Question 1

Siler City receives a trust donation for the purpose of maintaining flower beds in city parks,but the donor does not specify that the principal must be maintained.This type of trust would be most appropriately accounted for in a:

Accepted Answer

This type of trust, where the donor does not specify that the principal must be maintained, would typically be accounted for in a Special Revenue Fund. This is because the trust is intended for a specific purpose (maintaining flower beds in city parks), and the funds can only be used for that purpose. A Special Revenue Fund is used for the accounting of specific revenue sources that are restricted or earmarked for particular purposes.

Question 2

Use the following to answer the next four questions:
On April 1, 2014, the City of Southern Ponds issued $4,000,000 in 4% general obligation, tax supported bonds at 101 for the purpose of constructing a new police station. The premium was transferred to a debt service fund. A total of $3,990,000 was used to construct the police station, which was completed before December 31, 2014, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2014, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $200,000 is due April 1, 2015.
-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 bond sale would be reported as a $4,040,000 other financing source in the capital projects fund, reflecting the total proceeds including the premium. The $40,000 premium is then transferred as an other financing use in the capital projects fund and as an other financing source in the debt service fund.

Question 3

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 4

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

Accepted Answer

Debt service funds use the same measurement focus and basis of accounting as special revenue funds. Both use the current financial resources measurement focus and the modified accrual basis of accounting. Internal service funds use the economic resources measurement focus and the full accrual basis of accounting.

Question 5

Which of the following is not true regarding permanent funds?

Accepted Answer

Permanent funds are used to benefit the government or the public, not specific individuals or organizations.

Question 6

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 7

How would the government account for the unused bond proceeds?

Accepted Answer

The answer of How would the government account for the...

Question 8

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 9

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

Accepted Answer

The journal entry in the capital projects fund would be a debit to cash and credits to Other Financing sources - Proceeds of Bonds and Other Financing sources - Premium on Bonds. Premiums generated from the issuance of bonds for a capital projects fund must be used for debt service are generally transferred to the Debt Service Fund.

Question 10

When a governmental unit is primarily or secondarily liable for the debt,debt proceeds for special assessment obligations levied for the construction phase of a capital improvement project should be reported in which of the following fund types?

Accepted Answer

Debt proceeds for special assessment obligations levied for the construction phase of a capital improvement project should be reported in the Capital Projects fund, as this fund is used to account for all financial resources set aside for the acquisition or construction of major capital facilities. Since the debt is directly related to the capital improvement project, it should be reported in this fund type. The General fund is used for operating revenues and expenditures, while the Agency fund is used to account for resources held in a trustee capacity or as an agent for others. The Debt Service fund, on the other hand, is used to account for the accumulation of resources and the payment of general long-term debt principal and interest.

Question 11

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 12

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

Accepted Answer

A gift to a city with the proceeds to be used to maintain the city cemetery would be accounted for as non-expendable trust which benefits a government or its citizenry. Because the gift stipulates that earnings only not principal) may be used for its prescribed purpose would be reported in a Permanent Fund.

Question 13

Proceeds of tax supported bonds are recognized in a capital projects fund as a(an):

Accepted Answer

The proceeds of tax supported bonds are a source of financing for capital projects and are therefore recognized as an Other Financing Source in the capital projects fund.

Question 14

Use the following to answer the next four questions:
On April 1, 2014, the City of Southern Ponds issued $4,000,000 in 4% general obligation, tax supported bonds at 101 for the purpose of constructing a new police station. The premium was transferred to a debt service fund. A total of $3,990,000 was used to construct the police station, which was completed before December 31, 2014, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2014, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $200,000 is due April 1, 2015.
-How would the $3,990,000 be accounted for?

Accepted Answer

The $3,990,000 represents the cost of constructing the new police station, which is a capital asset and should be reported as such in the government-wide Statement of Net Assets. It is also an expenditure in the capital projects fund, which is used to account for the construction of capital assets.

Answer: 20 years
 The bonds have an annual principal payment of $200,000, and the total amount issued was $4,000,000. Therefore, the bonds will be repaid in 20 years ($4,000,000 ÷ $200,000 = 20).

Answer: Debt Service Fund
 The premium received from the sale of the bonds ($40,000 or 1% of $4,000,000) was transferred to the debt service fund. This fund is used to account for the payment of principal and interest on the bonds.

Answer: $40,000
 The premium received from the sale of the bonds was $40,000 (1% of $4,000,000). This premium is transferred to the debt service fund and will be used to pay principal and interest on the bonds.

Question 15

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 16

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

Accepted Answer

A permanent fund should be used to support a specific purpose or program indefinitely. In this case, the gift of $1,000,000 to a city to maintain war memorials fits this criterion as the proceeds can be invested indefinitely to support the maintenance of the memorials. The other options involve gifts that have a specific timeframe for expenditure or a variable purpose, and therefore would not qualify for accounting in a permanent fund.

Question 17

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

Accepted Answer

Permanent funds are used to account for resources that are restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs. Option C fits this definition as the principal is invested permanently, and only the proceeds are used for a specific purpose.

Question 18

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 was constructed entirely with bond proceeds, the funds would be transferred to a debt service fund. The capital projects fund would then debit Other Financing Uses-Transfers Out and the debt service fund would credit Other Financing Sources-Transfers In. This is because the debt service fund is responsible for repaying the bondholders, and any excess funds should be used for that purpose.

Question 19

Use the following to answer the next four questions:
On April 1, 2014, the City of Southern Ponds issued $4,000,000 in 4% general obligation, tax supported bonds at 101 for the purpose of constructing a new police station. The premium was transferred to a debt service fund. A total of $3,990,000 was used to construct the police station, which was completed before December 31, 2014, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2014, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $200,000 is due April 1, 2015.
-What amount would be reported as debt service expenditures for 2014?

Accepted Answer

The debt service expenditures for 2014 would include only the interest payment made on October 1, 2014, which is $80,000 (4% of $4,000,000 for six months). The principal payment is not due until April 1, 2015.

Question 20

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 would be recorded in a capital projects fund as an Other Financing Source. Other Financing Sources are inflows of resources from sources other than current revenues and proceeds of debt issuances. This includes transfers in from other funds, grants, and donations. The General Fund is a source of resources that is external to the capital projects fund and, therefore, would be recorded as an Other Financing Source.

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

Siler City receives a trust donation for the purpose of maintaining flower beds in city parks,but the donor does not specify that the principal must be maintained.This type of trust would be most appropriately accounted for in a:

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

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

Which of the following is not true regarding permanent funds?

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) :

How would the government account for the unused bond proceeds?

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) :

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

When a governmental unit is primarily or secondarily liable for the debt,debt proceeds for special assessment obligations levied for the construction phase of a capital improvement project should be reported in which of the following fund types?

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

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

Proceeds of tax supported bonds are recognized in a capital projects fund as a(an) :

Which of the following is true regarding capital projects funds?

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

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

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?

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