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

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Governmental Accounting: Debt Issuance, Capital Projects, and Fixed Asset ReportingThis quiz consist of 30 multiple choice questions. The first 15 questionscover the material inChapter 6.The second 15 questions cover the material in Chapter 7. Besure you are in the correct Chapterwhenyou take the quiz.Question 14 out of 4 pointsA governmental entity has elected to issue new debt and use the proceeds to redeem existingdebt because there is an economic gain in doing so.There is, however, an ‘accounting loss’associated with these events.An accounting loss is defined asAnswerSelected Answer:The cash paid to redeem the old debt less the book value of the old debt.Correct Answer:The cash paid to redeem theold debt less the book value of the old debt.Question 24 out of 4 pointsSix years ago Hill City issued $10 million of 6% term bonds, due 30 years from the date ofissue.Interest on the bonds is payable semi-annually on January 1 andJuly 1.Hill City has aSeptember 30 fiscal year end.The amount of interest payable that would be included on thebalance sheet for the debt service fund of Hill City at September 30 would beAnswerSelected Answer:$-0-CorrectAnswer:

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$-0-Question 34 out of 4 pointsWith regard to the resources dedicated to the acquisition of fixed assets which will be used ingeneral government activities, which of the following is true?AnswerSelectedAnswer:Governments must maintain capital project funds for resources that are legallyrestricted to the acquisition of fixed assets.CorrectAnswer:Governments must maintain capital project funds for resources that are legallyrestricted to the acquisition of fixed assets.Question 44 out of 4 pointsVoters in Phillips City approved the construction of a new $10 million city hall building andapproved a $10 million bond issue with a stated rate of interest of 6%to fund theconstruction.When the bonds were issued, they sold for 101.What are appropriate entriesrelated to the premium? In the capital project fundAnswerSelectedAnswer:Debit Cash $100,000; Credit Other Financing Sources—$100,000;ALSODebit Other Financing Uses—Nonreciprocal Transfer $100,000; Credit Cash$100,000Correct Answer:Debit Cash $100,000; Credit Other Financing Sources—$100,000;ALSODebit Other Financing Uses—Nonreciprocal Transfer $100,000; Credit Cash

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$100,000Question 50 out of 4 pointsThe City of St. Joe had outstanding $5 million of 6% bonds with a call provision.Due to changesin the prevailing interest rates, the City issued new bonds at 4.5% and used the proceeds to callthe 6%bonds.This is an example ofAnswerSelected Answer:In-substance defeasance.Correct Answer:Debt refunding.Question 64 out of 4 pointsThe City of Williamsburg decided to defeaseold 6% bonds carried in its Electric Enterprise Fundwith new 4.5% bonds.As a result of the defeasance, the City incurred an accounting loss.Thisloss should be recognizedAnswerSelectedAnswer:Over the remaining life of the old bonds or the new bonds, whichever isshorter.Correct Answer:Over the remaining life of the old bonds or the new bonds, whichever isshorter.Question 74 out of 4 points

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Harbor City issued 6% tax-exempt bonds and used the proceeds toacquire federal governmentsecurities yielding 7%.After paying the interest on the tax-exempt bonds, the City cleared1%.This is an example ofAnswerSelected Answer:Arbitrage.Correct Answer:Arbitrage.Question 84 out of 4pointsVoters 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 werereceived and the low bid was $10million.When the bonds were issued, they sold for face valueless bond underwriting fees of $.5 million.The School Board voted to fund the balance of theconstruction by a transfer from the general fund. The entry in the capital project fund to recordthe additional funding for the construction would beAnswerSelectedAnswer:Debit Due from General Fund $.5 million; Credit Other financing Sources $.5million.Correct Answer:Debit Due from General Fund $.5 million; Credit Otherfinancing Sources $.5million.Question 94 out of 4 pointsAdams County has outstanding $10 million in bonds issued by the County to construct a sewersystem in a specific area of the county.The taxpayers in that area voted for theconstructionand the bonds and agreed to tax themselves to pay the principal and interest on the

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