Question 1

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 - Transfer In because it represents an inflow of resources from a non-operating fund.

Question 2

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

If funds are left over at the end of a capital project that was financed by bond proceeds, those funds must be used for debt service or to refund the bonds. Therefore, the funds would be transferred to a debt service fund. The capital projects fund would debit Other Financing Uses-Transfers Out to show that the funds are being transferred out, and the debt service fund would credit Other Financing Sources-Transfers In to show that the funds are being transferred in. This ensures that the funds are being used in accordance with the bond covenants and restrictions.

Question 3

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 type since it is used for the construction or acquisition of major capital facilities or improvements.

Question 4

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

Accepted Answer

When a payment is due to a contractor from capital projects fund resources, the debit would be to Expenditures-Capital Outlay account. This is because the payment is made for a capital project, which is a long-term investment for the government. The capital outlay account is used to track the expenses related to these projects, such as construction costs, land purchases, and equipment. A capital asset account is used to record the acquisition of tangible assets, such as buildings and vehicles. Encumbrances Control is used to track the commitments made for goods and services that have not yet been received or paid for. No entry is made until payment is not the correct choice because the transaction requires an accounting entry to record the expenditure.

Question 5

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

Accepted Answer

Debt service funds use the measurement focus of the economic resources measurement focus and the accrual basis of accounting, which is the same as the special revenue funds. Internal service funds use the measurement focus of the economic resources measurement focus and the accrual basis of accounting or the internal service fund financial statements. Therefore, the best choice is B, which is special revenue funds.

Question 6

How would the government account for the unused bond proceeds?

Accepted Answer

The unused bond proceeds would be accounted for as an other financing source in the debt service fund and as an other financing use in the capital projects fund. This is because the bond proceeds were originally intended to be used for capital projects, but they were not used for that purpose. Therefore, the unused bond proceeds must be recorded as an other financing source in the debt service fund and as an other financing use in the capital projects fund.

Question 7

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 8

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 9

Use the following to answer the next four questions:
On April 1, 2015, the City of Southern Ponds issued $3,500,000 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 $3,490,000 was used to construct the police station, which was completed before December 31, 2015, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2015, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $175,000 is due April 1, 2016.
-How would the $3,490,000 be accounted for?

Accepted Answer

The $3,490,000 would be accounted for as an expenditure in the capital projects fund and as a capital asset in the government-wide Statement of Net Position.

Question 10

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 11

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

Accepted Answer

Proceeds of tax supported bonds are considered as financing sources for capital projects fund. Therefore, they are recognized as Other Financing Sources in the fund's financial statements.

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

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

Accepted Answer

GASB requires that investments with determinable fair values be recorded at fair value at year end and unrealized gains reported along with realized gains as "Investment Income-Net Increase in Fair Value of Investments."
Use the following to answer the next four questions:
On April 1, 2017, 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, 2017, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2017, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $200,000 is due April 1, 2018.

Question 14

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

Accepted Answer

Trusts that generate income for the benefit of the government or its citizens and require the principal to be maintained are reported in permanent funds. The scholarships benefits individuals and should be accounted for in a private-purpose trust fund. The landscaping improvements would be accounted for in a special revenue fund.

Question 15

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

A Special Revenue Fund is used to account for proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes, such as maintaining flower beds in city parks.

Question 16

Use the following to answer the next four questions:
On April 1, 2015, the City of Southern Ponds issued $3,500,000 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 $3,490,000 was used to construct the police station, which was completed before December 31, 2015, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2015, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $175,000 is due April 1, 2016.
-In addition to reporting a $3,500,000 liability and a $35,000 bond premium in the government-wide Statement of Net Position,how would the bond sale be reported?

Accepted Answer

The bond sale would be reported as a $3,535,000 other financing source in the capital projects fund, reflecting the total proceeds including the premium. The $35,000 premium is an other financing use in the capital projects fund and an other financing source in the debt service fund.

Question 17

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

Accepted Answer

Permanent funds are established for a specific purpose and the principal amount cannot be spent. In this case, the gift of $1,000,000 to maintain city war memorials is a specific purpose that meets the criteria for a permanent fund.

Question 18

Which of the following is not true regarding permanent funds?

Accepted Answer

A trust to benefit individuals, private organizations or other governments would be accounted for in a private-purpose trust fund.

Question 19

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

Accepted Answer

When bonds issued to fund a capital project are sold at a premium, the additional money received is recorded as Other Financing Sources - Premium on Bonds in the capital projects fund. This amount is then transferred from the capital projects fund to the debt service fund to pay off the principal and interest on the bonds. Therefore, both option A and B are correct. The additional money would not be transferred to the General Fund (option C) as it is not related to the general operations of the government.

Question 20

Use the following to answer the next four questions:
On April 1, 2015, the City of Southern Ponds issued $3,500,000 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 $3,490,000 was used to construct the police station, which was completed before December 31, 2015, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2015, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $175,000 is due April 1, 2016.
-What amount would be reported as debt service expenditures for 2015?

Accepted Answer

The debt service expenditures for 2015 would include the interest payment made on October 1, 2015. The interest for six months on $3,500,000 at 4% is $70,000.

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

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

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?

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?

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:

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) :

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) :

Which of the following is true regarding capital projects funds?

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

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

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?

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:

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

Which of the following is not true regarding permanent funds?

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