Book is Essentials of Accounting for Government and Nonprofits. Paul A. Copley 12th edition

Exercise 1: For each of the following, select the letter corresponding with the best answer.

1. Which of the following fund types use modified accrued accounting? a. Capital projects. b. Debt service. c. Permanent. d. All of the above.

2. Financing for the renovation of Fir Citys municipal park, begun and completed during the fiscal year came from the following sources: Grant from State Government $400,000 Proceeds from General Obligation Bond Issue 500,000 Transfer from Firs General Fund 100,000

In its fiscal Statement of Revenue, Expenditures, and Changes in Fund Balances, how should Fir City report these amounts (choose one of the following options)? Revenues Other Financing Sources a. $1,000,000 $ 0 b. 900,000 100,000 c. 400,000 600,000 d. 0 1,000,000

3. On the last day of the year, Pine Village signed a 10-year lease and took possession of a building for its administrative offices. The lease meets the criteria of a capital lease. What effect will the transaction have on the total assets reported in the following statements? General Fund Government-wide Statements (Balance Sheet) (Statement of Net Assets) a. Increase Increase b. No effect Increase c. Increase No effect d. No effect No effect

4. During the first year of a capital lease, Pine Village made its monthly rent payments (due the first day of each month) in a timely manner. What effect will the payments have on the total liabilities reported in the following statements? Debt Service Fund Government-wide Statements (Balance Sheet) (Statement of Net Assets) a. Decrease Decrease b. Decrease No effect c. No effect Decrease d. No effect No effect

5. Seaview City is legally obligated to maintain a debt service fund. On July 1, 2015, the City issued 10-year 5 percent term bonds in the amount of $20,000,000 at an issue price of 101. Interest is payable on January 1 and July 1. What amount of bond premium should be amortized in Seaviews debt service fund in the year ended December 31, 2015? a. $1,000,000 b. $ 200,000 c. $ 100,000 d. $ 0

Items 6-9 are based on the following information: The City of X, which has a calendar fiscal year, issued $1,000,000 in 6 percent general obligation bonds on October 1, 2015, at 101. Interest is payable on April 1 and October 1, and the first of 10 equal annual principal payments is due October 1, 2016. All payments are to be funded by General Fund transfers.

6. What would be amount of debt service expenditures for the year ended December 31, 2015? a. $0 b. $ 30,000 c. $ 60,000 d. $160,000

7. What would be the proper accounting for the $10,000 bond premium? a. The bond premium would normally be recorded as revenue in a capital projects fund. b. The bond premium would normally be amortized over the life of the bond issue. c. The bond premium would normally be recorded as another financing source in a capital projects fund. d. None of the above.

8. What would be the amount of the debt service expenditures for the year ended December 31, 2016? a. $0 b. $ 60,000 c. $130,000 d. $160,000

9. What would be the amount of the debt service expenditures for the year ended December 31, 2017? a. $160,000 b. $157,000 c. $154,000 d. $ 54,000

10. What would be an example of a permanent fund? a. A cemetery perpetual care fund. b. A gift given, to the invested permanently, with the proceeds to benefit retired firefighters. c. A pension trust fund. d. All of the above.

Exercise 2: For each of the following, select the letter corresponding with the best answer. 1. Which of the following activities would use a debt service fund to account for the accumulation of resources for and the payment of interest and principal on long-term debt? FIDUCIARY FUNDS PROPRIETARY FUNDS a. Yes No b. No Yes c. Yes Yes d. No No

2. Interest and principal on the City of Buena Vistas serial bonds are paid by a debt service fund using cash provided by the Citys General Fund. In the debt service funds statements, how will the cash receipts and disbursements be reported? CASH RECEIPTS CASH DISBURSEMENTS a. Transfers in Expenditures b. Transfers in Transfers out c. Revenues Expenditures d. Revenues Transfers out

Items 3-7 are based on the following information. During the fiscal year ending December 31, 2015, the City of X issued 6 percent general obligation bonds in the amount of $2,000,000 at par and used $1,990,000 of the proceeds to construct a police station. The remaining $10,000 was transferred to a debt service fund. The bonds were dated November 1, 2015, and paid interest on May 1 and November 1. The first of 20 equal annual principal payments was due on November 1, 2016.

3. How would the $2,000,000 bond sale be recorded? a. As a liability of the debt service fund. b. As a revenue in a capital projects fund. c. As another financing source in a debt service fund. d. As another financing source in a capital projects fund.

4. The amount of capital outlay expenditures to be reported by a capital projects fund would be? a. $2,000,000 b. $1,990,000 c. $2,010,000 d. $0

5. How would the government account for the $10,000 unused funds? a. As a revenue in a debt service fund and as an expenditure in a capital projects fund. b. As an asset in a capital projects fund and as a liability in a debt service fund. c. As another financing source in a capital projects fund and as another financing use in a debt service fund. d. As another financing source in a debt service fund and as another financing use in a capital projects fund.

6. What would be the amount recorded as expenditures by a debt service fund in the year ended December 31, 2015? a. $0 b. $20,000 c. $53,000 d. $60,000

7. What would be the amount of recorded as expenditures by a debt service fund in the year ended December 31, 2016? a. $0 b. $120,000 c. $220,000 d. $320,000

8. The general rule for modified accrual accounting is to recognize liabilities for obligations that will require current financial resources to settle. Which of the following is a exception to that rule? UNMATURED PRINCIPAL ON ACCRUED INTEREST ON GENERAL LONG-TERM DEBT GENERAL LONG-TERM DEBT a. Yes NO b. No Yes c. Yes Yes d. No No

9. When a government acquires a general fixed asset through a capital lease, the acquisition should be reflected in the governmental fund-basis financial statements as: a. An expenditure, but not another financing source. b. Another financing source, but not an expenditure. c. Both an expenditure and another financing source. d. Neither an expenditure nor another financing source.

10. Which of the following is true regarding permanent funds? a. Permanent funds must use modified accrual accounting. b. Permanent funds must include resources that cannot be expended. c. The income from permanent funds must benefit the government and/or its citizens. d. All of the above are true.