Question 1

When a government acquires general fixed assets under a capital lease agreement,the asset should be recorded in the government-wide financial statements:

Accepted Answer

When a government acquires general fixed assets under a capital lease agreement, the asset should be recorded in the government-wide financial statements 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. This is in accordance with the Generally Accepted Accounting Principles (GAAP) and ensures accurate reporting of capital lease assets on the financial statements. Option B and D are incorrect because recording the asset as an expenditure or an expense when payments are made does not reflect the accurate value of the asset. Option C is incorrect because it records the total lease payments, rather than the present value of the minimum lease payments, which may not accurately reflect the value of the asset.

Question 2

Which of the following is true with respect to special assessment levies?

Accepted Answer

If the government is not liable for the special assessment debt directly or through guarantee, the special assessment is accounted for in an agency fund. This is because an agency fund is used to account for assets held by a government on behalf of others and does not involve the government's own resources. The other options are incorrect. Taxpayers cannot opt out of a service-type special assessment, service-type special assessments can be accounted for in the General or special revenue fund, and construction-type special assessments are typically used to finance construction projects and are not accumulated until a certain amount is reached.

Question 3

Which of the following statements is false?

Accepted Answer

Debt service funds do not report accrued interest and principal payments as current liabilities; they recognize expenditures when payments are due.

Question 4

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

Accepted Answer

Debt service funds can accrue interest on investments and any excess funds that are not immediately needed to make debt payments.

Question 5

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

Accepted Answer

The answer of With respect to Permanent Funds,which of the...

Question 6

If the government is primarily or secondarily liable for the payment of debt principal and interest for a special assessment project:

Accepted Answer

If the government is primarily or secondarily liable for the payment of debt principal and interest for a special assessment project, the project should be accounted for as if it were a governmental project. This means that the debt and any associated tax levies should be recorded in the government-wide statements, and the project should be accounted for in the same way as any other governmental project. There is no need to use an internal service fund or a special revenue fund for this type of project.

Question 7

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.

Accepted Answer

The principle is nonexpendable. The income is to benefit the government or its citizenry and will be accounted for in a permanent fund.

Question 8

Which of the following is not correct regarding Government Trust Accounting?

Accepted Answer

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

Question 9

With respect to Debt Service Funds,which of the following is true?

Accepted Answer

While A may be true in some cases, it is not necessarily a requirement to have a separate debt service fund for each long-term obligation. B is true as capital lease payments are considered a type of debt service and may require a separate fund. C is false, as Debt Service Funds use modified accrual accounting. Therefore, the best choice is B.

Question 10

Which of the following statements regarding serial bonds is false?

Accepted Answer

The principal repayment on an annuity serial bond remains constant over the term of the bond, while the interest component decreases each year as the outstanding balance decreases.

Question 11

Which of the following is not a source of funding for capital projects?

Accepted Answer

All three options, issuance of long term debt, proceeds of dedicated taxes, and gifts from individuals or organizations, are sources of funding for capital projects.

Question 12

Which of the following statements is false?

Accepted Answer

The principal of permanent funds is classified as Nonspendable Fund Balance, not Committed Fund Balance, because it cannot be spent.

Question 13

Which of the following is false with respect to long-term debt?

Accepted Answer

All the statements provided are true with respect to long-term debt, making option D the correct choice as it states that all statements are true.

Question 14

Which of the following funds has an indefinite life?

Accepted Answer

The General Fund has an indefinite life since it is the primary operating fund of the government and is used for most routine and recurring transactions. It does not have specific restrictions on how the money can be used, and it is not limited to a particular fiscal year or project. In contrast, special revenue, capital projects, and debt service funds are created for specific purposes and have a limited life or specific restrictions on how the money can be used.

Question 15

Which of the following statements is false?

Accepted Answer

Intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are typically classified as Restricted Fund Balance, not Assigned.

Question 16

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

Accepted Answer

Fixed assets are not reported in governmental funds. They are recorded in the government-wide statements.

Question 17

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

Accepted Answer

A is correct because Capital Projects Funds are used to account for resources provided by long-term debt issues or dedicated taxes. 
B is correct because the transactions related to acquired capital assets are reported in the government-wide financial statements but not in the fund basis financial statements.

Question 18

Which of the following statements is true?

Accepted Answer

According to GASB Statement 54, the principal of permanent funds is classified as Nonspendable Fund Balance. Option A is incorrect because fund balances of debt service funds are classified as either Restricted or Committed, and not Unrestricted. Option C is incorrect because permanent funds do not have a Spendable fund balance category, only a Nonspendable and Committed category. Option D is incorrect because some funds, such as debt service funds and agency funds, may not have an Unassigned Fund Balance.

Question 19

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.

Accepted Answer

The gift is intended to be invested permanently, with the proceeds to be used to maintain the city war memorials. Therefore, it should be accounted for in a permanent fund, which is a type of fund designed to provide ongoing income for a specific purpose.

Question 20

With respect to bond refunding,which of the following is false?

Accepted Answer

Advanced refunding only results in the new debt being reported in the fund statements, not both the original and new debt.

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

When a government acquires general fixed assets under a capital lease agreement,the asset should be recorded in the government-wide financial statements:

Which of the following is true with respect to special assessment levies?

Which of the following statements is false?

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

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

If the government is primarily or secondarily liable for the payment of debt principal and interest for a special assessment project:

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.

Which of the following is not correct regarding Government Trust Accounting?

With respect to Debt Service Funds,which of the following is true?

Which of the following statements regarding serial bonds is false?

Which of the following is not a source of funding for capital projects?

Which of the following statements is false?

Which of the following is false with respect to long-term debt?

Which of the following funds has an indefinite life?

Which of the following statements is false?

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

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

Which of the following statements is true?

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.

With respect to bond refunding,which of the following is false?