Exam 6: Accounting for General Long-Term Liabilities and Debt Service

Which of the following debt service funds would normally have the largest balance in its Fund Balance account?

Select the key term that relate to accounting for general long-term liabilities and debt service from the list that best matches with the following definition. A. Legal defeasance B. Regular serial bonds C. In-substance defeasance D. Irregular serial bonds E. Debt limit F. Annuity serial bonds G. Debt margin ________ 1. A transaction in which cash or other assets are placed into an irrevocable trust for the benefit of debt holders ________ 2. Bonds for which the amount of annual principal repayments is scheduled to increase each year by approximately the same amount that interest payments decrease ________ 3. Bonds payable in which the total principal is repayable in a specified number of equal annual installments ________ 4. The maximum amount of gross or net debt that is legally permitted ________ 5. A transaction in which debt is legally satisfied based on certain provisions in the debt instrument even though the debt has not been repaid

On March 2, 2019, 20-year, 6 percent, general obligation serial bonds were issued at the face amount of $3,000,000. Interest of 6 percent per annum is due semiannually on March 1 and September 1. The first payment of $150,000 for redemption of principal is due on March 1, 2020. Fiscal year-end occurs on December 31. What is the interest expenditure for the fiscal year ending December 31, 2019?

A debt service fund is a:

Typically, proceeds from general obligation bonds will be recorded in the:

Which of the following is a True statement regarding in-substance defeasance of bonds?

Special assessment debt that carries government backing should be reported as "special assessment debt with governmental commitment."

Debt limit is a term used to denote the total amount of indebtedness of specified kinds that is allowed by law to be outstanding at any one time.

The City of Spartan's fiscal year ends on December 31. On October 1, 2020, the city issued $1,000,000 of 6%, 10-year term bonds with semiannual interest payments due on April 1 and October 1 each year, beginning on April 1, 2021. What amount of expense should the city recognize in its governmental activities journal for the years 2020 and 2021?

The sale of revenue bonds by a water utility fund would be recorded:

When Sunny City makes its annual lease payment on an unpaid lease obligation, the journal entry for the debt service fund accounts will include:

In the current fiscal year, St. George County issued $3,000,000 in general obligation term bonds for 102. The county is required to use any accrued interest or premiums for servicing the debt issue. a. How would the bond issue be recorded at the fund and government-wide levels? b. How would the bond issue be reported in the fund financial statements and the government-wide financial statements? c. What effect, if any, do interest payments have on the carrying value of the bond issue as reported in the financial statements?

The City of Spartan's fiscal year ends on December 31. On October 1, 2020, the city issued $1,000,000 of 6%, 10-year term bonds with semiannual interest payments due on April 1 and October 1 each year, beginning on April 1, 2021. What amount of expenditures should the city recognize in its debt service fund for the years 2020 and 2021? 

Debt margin is the difference between the debt limit and the amount of outstanding debt subject to the debt limitation.

On the due date for bond interest, the debt service fund journal entry (or entries) will include a debit to:

Debt service funds are used to account for which of the following?

Explain the financial reporting for special assessment bonds when a government assumes responsibility for debt service should special assessment collections be insufficient, and when the government assumes no responsibility whatsoever.

The liability for special assessment bonds that carry a secondary pledge of a city's general credit should be reported in the balance sheet(s) of:

Which of the following statements regarding debt service funds is True?

Special assessments levied for debt service of bonds issued for a special assessment capital project will be accounted for by a debt service fund under which of the following situations? Goverument is secondarily obligated Goverument is not secondarily obligated for the debt far the debt Yes Yes Yes No Yes