ACC 410 Week 6 Quiz – Strayer
Click on the Link Below to
Purchase A+ Graded Course Material
Quiz 4 Chapter 6 and 7
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 sold for
101. What are appropriate entries
related to the premium?
10. In the
capital project fund
a)
Debit Cash $100.000; Credit Revenues $100,000 ; no other entries
required.
b)
Debit Cash $100,000; Credit Other Financing Sources $100,000; No other
entries required.
c) Debit Cash $100,000; Credit Revenues; ALSO
Debit Other Financing Uses—Nonreciprocal
Transfer $100,000; Credit Cash $100,000
11. In the
debt service fund
a) Debit Cash $100.000; Credit Revenues
$100,000 ; no other entries required.
b)
Debit Cash $100,000; Credit Other Financing Sources—Nonreciprocal
Transfer $100,000; No other entries
required.
c) Other Financing Sources—Nonreciprocal
Transfer $100,000; credit Cash $100,000.
12. Sister City was notified by the State that
they had been awarded a $6 million grant to aid in the construction of a senior
citizens center. At the time of the
notification what is the appropriate entry in the capital project fund (assuming
that the City maintains its books and records in a manner to facilitate the
preparation of the fund financial statements)?
a)
No entry at the time of the notification
b)
Debit Grants Receivable $6 million; Credit Revenue $6 million
c)
Debit Grants Receivable $6 million; Credit Deferred Revenue $6 million.
d)
Debit Grants Receivable $6 million; credit Other Financing
Sources—Nonreciprocal Transfer $6 million.
13. Previously Rose City issued bonds with a
face value of $10 million to construct a new city maintenance facility. Assuming that the City maintains its books
and records in a manner that facilitates the preparation of the fund financial
statements, what is the appropriate entry when the City receives a progress
billing from the contractor?
a)
Debit Building; Credit Cash
b)
Debit Building; Credit Accounts Payable.
c)
Debit Expenditure; Credit Accounts Payable
d)
No entry is required.
14. Previously Atomic City had issued bonds with
a face value of $10 million to construct a new city hall. Because the money will not be needed for
several months, the city invested the bond proceeds in U.S. Government
securities. Assuming that the city
maintains its books and records in a manner that facilitates the preparation of
the fund financial statements, what is the appropriate entry when the City
receives interest on the investments?
a)
Debit Cash; Credit Revenue.
b)
Debit Cash; Credit Other Financing Source
c)
Debit Cash; Credit Deferred
Revenue
d)
No entry required.
15. A City issued bonds for the purpose of
financing a major capital improvement.
Which fund is the most appropriate fund in which to record the receipt
of the bond proceeds?
a)
General Fund.
b)
Special Revenue Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
16. Use of a Debt Service Fund is required
a)
When financial resources are being accumulated for the purpose of paying
for capital asset acquisition.
b)
When financial resources are being accumulated for the purpose of paying
principal and interest when it matures.
c)
For all bonded debt service payments.
d)
For all debt service payments.
17. 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
a)
$ -0-
b)
$150,000
c)
$300,000
d)
$600,000
18.
Sue City has outstanding $5 million in general term bonds used to finance the construction of the
new City Library. Sue City has a June 30
fiscal year-end. Interest at 6% is
payable each January 1 and July 1. The
principal of the bonds is due 10 years in the future. The City budgeted the July 1, 1999 interest
payment in the budget for the fiscal year ended June 30, 1999. On June 30, cash was transferred from the
General Fund to the Debt Service Fund to make the required payment. The maximum amount of interest payable that
may be included on the balance sheet of the debt service fund of Sue City at
June 30 would be
a)
$ -0-
b)
$150,000.
c)
$300,000.
d)
$3,000,00.
Use the following information to
answer questions #19 and #20
Calhoun County makes annual transfers from the general
fund to the debt service fund to pay principal and interest on long-term debt.
19. When the
County makes the transfer the entry in the debt service fund should be
a)
Debit Cash; Credit Revenue.
b)
Debit Cash; Credit Other Financing Sources.
c)
Debit Cash; Credit Interest Payable.
d)
Debit Cash with Fiscal Agent; Credit Other Financing Sources.
20. In
the debt service fund, what is the appropriate entry when the principal payment
is made?
a)
Debit Bonds Payable; Credit Cash.
b)
Debit Expenditures; Credit Cash.
c)
Debit Other Financing Uses—Nonreciprocal
Transfer; Credit Cash.
d)
No entry is required.
Use the following information to
answer questions #21 and #22.
The
citizens of a specific area of the City of Arlington approved the construction
of sidewalks in their residential neighborhood and approved a $1 million bond
issue to finance construction of those sidewalks. The citizens agreed to tax themselves for 20
years in an amount sufficient to pay principal and interest on the bonds. The City will oversee the construction of the
sidewalks and act as agent for servicing the debt. The City does not guarantee the debt nor does
it assume any legal or moral obligation for the bonds.
21. The proceeds of the bond issue should be
recorded in which fund of the City of Arlington?
a)
Agency Fund.
b)
Special Assessment Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
22. When the City collects the special tax, the
proceeds of that tax should be accounted for in which fund of the City of
Arlington?
a)
Agency Fund.
b)
Special Assessment Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
Use the following information to
answer questions #23 - #25.
The citizens of a specific area of the City of
Arlington approved the construction of sidewalks in their residential
neighborhood and approved a $1 million bond issue to finance construction of those
sidewalks. The citizens agreed to a
special tax on their property for 20 years in an amount sufficient to pay
principal and interest on the bonds. The
City will oversee the construction of the sidewalks and act as agent for
servicing the debt. If the special tax
is not sufficient to make the principal and interest payments, the City will
assume the obligations.
23. The
proceeds of the bond issue should be recorded in which fund of the City of
Arlington?
a)
Agency Fund.
b)
Special Assessment Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
24.
When the City collects the special tax, the proceeds of that tax should
be accounted for in which fund of the City of Arlington?
a)
Agency Fund
b)
Special Assessment Fund.
c)
Capital Project Fund.
d)
Debt Service Fund.
a)
Debit Taxes Receivable; Credit Revenues.
b)
Debit Taxes Receivable; Credit Deferred Revenues.
c)
Debit Taxes Receivable; Credit Liability.
d)
Debit Taxes Receivable; Credit Fund Balance.
26.
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 bonds. The County
contracted for the construction and issued the bonds but the City assumed no
legal or moral obligation for the bonds.
If the special tax payments are not sufficient to make the required
principal and interest payments, the County will not make up the difference. The $10 million of bonds should appear in which
fund financial statements or schedule?
a)
Capital Project Fund.
b)
Special Assessment Fund.
c)
Schedule of Long-term Obligations.
d)
The bonds need not appear on the face of the financial statements of
Adams County.
27.
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
a)
An illegal act.
b)
Poor fiscal management.
c)
Arbitrage.
d)
Debt refunding.
28.
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
a)
Debt retirement.
b)
Debt refunding.
c)
In-substance defeasance.
d)
Economic defeasance.
29. 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
a)
The present value of the principal and interest payments on the new debt
less the present value of the principal and interest payments on the old debt.
b)
The present value of the principal and interest payments on the old debt
less the present value of the principal and interest payments on the new debt.
c)
The cash paid to redeem the old debt less the book value of the old
debt.
d)
The face value of the new debt less the cash paid to redeem the old
debt.
30.
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
a)
As an adjustment to retained earnings since it is applicable to prior
periods.
b)
In the year of the defeasance.
c)
Over the remaining life of the old bonds or the new bonds, whichever is
shorter.
d)
It should not be recognized.
PROBLEMS (CHAPTER 6)
1. The voters of Salt Lake City authorized the
construction of a new north-south expressway for a total cost of no more that
$75 million. The voters also approved
the issuance of $50 million of 5% general obligation bonds. The balance of the necessary funds will come
from the following sources: $15 million
from a federal grant and $10 million
from a state grant. The City controls
expenditures in capital project funds through project management The City does not formally incorporate
budgetary entries in the capital project fund but it does use encumbrance
accounting for control purposes.
REQUIRED: Assuming the City
maintains its books and records in a manner that facilitates the preparation of
the fund financial statements, prepare journal entries, in the Capital Project
Fund, for the following transactions.
(a) The City issued $50 million of 5% general
obligation bonds at 101.
(b) The City transferred the premium to the
appropriate fund.
(c) The City incurred bid-related expenditures of
$1,000.
(d) The City signed a contract with the lowest
competent bidder for $48 million.
(e) The city received notice from the
State that the grant had been approved and the proceeds will be forwarded to
the City in the State’s current fiscal year.
(f) The City received the
federal grant in full.
(g) The City received a progress billing from the
contractor for $10 million. The City pays the billing.
2. The City of Eugene has the following
balances in the accounts of its capital project fund at year-end. All accounts have normal balances. All amounts are in millions of dollars.
REQUIRED:
(a) Prepare an operating
statement for the capital project fund.
(b) Prepare a Balance Sheet for the capital
project fund.
Cash $ 68
Deferred
Revenue $ 5
Expenditures $ 10
Fund
Balance—Unreserved $ 14
Grants
Receivable $ 10
Other
Financing Sources $ 50
Other
Financing Uses $ 1
Revenues $ 20
3. In 1999, the voters of Southside City
authorized the construction of a new swimming pool for a total cost of no more
that $5 million. The voters also
approved the issuance of $5 million of 5% general obligation serial bonds to be
repaid by a special property tax .
Interest on these bonds is payable annually on June 30. On June 30, 1999, the City sold the bonds at
101 and signed contracts for the construction of the swimming pool. Each June 30, beginning in 2000, $250,000 of
the bonds mature. If the property tax is
not sufficient to make the necessary principal and interest payments the City
is obligated to transfer the necessary monies from the general fund to the debt
service fund. The City does not formally
incorporate budgetary entries in the debt service fund but it does use encumbrance accounting
for control purposes. The City has a
June 30 fiscal year end.
REQUIRED:
Assuming the City maintains it
books and records in a manner that facilitates the preparation of the fund
financial statements, prepare journal entries, in the Debt Service Fund, for the following transactions.
(a)
The City immediately transferred the premium to the Debt Service
Fund. The Debt Service Fund may not use
the premium to pay principal or interest until the year 2019.
(b) On June 30, Southside City invests the
premium in a 10-year 5% Certificate of Deposit at a local financial institution. The Certificate pays interest annually on
June 30. The interest is automatically
reinvested in the Certificate.
(c) Property taxes in the amount of $300,000 were collected by June 30,
2000. Another $50,000 is expected to be
collected by August 31.
(d) The city transferred, to the debt service
fund, the cash necessary to make the June 30, 2000 payments. The checks will be mailed on July 1.
(e) The city recognized the interest earned on
the Certificate of Deposit.
(f) The city recognizes the appropriate
liabilities in the debt service fund.
ESSAYS
(CHAPTER 6)
1. The citizens of a defined geographical area
of the City of Sale authorized a special assessment to be levied on their
property to finance the reconstruction of the sewer system infrastructure that
serves the area. The City will solicit
bids, oversee reconstruction, issue the debt in the name of the City, and
service the debt. The City does not guarantee the debt but the City
will collect the special assessments and make principal and interest payments
to the bondholders. Discuss the
appropriate accounting for the construction phase and the debt service phase of
this project. Justify the required
accounting and financial reporting for these two phases of this project.
2. What is arbitrage? What are its potential uses and/or
abuses? How are potential abuses
regulated?
Chapter 7
Governmental Activities - Capital
Assets and Investments in Marketable Securities
TRUE/FALSE (CHAPTER 7)
1. General capital assets are distinguished
from the capital assets of proprietary funds and fiduciary funds.
2. General capital assets are excluded from
governmental funds, themselves, because of the funds measurement focus (current
financial resources).
3. In governmental funds, the capital asset
costs are reported as expenses when the assets are acquired.
4. At the government-wide level, governments
must depreciate inexhaustible assets, such as land, works of art, or historical
treasures.
5. Governments do not have to depreciate
infrastructure assets if they can demonstrate they are preserving them in a
specified condition.
6. Unlike businesses, governments should not
capitalize interest on general capital assets that they construct themselves.
7. Most infrastructure assets are the
responsibility of the federal government, not state and local governments.
8. Prior to the issuance of GASB Statement No.
34, state and local governments provided virtually no information as to most of
their infrastructure.
9. Governments invest in marketable securities
for much the same reason that businesses do—to earn a return on cash that would
otherwise be unproductive.
10. Governments are prohibited from entering into
reverse repurchase agreements.
MULTIPLE CHOICE (CHAPTER 7)
1. The objectives of financial reporting for
fixed assets should be to provide information
a)
About a governmental entity’s physical resources.
b)
That can be used to assess the service potential of a governmental entity’s
physical resources.
c)
To help users assess a government’s long- and short-term capital needs.
d)
All of the above.
2. A governmental entity may record long-term
assets in which of the following funds or account groups?
a)
General Fund
b)
Internal Service Fund.
c)
Capital Project Fund
d)
Debt Service Fund.
3. General fixed assets are excluded from
governmental funds because
a)
The measurement focus of governmental funds is on current financial
resources.
b)
They are not used to generate revenues.
c)
The basis of accounting is accrual.
d)
None of the above.
4. The City of Shiloh sold a used police
car. The police car, which had a historical cost of $17,000 and a fair
value of $12,000, was sold for $5,000.
Assuming that the City maintains its books and records in a manner to
facilitate the preparation of the fund financial statements, what is the
appropriate entry in the General Fund to record this sale?
a)
Debit Cash $5,000; Credit Revenue $5,000.
b)
Debit Cash $5,000 and Loss on Sale $7,000; Credit Automotive Equipment
$12,000.
c)
Debit Cash $5,000; Credit Other Financing Sources—Sale of Asset $5,000.
d)
Debit Cash $5,000; Credit Automotive Equipment $5,000.
5. Which of the following costs will be
included in the cost of land on the government-wide financial statements?
a)
Purchase price (invoice amount).
b)
Cost of demolishing existing structures that cannot be used.
c)
Closing costs.
d)
All of the above.
6. Donated assets are reported at
a)
Historical cost to the donor.
b)
Book value in the hands of the donor.
c)
Fair value on date of donation.
d)
Zero value because they were not purchased.
7. To elect not to capitalize works of art and
similar assets, a government must see that the assets meet all of the following
criteria except:
a) The assets must be held for
public exhibition, education, or research in furtherance of public service,
rather than for financial gain.
b)
The assets must be protected, kept unencumbered, cared for and
preserved.
c)
The assets must be subject to an organizational policy that requires the
proceeds form sales of the collection items be used to acquire very similar
items for the collection.
d)
The assets must be subject to an organizational policy that requires the
proceeds from sales of the collection items be used to acquire other items for
the collection.
8. If a government capitalizes works of art and
similar assets, which of the following statements is true relative to
depreciation on the works of art and similar assets?
a)
Donated assets cannot be depreciated.
b)
All works of art must be depreciation, not just exhaustible.
c)
All exhaustible assets must be depreciated.
d)
The government may elect to omit all depreciation.
9. Which of the following is NOT an
infrastructure asset?
a)
Roads.
b)
Sidewalks.
c)
Buildings.
d)
Bridges.
10. If a government receives a donation of a work
of art, the government must recognize revenue
a)
Only if it elects to capitalize its collection.
b)
Only if it elects NOT to capitalize its collection.
c)
On all donations of works of art.
d)
It cannot recognize revenue from donations.
11. For a government that elects NOT to
capitalize its works of art and similar assets, the appropriate entry when
receiving a contribution of a work of art at the government-wide level is
a)
No entry is required for contributed assets.
b)
Debit Asset; Credit Revenues.
c)
Debit Asset; Credit Equity.
d)
Debit Expense, Credit Revenue.
12. For a government that elects to capitalize
its works of art and similar assets, the appropriate entry when receiving a
contribution of a work of art at the government-wide level is
a)
No entry is required for contributed assets.
b)
Debit Asset; Credit Revenues.
c)
Debit Asset; Credit Equity.
d)
Debit Expense/Expenditure, Credit Revenues.
13. GASB standards require that depreciation be
reported on all capital assets except
a)
Infrastructure accounted for on the standard approach.
b)
Infrastructure assets accounted for on the modified approach.
c)
Donated assets.
d)
Capitalized works of art.
14. With regard to capitalization of
infrastructure, which of the following is true?
a)
All infrastructure must be capitalized on the financial statement before
GASB Statement No. 34 can be implemented.
b)
Only large governments must capitalize all infrastructure on the date
they implement GASB Statement No. 34.
c)
Small and medium size governments may elect to delay capitalization of
infrastructure.
d)
Small governments may omit capitalizing all infrastructure acquired
before the date on which they implement GASB Statement No. 34.
15. If a government elects the modified approach
with regard to capitalization of infrastructure
a)
Costs to preserve infrastructure assets are expensed as incurred with no
additional disclosure required.
b)
Costs to preserve infrastructure assets are expensed as incurred and
disclosure of assessed condition is required.
c)
Costs to preserve infrastructure assets are capitalized as incurred and
depreciated over the estimated useful life with no additional disclosure
required.
d)
Costs to preserve infrastructure assets are capitalized as incurred and
NOT depreciated over the estimated useful life with additional disclosure
required.
16. A broker-dealer or other financial
institution transfers cash to a government in exchange for securities and the
government agrees to repay the cash plus interest and return the
securities. From the government's point
of view, this transaction is a
a)
Repurchase agreement.
b)
Reverse repurchase agreement.
c)
Derivative.
d)
Option.
17. The risk that the other party to an
investment will not fulfill its obligation is
a)
Market risk.
b)
Credit risk.
c)
Collaterized risk.
d)
Legal risk.
18. Which of the following is NOT an example of a
derivative?
a)
Stock options.
b)
Interest-only strips.
c)
Debt instruments backed by pools of mortgages.
d)
Repurchase agreements.
19. Governments must classify bank balance in one
of three categories. Which of the
following is NOT one of those categories?
a)
Insured or collateralized with the security held by the entity or its
agents in the entity’s name.
b) Collateralized with security held by the
pledging financial institution’s trust department.
c)
Insured, registered in the name of the government or held by the
government or its agent in the government’s name.
d) Uncollateralized.
20. Investments, other than bank balances, must
be classified into one of three categories.
Which of the following is NOT one of those categories?
a) Insured, registered in the name of the
government or held by the government or its agent in the government’s name.
b) Uninsured and unregistered, with securities
held by the other party’s trust department or agent in the government’s name.
c) Uninsured and unregistered in the
government’s name and held by the other
party or the other party’s agent.
d)
Uncollateralized.
PROBLEMS (CHAPTER 7)
1. The City of Brownsville engaged in the
following transactions. Assuming that
the City maintains its books and records in a manner that facilitates the
preparation of the fund financial statements, prepare the appropriate journal
entries in the General Fund.
a)
The City purchased for cash three dump trucks at a unit cost of $70,000
each.
b)
The City sold for $3,000, a police car that had been purchased four
years ago at a cost of $30,000. At the
time of acquisition, the City estimated that the police car had a useful life
of five years and a salvage value of $5,000.
c)
During the year, the City spent $12 million to build a third lane on
both sides of the major north-south highway through town.
d)
During the year the City began construction of a new City Hall. By year-end, the City had made progress
payments to the contractor of $2 million.
2. The City of Brownsville engaged in the
following transactions. Assuming that
the City maintains its books and records in a manner that facilitates the
preparation of the government-wide financial statements, prepare the
appropriate journal entries.
a)
The City purchased for cash three dump trucks at a unit cost of $70,000
each.
b)
The City sold for $3,000, a police car that had been purchased four
years ago at a cost of $30,000. At the
time of acquisition, the City estimated that the police car had a useful life
of five years and a salvage value of $5,000.
c)
During the year, the City spent $12 million to build a third lane on
both sides of the major north-south highway through town.
d)
During the year the City began construction of a new City Hall. By year-end, the City had made progress
payments to the contractor of $2 million.
3. GASB Statement No. 34 allows for two
different treatments of infrastructure.
If the government chooses to use the modified approach instead of the
standard (depreciation) approach, what is the proper accounting treatment of
preservation cost at the government-wide level?
ESSAYS (CHAPTER 7)
1. Governmental accounting does not permit
depreciation to be charged on the operating statements of the governmental
funds. Present arguments FOR reporting
depreciation and present arguments AGAINST reporting depreciation.
2. What is “deferred maintenance”? What is its possible role in governmental
financial reporting?
3. Recently, governmental investment policies
have been sharply criticized because of some significant losses incurred by
certain governments. What is the nature
of the problem that is being criticized?
What should be the role of accounting in determining and reporting
investment strategies?
No comments:
Post a Comment