Question 1

In which fund type would a government's debt service fund be found?

Accepted Answer

A government's debt service fund is an example of a governmental fund type, which is used to account for transactions related to long-term debt issued by the government. This fund type is used to make principal and interest payments on the government's outstanding debt obligations.

Question 2

Sugar City issued $2 million of bonds to fund the construction of a new city office building.The bonds have a stated rate of interest of 5 percent and were sold at 101.Which of the following entries should be made in the capital projects fund to record this event?

Accepted Answer

The capital projects fund should record the total cash received as an "Other financing source" since it is not a liability of the fund itself.

Question 3

In the capital projects fund

Accepted Answer

The transfer of funds from the general fund to the capital projects fund is a nonreciprocal transfer-in, which should be recorded as a credit to Other financing sources-nonreciprocal transfer-in in the capital projects fund. The corresponding debit should be made to Due from general fund in the capital projects fund.

Question 4

The amount of bonds payable that should be included on the balance sheet for the debt service fund of the City of Russell at June 30, 2015 is

Accepted Answer

The debt service fund is a governmental fund that is used to account for the resources that are set aside for the payment of principal and interest on general long-term debt. Therefore, only the bonds payable related to the general long-term debt should be included in the balance sheet of the debt service fund.

According to the information provided, the City of Russell issued $3,500,000 of general obligation bonds and sold $350,000 of those bonds during the fiscal year ended June 30, 2015. This means that the remaining bonds payable at June 30, 2015, should be $3,500,000 - $350,000 = $3,150,000. However, only the bonds payable related to the general long-term debt should be included in the balance sheet of the debt service fund. Therefore, the correct amount of bonds payable to be included in the balance sheet of the debt service fund is $350,000.

Hence, the correct answer is B) $350,000.

Question 5

Use of a debt service fund is required.

Accepted Answer

A debt service fund is established to accumulate financial resources for the payment of principal and interest when it becomes due on bonded debt. Therefore, choice B is the correct answer as it accurately describes the purpose of a debt service fund. Choice A is incorrect as it only applies to a capital projects fund, and choices C and D are too broad as not all debt service payments necessarily require the use of a debt service fund.

Question 6

The entry in the capital projects fund to record the receipt of the bond proceeds should be

Accepted Answer

The answer of The entry in the capital projects fund...

Question 7

Six years ago Hill City issued $10 million of 6 percent term bonds, due 30 years from the date of issue.Interest on the bonds is payable semi-annually on January 1 and July 1.Hill City has a September 30 fiscal year-end.The amount of interest payable that should be included on the balance sheet for the debt service fund of Hill City at September 30 is

Accepted Answer

The answer of Six years ago Hill City issued $10...

Question 8

Previously Atomic City had issued bonds with a face value of $10 million to construct a new city hall.Because the money will not be needed for several months, the city invested the bond proceeds in U.S.Government securities.Assume that the city maintains its books and records in a manner that facilitates the preparation of fund financial statements.What is the appropriate entry when the city receives interest on the investments?

Accepted Answer

Since the bond proceeds were invested in government securities, the interest received is considered revenue for the city. Therefore, the appropriate entry is to debit cash (increasing the asset) and credit revenue (increasing the revenue).

Question 9

Avon City issued bonds for the purpose of financing a major capital improvement.Which fund is the most appropriate fund in which to record the receipt of the bond proceeds?

Accepted Answer

The most appropriate fund to record receipt of bond proceeds for capital improvements is the capital projects fund. This fund is used to account for financial resources used for the acquisition or construction of major capital facilities and improvements. The bond proceeds are meant to finance a major capital improvement, so it is logical to record the bond proceeds in a capital projects fund.

Question 10

Sue City has outstanding $5 million in general obligation term bonds used to finance the construction of the new City Library.Sue City has a June 30 fiscal year-end.Interest at 6 percent is payable each January 1 and July 1.The principal of the bonds is due 10 years in the future.The city budgeted the July 1, 2015 interest payment in the budget for the fiscal year ended June 30, 2015.On June 30, cash was transferred from the general fund to the debt service fund to make the required payment.The maximum amount of interest payable that may be included on the balance sheet of the debt service fund of Sue City at June 30 is

Accepted Answer

The maximum amount of interest payable that may be included on the balance sheet of the debt service fund of Sue City at June 30 is $150,000 (6% x $5,000,000 x 6/12). This represents the interest accrual for the six months from January 1 to June 30, 2015.

Answer: B
 The county must transfer the cash necessary to make the July 1 interest payments to the fiscal agent by June 20. This ensures that the fiscal agent has enough time to distribute the payments to bondholders on July 1.

Question 11

The debt service fund of a government is accounted for using which of the following bases of accounting?

Accepted Answer

The debt service fund of a government is accounted for using the modified accrual basis of accounting. This basis of accounting recognizes revenues when they become available and measurable, and expenses when they are incurred in the current period or are expected to be paid soon after the end of the period. This method of accounting allows the government to plan for future debt payments and ensure that sufficient resources are available to meet those obligations as they become due. The budgetary and cash bases of accounting do not provide adequate information about future debt payments, while the accrual basis of accounting is not appropriate for government debt service funds.

Question 12

Sister City was notified by the state that it has been awarded a $5 million grant to aid in the construction of a senior citizens center.At the time of the notification what is the appropriate entry in the capital projects fund? Assume that the city has met all eligibility requirements and maintains its books and records in a manner to facilitate the preparation of fund financial statements.

Accepted Answer

Since the city has met all eligibility requirements for the grant, it recognizes the grant as revenue in the capital projects fund, thus debiting Grants Receivable and crediting Revenue.

Question 13

With regard to the resources dedicated to the acquisition of capital assets that will be used in general government activities, which of the following is true?

Accepted Answer

The answer of With regard to the resources dedicated to...

Question 14

The entry in the capital projects fund to record the additional funding for the construction should be

Accepted Answer

The entry records the receipt of additional funding from the general fund as a nonreciprocal transfer, which is not considered revenue but rather an other financing source.

Question 15

In the debt service fund

Accepted Answer

The debt service fund records the receipt of cash from other funds as "Other financing sources-nonreciprocal transfer-in" when money is transferred from the general fund to cover the bond discount.

Question 16

Previously Rose City issued bonds with a face value of $10 million to construct a new city maintenance facility.Assume that the city maintains its books and records in a manner that facilitates the preparation of fund financial statements.What is the appropriate entry when the city receives a progress billing from the contractor?

Accepted Answer

When the city receives a progress billing from the contractor, it should recognize the amount as an expenditure and increase the accounts payable balance. Therefore, the appropriate entry is to debit Expenditures and credit Accounts payable. It is not appropriate to debit Building as the construction is still in progress and the asset is not yet complete. It is not appropriate to credit Cash as the city has not yet made the payment. No entry is required to debit Accounts payable without recognizing the expense.

Question 17

In the debt service fund

Accepted Answer

The answer of In the debt service fund
...

Question 18

In the capital projects fund

Accepted Answer

The answer of In the capital projects fund
...

Question 19

The amount of interest payable (assuming an outstanding balance of $4,000,000 of bonds)that should be included on the balance sheet for the debt service fund of the City of Russell at June 30, 2015 is

Accepted Answer

To calculate the amount of interest payable, we need to use the formula: Outstanding balance of bonds * Interest rate * Time. The time in this case is for one year, from July 1, 2014 to June 30, 2015. We are not given the interest rate, so we cannot calculate the exact amount of interest. However, we know that the interest payable must be between $168,000 and $420,000, based on the range of the multiple-choice answers. We can make an educated guess that the interest rate is around 5%, which would result in interest payable of $200,000. Since $200,000 is closest to answer choice C, that is the best choice.

Question 20

Salt City issued $5 billion of bonds at face value to fund the reconstruction of major interstate highways in and around the city.The bond underwriters withheld $2 million for underwriting fees and remitted the balance to the city.Assuming the city maintains its books and records in a manner that facilitates the preparation of fund financial statements, how should the underwriting fee be recorded in the capital projects fund?

Accepted Answer

The answer of Salt City issued $5 billion of bonds...

Quiz 6: Accounting for Capital Projects and Debt Service

In which fund type would a government's debt service fund be found?

Sugar City issued $2 million of bonds to fund the construction of a new city office building.The bonds have a stated rate of interest of 5 percent and were sold at 101.Which of the following entries should be made in the capital projects fund to record this event?

In the capital projects fund

The amount of bonds payable that should be included on the balance sheet for the debt service fund of the City of Russell at June 30, 2015 is

Use of a debt service fund is required.

The entry in the capital projects fund to record the receipt of the bond proceeds should be

Avon City issued bonds for the purpose of financing a major capital improvement.Which fund is the most appropriate fund in which to record the receipt of the bond proceeds?

The debt service fund of a government is accounted for using which of the following bases of accounting?

With regard to the resources dedicated to the acquisition of capital assets that will be used in general government activities, which of the following is true?

The entry in the capital projects fund to record the additional funding for the construction should be

In the debt service fund

In the debt service fund

In the capital projects fund

The amount of interest payable (assuming an outstanding balance of $4,000,000 of bonds) that should be included on the balance sheet for the debt service fund of the City of Russell at June 30, 2015 is