ACC 410 Week 11 Final Exam – Strayer
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Chapter 6 Through 15
Part 1: Chapter 6 Through 10
Part 2: Chapter 11 Through 15
Governmental Activities -
Accounting for Capital Projects and Debt Service
TRUE/FALSE (CHAPTER 6)
1. The resources to service all long-term
debts of the governmental entity are typically accounted for in debt service
funds.
2. When governments establish capital projects
funds, they may choose to maintain a separate fund for each major project, or
they may choose to combine two or more projects in a single fund.
3. GASB Statement No. 34 does not require a
budgetary comparison statement for capital projects funds as it does for the
general fund and for each major special revenue fund that has a legally adopted
annual budget.
4. Capital projects funds do not report
long-term obligations in the fund.
5. When bonds are issued at a premium, the
capital projects fund can transfer those excess resources to the debt service
fund.
6. When bonds
are issued at a discount, the debt service fund usually transfers an amount to
the capital projects fund to make up for the deficiency.
7. In
accounting for costs incurred on a major construction project in a capital
projects fund, the construction outlays would be accumulated in a long-term
asset account.
8. Debt
service funds are maintained to account for resources accumulated to pay
interest and principal on general long-term debt—that is, long-term debt
associated primarily with governmental activities.
9. In
contrast to the accounting for debt service fund expenditures, the interest
revenue on bonds held as investments should be accrued in the period the
revenue is earned.
10. Special
assessments are imposed nonexchange transactions, similar to property tax
levies.
11. The
interest paid on debt issued for public purposes by state and local governments
is generally subject to federal taxation.
12. Nongovernmental not-for-profits must account
for defeasances differently than governments.
MULTIPLE CHOICE (CHAPTER 6)
1. The capital project fund of a governmental
entity is accounted for using which of the following bases of accounting?
a)
Budgetary basis.
b)
Cash basis.
c)
Modified accrual basis.
d)
Accrual basis.
2. In which fund type would a governmental entity’s
capital project fund be found?
a)
Governmental fund type.
b)
Proprietary fund type.
c)
Fiduciary fund type.
d)
Capital project fund type.
3. The debt service fund of a governmental entity is accounted
for using which of the following bases of accounting?
a)
Budgetary basis.
b)
Cash basis.
c)
Modified accrual basis.
d)
Accrual basis.
4. In which fund type would a governmental
entity’s debt service fund be found?
a) Governmental fund type.
b)
Proprietary fund type.
c)
Fiduciary fund type.
d)
Capital project fund type.
5. With regard to the resources dedicated to
the acquisition of fixed assets which will be used in general government activities,
which of the following is true?
a) Governments must maintain capital project
funds for resources that are legally restricted to the acquisition of fixed
assets.
b)
Governments may maintain capital project funds for resources that are
legally restricted to the acquisition of fixed assets.
c)
Governments may account for any resources dedicated (whether legally or
not) to the acquisition of fixed assets in any of the governmental funds.
d)
Government must account for all resources set aside for fixed asset
acquisition in a capital project fund.
6. Salt City issued $5 billion of bonds at face
value to fund the reconstruction of the major interstate highways in and around
their 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
statement, how would the underwriting fee be accounted for in the capital
project fund?
a)
Reduce Other financing sources $2 million.
b)
Reduce Bonds payable $2 million.
c)
Increase Expenditures $2 million.
d)
It would not be accounted for in the capital project fund.
7. 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% and were sold at 101. Which of the
following entries should be made in the Capital Project Fund to record this
event?
a)
Debit Cash $2.02 million; Credit Bonds Payable $2 million and Premium on
Bonds Payable $.02 million.
b)
Debit Cash $2.02 million; Credit Bonds Payable $2 million and Other
Financing Sources $.02 million.
c)
Debit Cash $2.02 million; Credit Other Financing Sources $2.02 million.
d)
Debit Cash $2.02 million; Credit Other Financing Sources $2 million and
Revenue $.02 million.
Use the following information to
answer questions # 8 and #9
Voters
in Lincoln School District approved the construction of a new high school and
approved a $10 million bond issue with a stated rate of interest of 6% to fund
the construction. Bids were received
and the low bid was $10 million. When
the bonds were issued, they sold for face value less bond underwriting fees of
$.5 million. The School Board voted to
fund the balance of the construction by a transfer from the general fund.
8. The entry in the capital project fund to
record the receipt of the bond proceeds would be
a)
Debit Cash $9.5 million; Credit Bonds Payable $9.5.
b)
Debit Cash $9.5 million; Credit Other Financing Sources $9.5.
c)
Debit Cash $9.5 million and Expenditures $.5 million; Credit Bonds
Payable $10 million.
d)
Debit Cash $9.5 million and Expenditures $.5 million; Credit Other
Financing Sources $10.
a)
Debit Due from General Fund $.5 million; Credit Other financing Sources
$.5 million.
b)
Debit Due from General Fund $.5 million; Credit Revenue $.5 million.
c)
Debit Cash $.5 million; Credit Due to General Fund $.5 million.
d)
Debit Other Financing Sources $.5 million; Credit Due to General Fund
$.5 million.
Use the following information to
answer questions #10 and #11
Voters in Phillips City approved the
construction of a new $10 million city hall building and approved a $10 million
bond issue with a stated rate of interest of 6% to fund the construction. When the bonds were issued, they s
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