Question 1

A government's MD&A states that government-wide net position decreased as a result of the issuance of a long-term liability during the current reporting period. Does this sound correct? How does the issuance of long-term debt typically affect net position in the year of issuance?

Accepted Answer

The answer of A government's MD&A states that government-wide net...

Question 2

Which of the following statements is not True for debt service funds?

Accepted Answer

A)  Special assessment debt for which the government has some obligation is paid through the debt service fund. 
B)  Interest payable may be reported as a liability of the debt service fund. 
C)  Bond principal is shown as a liability of the debt service fund only when that principal is due and payable. 
D)  All tax-supported bond principal is shown as a liability of the debt service fund.

Question 3

Which of the following statements is True?

Accepted Answer

A)  Debt margin is reported in the governmental activities column of the government-wide statements. 
B)  Debt limit represents the total amount of indebtedness of specified kinds that is allowed by law to be outstanding at any one time. 
C)  Overlapping debt is a calculation of the difference between the amount of debt limit calculated as prescribed by law and the net amount of outstanding indebtedness subject to limitation. 
D)  All of the given statements are True.

Question 4

Pollution remediation obligations arise from responsibilities related to the cleanup of hazardous wastes or hazardous substances resulting from existing pollution.

Accepted Answer

A) True 
 B)False

Question 5

Pollution remediation obligations should be recognized if which of the following obligating events has occurred?

Accepted Answer

A)  A violation of a pollution prevention permit has occurred. 
B)  The government is named or will be named as the responsible or potentially responsible party to a remediation. 
C)  The government is compelled to take remediation action due to imminent endangerment to the public health. 
D)  All of the given items are obligating events that would require recognition of a pollution remediation obligation.

Question 6

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

Accepted Answer

A)  A debit to Lease Obligation Payable. 
B)  A credit to Lease Obligation Payable. 
C)  A debit to Lease Expense. 
D)  A debit to Expenditures-Principal of Lease Obligation.

Question 7

Although some governments have issued taxable debt, the interest earned on most debt issued by state and local governments is exempt from federal taxation and, in some states, from state taxation.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Explain the essential differences between regular serial bonds, deferred serial bonds, annuity serial bonds, and irregular serial bonds. How do regular serial bonds differ from term bonds?

Accepted Answer

The answer of Explain the essential differences between regular serial...

Question 10

Term bond issues mature in installments.

Accepted Answer

A) True 
 B)False

Question 11

Resources to pay interest on tax-supported bond issues are generally accumulated in special revenue funds.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following basic financial statements contains a column for the total of all debt service funds?

Accepted Answer

A)  Statement of cash flows. 
B)  Statement of revenues, expenditures, and changes in governmental fund balances. 
C)  Statement of revenues, expenses, and changes in proprietary net position. 
D)  No basic financial statement contains a column for the total of all debt service funds.

Question 13

The liability for general obligation bonds should be recorded in the:

Accepted Answer

A)  General Fund. 
B)  Capital projects fund. 
C)  Governmental activities journal. 
D)  Debt service fund.

Question 14

Financial statement note disclosures on long-term liabilities should include information on authorization of new debt issues, sale of previously authorized issues, and retirement and refunding of debt during the year.

Accepted Answer

A) True 
 B)False

Question 15

On June 1, Brooktown levied special assessments in the amount of $500,000, payable in 10 equal annual installments beginning on June 30. The assessment installments are intended to pay principal and interest on special assessment bonds for which the town has pledged its full faith and credit should assessments be insufficient. Assuming no allowance for uncollectible receivables, the journal entry in the debt service fund on June 1 would include:

Accepted Answer

A)  A debit to Assessments Receivable-Current for $500,000. 
B)  A debit to Assessments Receivable-Current for $50,000. 
C)  A credit to Revenues for $500,000. 
D)  No journal entry is made in the debt service fund because special assessments are used.

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

A government's MD&A states that government-wide net position decreased as a result of the issuance of a long-term liability during the current reporting period. Does this sound correct? How does the issuance of long-term debt typically affect net position in the year of issuance?

Which of the following statements is not True for debt service funds?

Which of the following statements is True?

Pollution remediation obligations arise from responsibilities related to the cleanup of hazardous wastes or hazardous substances resulting from existing pollution.

Pollution remediation obligations should be recognized if which of the following obligating events has occurred?

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

Although some governments have issued taxable debt, the interest earned on most debt issued by state and local governments is exempt from federal taxation and, in some states, from state taxation.

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

Explain the essential differences between regular serial bonds, deferred serial bonds, annuity serial bonds, and irregular serial bonds. How do regular serial bonds differ from term bonds?

Term bond issues mature in installments.

Resources to pay interest on tax-supported bond issues are generally accumulated in special revenue funds.

Which of the following basic financial statements contains a column for the total of all debt service funds?

The liability for general obligation bonds should be recorded in the:

Financial statement note disclosures on long-term liabilities should include information on authorization of new debt issues, sale of previously authorized issues, and retirement and refunding of debt during the year.