepted Answer

The debt service fund is used to account for the payments of principal and interest on long-term debt. It is given that the bond payable principal of $100,000 is due annually on January 1 and the interest of $371,000 ($350,000 + 21,000) would be due semi-annually on January 1 and July 1. Therefore, the total amount due for the year is $471,000 ($100,000 principal payment + $371,000 interest payment).

Question 2

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

Accepted Answer

The $3,000,000 bond sale would be recorded as an other financing source in the capital projects fund, as the proceeds from the sale will be used to finance capital projects. It would not be recorded as a liability in the debt service fund, as the debt service fund is used to account for and pay off existing debt. It also would not be recorded as an other financing use in the debt service fund, as the proceeds are not being used to pay off existing debt in that fund. It would not be recorded as a liability in the capital projects fund, as the bond sale is a source of funding, not a liability.

Question 3

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

Accepted Answer

The answer of Which of the following is true regarding...

Question 4

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

Accepted Answer

When bonds are sold at a premium, the additional money received is recorded as Other Financing Sources - Premium on Bonds in the capital projects fund. This premium is not available for funding the project and must be used to pay interest or principal on the debt. Therefore, the premium amount is transferred from the capital projects fund to the debt service fund to be used for debt service purposes. So, both option A and B are correct.

Question 5

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?

Accepted Answer

The answer of In addition to reporting a $4,000,000 liability...

Question 6

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

Accepted Answer

The first statement is partially true as the General Fund is always a major fund, but 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 or 5 percent of the corresponding totals for governmental and enterprise funds combined. The second statement is also true as nonmajor funds are reported in aggregate in a discrete column.

Question 7

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

Accepted Answer

The answer of Which of the following should be accounted...

Question 8

Which of the following is not true regarding permanent funds?

Accepted Answer

The answer of Which of the following is not true...

Question 9

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

Accepted Answer

Debt service funds are similar in nature to special revenue funds, as they are also used to account for a specific revenue source (debt service) and the related expenses. Therefore, debt service funds should use the same measurement focus and basis of accounting as special revenue funds. Internal service funds are used to account for services provided by one department to another within the same government entity, and do not have a specific revenue source or expenses related to debt service.

Question 10

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

Accepted Answer

A permanent fund is a restricted fund that is intended to be held in perpetuity, with only the investment income available for spending. Option B describes a gift that is intended to be invested permanently and the proceeds used for a specific purpose (buying books for the city library), making it a permanent fund. Option A describes a gift intended to be used to address a short-term budget shortfall, which makes it a general fund. Option C describes a gift intended to be invested permanently but the proceeds used for scholarships, which makes it a restricted fund but not a permanent fund. Option D describes a gift to be used for landscaping improvements, which makes it a capital project fund.

Question 11

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?

Accepted Answer

When funds are left over at the end of a capital project that has been constructed entirely with bond proceeds, the funds must be used for debt service. Therefore, the funds would be transferred to a debt service fund. The capital projects fund would debit Other Financing Uses-Transfers Out to reflect the transfer of funds and the debt service fund would credit Other Financing Sources-Transfers In to reflect the receipt of funds. This ensures that the leftover funds are used to pay off the debt incurred for the capital project.

Question 12

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):

Accepted Answer

Grants, entitlements, or shared revenues received by a capital projects fund from another governmental unit are considered to be revenues of the capital projects fund.

Question 13

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

Accepted Answer

The answer of When a payment is due to a...

Question 14

How would the government account for the unused bond proceeds?

Accepted Answer

Unused bond proceeds are accounted for as an other financing source in the debt service fund and as an other financing use in the capital projects fund.

Question 15

A transfer from the General Fund to a debt service fund to make annual payments on principal and interest would be recorded in the debt service fund as a (an):

Accepted Answer

The journal entry would be a debit to cash and a credit to Other Financing Sources - Transfers In

Question 16

Which of the following is true regarding capital projects funds?

Accepted Answer

Capital projects funds are governmental funds. Governmental funds use the modified accrual basis of accounting and the current financial resources measurement focus. Capital project funds record encumbrances and do not record fixed assets or depreciation.

Question 17

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

Accepted Answer

The capital outlay expenditures reported by the capital projects fund would be the amount used to construct the fire station, which is $2,970,000.

Question 18

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

Accepted Answer

Cash provided by the General Fund for a capital project is considered an Other Financing Source in a capital projects fund. This is because the General Fund is not the primary fund for capital projects and is providing funds to another fund to finance the project.

Question 19

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

Accepted Answer

The answer of How would the $30,000 premium be accounted...

Question 20

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

Accepted Answer

The answer of What would be the amount of expenditures...

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