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Governmental Accounting: Debt Issuance, Capital Projects, and Fixed Asset Reporting

An assignment covering financial reporting and debt issuance in government accounting.

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    Governmental Accounting: Debt Issuance, Capital Projects, and Fixed Asset Reporting This quiz consist of 30 multiple choice questions. The first 15 questions cover the material in Chapter 6. The second 15 questions cover the material in Chapter 7. Be sure you are in the correct Chapter when you take the quiz. Question 1 4 out of 4 points A governmental entity has elected to issue new debt and use the proceeds to redeem existing debt because there is an economic gain in doing so. There is, however, an ‘accounting loss’ associated with these events. An accounting loss is defined as Answer Selected Answer: The cash paid to redeem the old debt less the book value of the old debt. Correct Answer: The cash paid to redeem the old debt less the book value of the old debt. Question 2 4 out of 4 points Six years ago Hill City issued $10 million of 6% term bonds, due 30 years from the date of issue. Interest on the bonds is payable semi - annually on January 1 and July 1. Hill City has a September 30 fiscal year end. The amount of interest payable that would be included on the balance sheet for the debt service fund of Hill City at September 30 would be Answer Selected Answer: $ - 0 - Correct Answer:

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    $ - 0 - Question 3 4 out of 4 points 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? Answer Selected Answer: Governments must maintain capital project funds for resources that are legally restricted to the acquisition of fixed assets. Correct Answer: Governments must maintain capital project funds for resources that are legally restricted to the acquisition of fixed assets. Question 4 4 out of 4 points 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 sold for 101. What are appropriate entries related to the premium? In the capital project fund Answer Selected Answer: Debit Cash $100,000; Credit Other Financing Sources — $100,000; ALSO Debit Other Financing Uses — Nonreciprocal Transfer $100,000; Credit Cash $100,000 Correct Answer: Debit Cash $100,000; Credit Other Financing Sources — $100,000; ALSO Debit Other Financing Uses — Nonreciprocal Transfer $100,000; Credit Cash

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    $100,000 Question 5 0 out of 4 points The City of St. Joe had outstanding $5 million of 6% bonds with a call provision. Due to changes in the prevailing interest rates, the City issued new bonds at 4.5% and used the proceeds to call the 6% bonds. This is an example of Answer Selected Answer: In - substance defeasance. Correct Answer: Debt refunding. Question 6 4 out of 4 points The City of Williamsburg decided to defease old 6% bonds carried in its Electric Enterprise Fund with new 4.5% bonds. As a result of the defeasance, the City incurred an accounting loss. This loss should be recognized Answer Selected Answer: Over the remaining life of the old bonds or the new bonds, whichever is shorter. Correct Answer: Over the remaining life of the old bonds or the new bonds, whichever is shorter. Question 7 4 out of 4 points

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    Harbor City issued 6% tax - exempt bonds and used the proceeds to acquire federal government securities yielding 7%. After paying the interest on the tax - exempt bonds, the City cleared 1%. This is an example of Answer Selected Answer: Arbitrage. Correct Answer: Arbitrage. Question 8 4 out of 4 points 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. The entry in the capital project fund to record the additional funding for the construction would be Answer Selected Answer: Debit Due from General Fund $.5 million; Credit Other financing Sources $.5 million. Correct Answer: Debit Due from General Fund $.5 million; Credit Other financing Sources $.5 million. Question 9 4 out of 4 points Adams County has outstanding $10 million in bonds issued by the County to construct a sewer system in a specific area of the county. The taxpayers in that area voted for the construction and the bonds and agreed to tax themselves to pay the principal and interest on the

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