Question 1

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.
FALSE

Accepted Answer

In a capital projects fund, the entry would typically debit Cash and credit Other Financing Sources, not Bonds Payable, as the fund focuses on financial resources rather than long-term liabilities.

Question 2

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.

Accepted Answer

Under governmental accounting principles, expenditures are recorded each period for the amount of the annual lease payment for all leases. However, for capital leases, the expenditure is classified as a long-term asset and depreciated over the useful life of the asset, while for operating leases, the expenditure is classified as an expense in the period incurred.

Question 3

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

Accepted Answer

Other Financing Sources are reported separately from Total Revenues in the Statement of Revenues, Expenditures, and Changes in Fund Balances.

Question 4

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."

Accepted Answer

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

Question 5

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

Accepted Answer

The answer of Premiums generated from the issuance of bonds...

Question 6

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.

Accepted Answer

Interest expenditures are typically recorded as they become due and payable, rather than being accrued at year-end. This is because debt service funds are designed to account for the repayment of existing debt, rather than the creation of new liabilities through accruals.

Question 7

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.

Accepted Answer

Trusts that generate income for the benefit of the government or its citizens and require the principal to be maintained are reported in permanent funds. Trusts that generate income for the benefit of individuals, private organizations or other governments are reported in private-purpose trust funds.

Question 8

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

Accepted Answer

The principal of permanent funds is considered nonspendable because it is legally restricted and can only be used for a specific purpose. It cannot be spent or used to finance ongoing government operations.

Question 9

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

Accepted Answer

The principal of a permanent fund must be maintained so it is classified s nonspendable fund balance. The remaining unexpended resources would be classified as restricted or assigned fund balance.

Question 10

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.

Accepted Answer

Capital outlay expenditures of capital projects funds are used to acquire or improve major capital assets and are therefore reported in the government-wide Statement of Net Assets as additions to the general fixed assets.

Question 11

Fixed assets are not capitalized in governmental funds.

Accepted Answer

Fixed assets are not capitalized in governmental funds because they are not considered resources that can be easily converted into cash for immediate use in the fund. Instead, they are reported in notes or supplementary information in the financial statements.

Question 12

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.

Accepted Answer

Defeasance is a process used to remove or extinguish existing debt. When a government issues new debt and sets aside the proceeds in an escrow account to pay off existing debt at maturity, the existing debt is said to be defeased. This means that the government has effectively paid off the debt and replaced it with new debt.

Question 13

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

Accepted Answer

All the governmental funds general, special revenue, capital projects, debt service and permanent) use the modified accrual basis of accounting and the current financial resources measurement focus.

Question 14

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

Accepted Answer

Interest revenues accrued on investments held by a permanent fund are recognized and reported as revenue at year-end.

Question 15

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

Accepted Answer

Expenditures are recorded for the interest and principle amounts in the year that they are legally due. Long-term portions of debt are not recorded in the debt service fund.

Question 16

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

Accepted Answer

Capital projects funds are not included in the Budgetary Comparison Schedule because they are not used for the day-to-day operations of the government, but rather for large construction or infrastructure projects that have a longer time frame. The Budgetary Comparison Schedule is used to compare the budgeted amounts to the actual amounts spent on operating expenses and revenues for the year.

Question 17

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

Accepted Answer

Capital project funds are created to finance specific capital projects and exist only for the duration of those projects. Once the project is completed, the remaining funds are typically returned to the general fund or used to finance other capital projects.

Question 18

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

Accepted Answer

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 19

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.

Accepted Answer

Projects financed with special assessment debt are accounted for in capital projects funds.

Question 20

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.

Accepted Answer

Debt service funds are used to account for the payment of principal and interest of general long-term debt of a state or local government. Debt service funds are not created for debt issues where the activities of proprietary funds are intended to generate sufficient cash to make interest and principal payments. Enterprise funds are proprietary funds.

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

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. FALSE