Deck 5: Accounting for Other Governmental Fund Types: Capital Projects, debt Service, and Permanent

Question 1

Only the General Fund has a positive Unassigned Fund Balance.

Answer 1

True

Question 2

Fund balances of debt service funds are classified as assigned or unassigned according to the categories identified in GASB Statement 54.

Answer 2

False

Question 3

A special assessment tax is a tax levy that is assessed against only those taxpayers who are deemed to benefit from the service or project paid for by the proceeds of the special assessment levy.

Answer 3

True

Question 4

If a bond sinking fund is required by creditors or law,the unexpended resources would be classified as Restricted.

Question 5

Fund balances of debt service funds are classified among the categories identified in GASB Statement 54 as Restricted and Unrestricted.

Question 6

The residual classification for funds other than the General Fund is Assigned.

Question 7

Debt service and permanent funds do not typically record encumbrances.

Question 8

The principal of permanent funds are classified as Nonspendable Fund Balance.

Question 9

Unexpended intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are likely to be classified as Assigned Fund Balance.

Question 10

The fund balance of permanent funds should be classified as Nonspendable,Spendable and Committed.

Question 11

Net assets represented by supplies and prepaid expenses are classified in governmental funds as Nonspendable Fund balance.

Question 12

Governmental funds recognize encumbrances and expenditures,not expenses.

Question 13

If a sinking fund is required by creditors or law,the unexpended resources would be classified as Assigned Fund Balance.

Question 14

Special assessments are levied to finance long-term construction projects that benefit the general population.

Question 15

Unmatured principal installments and accrued interest which is due shortly after year end are required to be reported as liabilities in the debt service fund at year end.

Question 16

Capital Projects,debt service and permanent funds do not typically record budgets.

Question 17

Debt service funds may accrue interest and report principle payments due if the payments are due within 30 days after year end.

Question 18

Unexpended resources transferred to the debt service fund from the General Fund would typically be classified as Restricted Fund Balance.

Question 19

Unexpended intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are likely to be classified as Restricted Fund Balance.

Question 20

All of the governmental funds use the modified accrual basis of accounting.

Question 21

When bonds are sold to construct a capital asset through a capital projects fund,an entry would be made to debit Cash and credit Bonds Payable in the capital projects fund.
FALSE

Question 22

Under governmental accounting principles for capital and operating leases; expenditures are recorded each period for the amount of the annual lease payment for all leases,but the expenditures are classified differently for capital and operating leases.

Question 23

In a Statement of Revenues,Expenditures,and Changes in Fund Balances,Other Financing Sources are reported within Total Revenues.

Question 24

Investments of permanent funds should be reported at fair value,if determinable,and unrealized gains reported along with realized gains as "Investment Income-Net Increase in Fair Value of Investments."

Question 25

Premiums generated from the issuance of bonds for a capital projects fund are generally transferred to the General Fund.

Question 26

When accounting for interest expenditures through debt service funds,interest is normally recorded as an expenditure when due and payable; it is not accrued at year-end.

Question 27

When a government receives a gift that must be invested permanently and the investment proceeds are used to benefit the government or its citizens,it would be appropriate to account for that gift in a private purpose trust fund.

Question 28

The principal of permanent funds must be classified as Nonspendable Fund Balance.

Question 29

The portion of a permanent fund which is spendable should be reported as Unassigned Fund Balance.

Question 30

Capital outlay expenditures of capital projects funds will result in additions to the general fixed assets reported in the government-wide Statement of Net Assets.

Question 31

Fixed assets are not capitalized in governmental funds.

Question 32

If a government issues new debt,and places the proceeds in an escrow account pending the maturity date of existing debt,the existing debt is said to be defeased.

Question 33

Capital projects funds use the financial resources measurement focus and accrual basis of accounting.

Question 34

Interest revenues accrued at year-end on investments held by a permanent fund.

Question 35

The current and long-term portions of General Long-term Debt are normally reported in a debt service fund.

Question 36

Capital projects funds are not normally included in the Budgetary Comparison Schedule.

Question 37

Capital project funds only exist for the duration of the project for which it is created.

Question 38

Bond refunding is repurchasing bonds from bondholders using residual money left over after a capital project has been completed.

Question 39

When governments construct projects that are financed with special assessment debt,to be paid back by affected property owners,those projects would never be accounted for in capital projects funds.

Question 40

Debt service funds are used to account for the payment of principal and interest of both general and enterprise related long-term debt of a state or local governmental unit.

Question 41

Special Projects Fund is a fund type that is used to account for revenues and other financing sources that are intended to service debt.

Question 42

Fund basis financial statements in which capital projects funds are reported are the Governmental Funds Balance Sheet and the Governmental Funds Statement of Revenues,Expenditures,and Changes in Fund Balances.

Question 43

Permanent funds account for resources that are donor restricted to the extent earnings (but not principal)may be used to support government programs.

Question 44

An encumbrance in a capital project fund is created when the contract for the work is signed or issued.

Question 45

Budgets are typically not recorded for capital projects,debt service,and permanent funds.

Question 46

A special assessment tax is assessed against all tax payers regardless of who benefits.

Question 47

General Funds and special revenue funds typically record budgets.

Question 48

With respect to Capital Projects Funds,GASB standards require the accrual basis of accounting.

Question 49

If taxes and/or special assessments are levied specifically for payment of interest and principal on long-term debt,those taxes are recognized as revenues of the debt service fund.

Question 50

Budgets are typically not recorded for Capital Projects Funds.

Question 51

Major sources of funding for Capital Project Funds include the issuance of long term debt and grants from other governmental units.

Question 52

Budgets are typically recorded for Special Revenue Funds.

Question 53

An annuity serial bond is one where the amount of the principal increases each year by the same amount that the interest payments decrease.

Question 54

Proceeds of debt issues should be recognized by a Capital Projects fund at the time the debt is authorized.

Question 55

A non-expendable trust which benefits a government or its citizenry and which stipulates that earnings only (not principal)may be used for its prescribed purpose would be reported in a Special Revenue Fund.

Question 56

Budgets are typically not recorded for Debt Service Funds.

Question 57

Funds whose earnings benefit individuals,private organizations,or other governments are reported in permanent funds.

Question 58

Encumbrance accounting is typically used for Permanent Funds.

Question 59

When using debt service accounting,long term interest is not to be accrued unless the payment is due in no more than one month and the government has resources available for payment.

Question 60

Private-purpose Trust Funds benefit individuals,private organizations,or other governments.

Question 61

When a government acquires general fixed assets under a capital lease agreement,the asset should be recorded in the government-wide financial statements:

A) at the inception of the lease agreement at the lesser of the present value of the minimum lease payments or the fair market value of the property.
B) as an expenditure when payments are made.
C) at the inception of the lease agreement for the total lease payments.
D) as an expense when payments are made.

Question 62

Which of the following is true with respect to special assessment levies?

A) Taxpayers may opt out of a service-type special assessment if they agree to not use the service funded by the assessment.
B) Service-type special assessments may not be accounted for in the General or special revenue fund.
C) Construction-type special assessments are accumulated until there is enough money to finance the construction project.
D) If the government is not liable for the special assessment debt directly or through guarantee, the special assessment is accounted for in an agency fund.

Question 63

Which of the following statements is false?

A) Debt service funds are required to report accrued interest and principal payments as current liabilities.
B) All of the governmental funds use the modified accrual basis of accounting.
C) General fixed assets that are acquired with governmental fund resources are recorded as expenditures in the governmental funds but are displayed as capital assets in the governmental-wide financial statements.
D) Permanent funds reflect resources that are legally restricted so that principal may not be expended and earnings are used to benefit the government or its citizenry.

Question 64

With respect to Debt Service Funds,which of the following is not correct?

A) Typically, resources are provided through transfers from the General or other funds.
B) There are two types of debt service expenditures: interest and principal.
C) Debt service funds never accrue interest.
D) In most cases, interest and principal payments are not recorded until payment is due.

Question 65

With respect to Permanent Funds,which of the following is not true?

A) The principal is classified as Nonspendable Fund balance.
B) Permanent Funds are created when resources are provided by private donation.
C) Permanent Funds use the current financial resources measurement focus.
D) Earnings in excess of expenditures must be added to principal corpus.

Question 66

If the government is primarily or secondarily liable for the payment of debt principal and interest for a special assessment project:

A) The tax levy and debt service expenditures should be recorded in an internal service fund.
B) A special revenue fund should account for the proceeds of the debt and construction expenditures.
C) The project is accounted for as if it were a governmental project.
D) The debt is not recorded in the government-wide statements.

Question 67

A gift of $1,000,000 to a city,to be invested permanently,with the proceeds to be used to maintain the city war memorials should be accounted for in a special projects fund.

Question 68

Which of the following is not correct regarding Government Trust Accounting?

A) If a trust is to benefit the government or its citizenry, it should be accounted for in a special revenue or permanent fund.
B) If a trust is to benefit individuals, private organizations, or other governments, it should be accounted for in a private-purpose trust fund.
C) The journal entry to establish a permanent fund would include a credit to Fund Balance - Restricted.
D) Trust funds accounted for in a permanent fund use modified accrual accounting.

Question 69

With respect to Debt Service Funds,which of the following is true?

A) Each separate long-term obligation must be accounted for in a separate debt service fund
B) Debt service funds may be required to service capital lease obligation
C) Debt service funds use accrual accounting
D) All of the above are true.

Question 70

Which of the following statements regarding serial bonds is false?

A) The principal on serial bonds is paid over the term of the bonds.
B) The assets of a debt service fund may include Cash with Fiscal Agent.
C) The principal repayment on an annuity serial bonds decreases each year as the outstanding balance decreases.
D) If the first payment is delayed for more than a year with equal payments thereafter, the bonds are deferred serial bonds.

Question 71

Which of the following is not a source of funding for capital projects?

A) Issuance of long term debt
B) Proceeds of dedicated taxes
C) Gifts from individuals or organizations
D) All of the above are sources of funding for capital projects.

Question 72

Which of the following statements is false?

A) Supplies and prepaid expenses are classified in governmental funds as Nonspendable Fund balance.
B) Capital Projects, debt service and permanent funds do not typically record budgets.
C) Debt service and permanent funds do not record encumbrances.
D) Principal of permanent funds is classified as Committed Fund Balance.

Question 73

Which of the following is false with respect to long-term debt?

A) Term bonds mature in their entirety on a given date.
B) If a sinking fund is required by creditor or law, the unexpended resources would be classified as restricted.
C) Resources transferred to the debt service fund from the General Fund would typically be classified as Other financing sources by the debt service fund.
D) All of the above statements are true.

Question 74

Which of the following funds has an indefinite life?

A) General Fund.
B) Special revenue.
C) Capital projects.
D) Debt Service.

Question 75

Which of the following statements is false?

A) Intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are likely to be classified as Assigned Fund Balance.
B) The corpus (principal) from a permanent fund should be classified as Nonspendable.
C) The residual classification for funds other than the General Fund is Assigned.
D) If a bond sinking fund is required by creditors or law, the unexpended resources would be classified as Restricted.

Question 76

Fixed assets of completed projects are recorded in the accounts of capital projects funds.

Question 77

With respect to Capital Projects Funds which of the following is correct?

A) These funds commonly account for resources provided by long-term debt issues or dedicated taxes.
B) Acquired capital assets appear in the government-wide but not the fund basis financial statements.
C) A and B are both correct.
D) Neither A or B is correct.

Question 78

Which of the following statements is true?

A) Fund balances of debt service funds are classified among the categories identified in GASB Statement 54 as Restricted and Unrestricted.
B) The principal of permanent funds are classified as Nonspendable Fund Balance.
C) The fund balance of permanent funds should be classified as Nonspendable, Spendable and Committed.
D) All funds have an Unassigned Fund Balance.

Question 79

A gift of $1,000,000 to a city,to be invested permanently,with the proceeds to be used to maintain the city war memorials should be accounted for in a permanent fund.

Question 80

With respect to bond refunding,which of the following is false?

A) Advanced refunding exists when the proceeds of a bond issue are placed in an escrow account pending the maturity date of the existing debt.
B) Advanced refunding will result in both the original and new debt to be reported in the fund statements.
C) Current refunding exists when new debt is issued to call the existing debt.
D) Bond refunding is often done to obtain better interest rates.