Question 1

Which of the following is true?

Accepted Answer

D

Question 2

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

Accepted Answer

The Capital Project Fund would report the General Fund's share of the project as a $1,000,000 other financing source because transfers from the General Fund to finance capital projects are considered other financing sources, not revenue.

Question 3

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

Accepted Answer

Capital Projects Funds are used to account for the acquisition or construction of major capital assets such as buildings, land, and equipment that have a useful life of at least three years. Construction of a general government office building is a capital asset-related transaction that would most likely be accounted for through a Capital Projects Fund. The other options are not typically accounted for through a Capital Projects Fund.

Question 4

Bond anticipation notes are

Accepted Answer

Bond anticipation notes can sometimes be treated as general long-term liabilities, even if they have a term of one year or less. This depends on whether they are considered to be part of the overall financing plan for a specific project, rather than just a short-term cash flow solution.

Question 5

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.

Question 6

There are four (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 four (4) separate scenarios for...

Question 7

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 June 30, 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, August 31, 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 8

Which 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 financing the construction project are not capitalized as part of the cost of a capital asset acquired through a Capital Projects Fund. While the interest paid during the construction period is added to the cost of the asset, the interest paid on the long-term financing of the project is not. Instead, it is recorded as an expenditure in the fund's statement of revenues, expenditures, and changes in fund balances. A, B, and D are all costs that can be capitalized as part of the cost of a capital asset acquired through a Capital Projects Fund.

Question 9

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 refinanced 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

The bond anticipation notes (BANs) are expected to be refinanced into long-term debt, so they are not reported as a liability in the Capital Projects Fund, which is used for short-term financing.

Question 10

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 11

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 12

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

Accepted Answer

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

Question 13

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 bond anticipation notes are to be repaid from bond proceeds if the voters approve the bonds. Therefore, they are a liability of the Capital Projects Fund.

Question 14

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:

$\underline{\text{ Transactions:  }}$
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.

$\underline{\text{ Requirements: }}$ 
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 15

Which of the following is a distinguishing feature of a budget for a Capital Projects Fund?

Accepted Answer

A distinguishing feature of a budget for a Capital Projects Fund is that it is usually for the term (life) of the project, rather than just a single year or for projects where contracts will be issued. Additionally, since a Capital Projects Fund is used to account for the acquisition or construction of major capital facilities or assets, revenue or other financing sources are typically important components of the budget.

Question 16

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 17

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 18

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 because they represent a reduction in the amount of money received from the bond issuance, rather than an outflow of resources. Payment of construction costs, bond issue costs, and interest on short-term debt issued to finance capital project are all expenditures that would be reported in a Capital Projects Fund.

Question 19

Retirement of the principal of a bond anticipation note 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

The retirement of a bond anticipation note is not reported in the Capital Projects Fund operating statement because it is not an operating transaction.

Question 20

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.
$\underline{\text{ Transactions: }}$ 
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...

Quiz 7: Capital Projects Funds