Question 1

Which of the following statements is true concerning accounting and financial reporting practices related to capital asset acquisitions?

Accepted Answer

Routine capital purchases such as vehicles and equipment often may be financed and accounted for in a General Fund. This is because these purchases do not require a separate fund and can be budgeted and paid for out of the General Fund. However, larger capital projects such as the construction of buildings or major infrastructure typically require a separate Capital Project Fund to account for the acquisition or construction costs. Capital lease transactions related to governmental funds are also typically accounted for in a separate fund, such as a Debt Service Fund. Capital projects can last for multiple fiscal years, and the length will depend on the scope and complexity of the project.

Question 2

A government had $7,000,000 of 5%, six month bond anticipation notes outstanding at the end of the fiscal year. As of this date, the government has completed all legal procedures and the notes will be re-financed to a term of ten years the following month. The BAN liability reported in the Capital Projects Fund as of the end of the fiscal year should be

Accepted Answer

A

Question 3

SEQ CHAPTER \h \r 1Which of the following expenditures is not capitalized as part of the cost of a capital asset acquired through a Capital Projects Fund?

Accepted Answer

Interest expenditures on bond anticipation notes are not capitalized as part of the cost of a capital asset acquired through a Capital Projects Fund, as they represent the cost of financing the construction project and are accounted for separately as debt service expenditures. The other options (A, B, and D) represent direct costs incurred to acquire or construct the asset and are therefore capitalized as part of the cost of the asset.

Question 4

Which of the following is true?

Accepted Answer

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

Question 5

Which of the following transactions would not be reported as an expenditure in a Capital Projects Fund?

Accepted Answer

Bond discounts are not reported as expenditures in a Capital Projects Fund; they are typically amortized over the life of the bond.

Question 6

Which of the following capital asset-related transactions would most likely be accounted for through a Capital Projects Fund?

Accepted Answer

The construction of a general government office building is a major capital asset-related transaction that would warrant the use of a Capital Projects Fund. This fund is typically established for the acquisition or construction of major capital assets, such as buildings, and is used to account for the funding of these projects. Options A, B, and D are all related to general government capital assets, but they do not typically require the use of a Capital Projects Fund. A major general government capital lease transaction may be accounted for through a Debt Service Fund, the purchase of computers may be accounted for through the General Fund, and the maintenance of fixed assets may be accounted for through an Internal Service Fund.

Question 7

A governmental entity issued bond anticipation notes BANs during the year for a major capital project. The BANs were refinanced with long-term general obligation bonds before the end of the fiscal year. The journal entry to record the retirement of the BANs in the Capital Projects Fund the governmental entity should include

Accepted Answer

The retirement of the BANs represents an Other Financing Use, as the Capital Projects Fund used the proceeds from the long-term general obligation bonds to pay off the BANs. There would not be a fund liability or revenues associated with the retirement of the BANs, as it only represents a shift in financing sources.

Question 8

Moore County is developing a new all-sports county park. The estimated cost of the project is $15,000 all amounts are in thousands of dollars. Funding is being provided for the project based on the following schedule:
General Obligation Bonds, 8%, 30-year serial bonds 9,000
State capital grant expenditure driven 4,500
County resources transfers from the General Fund 1,500
Total resources 15,000
Transactions:
1. The bonds were issued at 104 and with $20 in bond issue costs.
2. The funding from the General Fund was received.
3. The county purchased land for the project paying $2,000 in cash.
4. A contract for construction of the required facilities 12,000.
5. During the year, the county was billed $8,000 for the project. It was projected that this billing is for 75% of the construction project. The county paid all but 10% of the amount. The balance will be paid when the contract is completed.
6. Near the end of the fiscal year, the state paid the amount owed, less 20% that is in question. This amount will be paid no earlier than 90 days into the following fiscal year.
Requirements:
1. Prepare all the entries required in the Park Capital Projects Fund for Moore County for these transactions and events. No explanations are required. If not entry is required, state "No entry required" and state why. All amounts are in thousands of dollars.
2. Indicate the effects of each transaction on the accounting equation of the Capital Projects Fund and on the General Capital Assets and General Long-Term Liabilities accounts. If an element is not affected, put "NE" in the appropriate box.

Accepted Answer

The answer of Moore County is developing a new all-sports...

Question 9

Retirement of the principal of a bond anticipation notes that is recorded as a liability in a Capital Projects Fund should be reported in the Capital Projects Fund statement of revenues, expenditures, and changes in fund balance as

Accepted Answer

Retirement of the principal of a bond anticipation note that is recorded as a liability in a Capital Projects Fund is a reduction of a liability. Therefore, it should be reported as a reduction of a liability in the Capital Projects Fund statement of revenues, expenditures, and changes in fund balance.

Question 10

If a governmental entity issued a six-month, $400,000 note payable at 6% interest three months prior to the fiscal year end to help finance a new fire station, Capital Projects Fund interest payable should be accrued as of the end of the fiscal year in the amount of

Accepted Answer

The answer of If a governmental entity issued a six-month,...

Question 11

The City of Bamberg, which has a fiscal year end of December 31, issued a nine month $1,000,000 bond anticipation note on July 1. The city is planning to renew or re-issue the bond anticipation notes for another six month period when they mature. What would the Capital Projects Fund liability for the note be on December 31?

Accepted Answer

The Capital Projects Fund liability for the note on December 31 would be $1,000,000 because the note is still outstanding at the end of the fiscal year, and the full amount of the note is the liability.

Question 12

There are 4 separate scenarios for bond issuances below. For each scenario, prepare the journal entry or entries for the transaction for the Capital Projects Fund and indicate the effects of each scenario on the Capital Projects Fund balance sheet equation and the General Capital Assets and General Long-Term Liabilities accounts.
Scenarios:
A. $3,000 in 6%, 15-year serial bonds are issued at par in a private placement.
B. $4,000 in 5%, 20-year serial bonds are issued at par. Bond issue costs were $100.
C. $5,000 in 4%, 25-year serial bonds are issued at 104. Bond issue costs were $150.
D. $6,000 in 4%, 30-year bonds were issued at 97. Bond issue costs were $200.

Accepted Answer

The answer of There are 4 separate scenarios for bond...

Question 13

A county government secured a six-month, $600,000 loan at 5% interest from a local lending institution to finance a project at a county-owned park. The loan transaction took place one month prior to the end of the fiscal year, at which time 50% of the project was completed for $300,000. As of the end of the fiscal year, the county should report capital outlay expenditures in the amount of

Accepted Answer

Capital outlay expenditures should reflect the actual amount spent on the project, which is $300,000, not including the interest on the loan.

Question 14

A government issued bond anticipation notes to provide initial financing for a general government capital project. The bond anticipation note

Accepted Answer

The answer of A government issued bond anticipation notes to...

Question 15

Bond anticipation notes are

Accepted Answer

Bond anticipation notes can be treated as general long-term liabilities even if their term is one year or less. This is because they are issued in anticipation of issuing long-term bonds to finance a specific project or capital expenditure, and are often structured as interim financing until the long-term bonds can be sold. However, they may also be treated as fund liabilities if they are issued by a specific fund with a defined purpose. Therefore, the answer is D, which states that bond anticipation notes can be treated as general long-term liabilities even if their term is one year or less.

Question 16

A government issued short-term bond anticipation notes for a capital project. The notes are to be repaid from bond proceeds if the voters approve the bonds. The bond anticipation notes

Accepted Answer

The answer of A government issued short-term bond anticipation notes...

Question 17

The General Fund is partially funding the construction of a new police station. 80% of the project is being financed; the General Funds' share of the project is $1,000,000. The Capital Project Fund would report the General funds' share as a

Accepted Answer

The General Fund's contribution to the Capital Project Fund is considered an "other financing source" because it is not a revenue generated from operations but rather a transfer of funds for a specific purpose.

Question 18

Green Mountain County had the following transactions related to the issuance of its bond anticipation notes. All amounts are in thousands of dollars.
Transactions:
1. The county issued $5,000 of 6-month, 6% bond anticipation notes BANs on March 1, 20X5. The proceeds will be used to begin construction of a major courthouse addition and improvement.
2. Prepare any entries required at December 31, 20X5, the fiscal year end.
3. The county issued $9,000 of courthouse bonds at par on August 15, 20X5. The bond issuance costs were $100.
4. The BANs were repaid on the due date, September 30, 20X5.
Requirements:
A. 1 Prepare the journal entries required in a Capital Projects Fund to record these transactions, assuming the bond anticipation notes do not qualify for long-term debt treatment. If no entry is required, state "No entry required" and explain why.
2 Indicate the effects of each transaction on the accounting equation of the Capital Projects Fund and on the General Capital Assets and General Long-Term Liabilities accounts. If an element is not affected, put "NE" in the appropriate box.
B. 1 Prepare the journal entries required in a Capital Projects Fund to record these transactions, assuming the bond anticipation notes qualify for long-term debt treatment. If no entry is required, state "No entry required" and explain why.
2 Indicate the effects of each transaction on the accounting equation of the Capital Projects Fund and on the General Capital Assets and General Long-Term Liabilities accounts. If an element is not affected, put "NE" in the appropriate box.

Accepted Answer

The answer of Green Mountain County had the following transactions...

Question 19

Requirements:
1. Prepare all the entries required in the Jail Addition Capital Projects Fund for Franklin County for the following transactions and events. No explanations are required. If no entry is required, state "No entry required" and state why. Assume that the bond anticipation notes meet the criteria for being treated as long-term debt. June 30 is the fiscal year end for Franklin County. All amounts are in thousands of dollars.
2. Indicate the effects of each transaction on the accounting equation of the Capital Projects Fund and on the General Capital Assets and General Long-Term Liabilities accounts. If an element is not affected, put "NE" in the appropriate box.
Transactions:
1. The county issued $2,500 of 8-month, 9% bond anticipation notes on August 1, 20X3. The proceeds are to be used to begin construction of a recently approved addition to the county jail.
2. On July 10, the county signed a contract for $5,000,000 for construction of the addition.
3. On November 30, the contractor billed the county for 40% of the work on the jail addition. The actual cost of the work was $2,200. The county paid all but 10% of the amount billed. The balance is to be paid upon completion and approval of the project.
4. The county issued $5,000 of 10-year, 8% bonds at par on March 31, 20X4. Bond issue costs of $50 were withheld from the proceeds. Interest and one-tenth of the principal are payable annually on the bonds. The bond proceeds are to be used to repay the bond anticipation notes and to finance construction of the jail addition.
5. On March 31, the county transferred $200 from the General Fund to the Jail Addition Capital Projects Fund to provide additional funding for the project. The BANs and interest also were paid on that date.
6. In May the contractor billed the county $2,800 for the remainder of the work on the jail. The county approved the facility and paid the contractor all amounts owed.

Accepted Answer

The answer of Requirements:
1. Prepare all the entries required in...

Question 20

Which of the following statements is false?

Accepted Answer

Debt service payments on capital-related debt are typically paid from a Debt Service Fund, not a Capital Projects Fund. Capital Projects Funds are used to account for financial resources used for the acquisition or construction of major capital assets by a governmental entity, not for the debt service on those projects.

Quiz 7: Capital Projects Funds