Questions 1-10 multiple choice. Only information needed.

EXERCISES AND PROBLEMS d transfer an amount equal to the di from a debt service fund to the projects fund but make no transfer of amount equal to the premiums from capital projects fund to the debt services 4. A city holds U.S. Treasury notes as an in ment in a capital projects fund. During ver the market value of the notes increas $50,000. Of this amount, $14,000 can attributed to a decline in prevailing inte rates and S36,000 to interest that has bee earned but not yet received. As of year-end the city should recognize as revenue a. So b. S14,000 c. $36,000 d. 550,000 6-1 Select the best answer. 1. A government opts to set aside $10 million of general fund resources to finance a new city hall. Construction is expected to begin in several years, when the city has set aside an additional S90 million. a. The government must account for the $10 million in a capital projects fund, and in its government-wide statements its report the S10 million as "restricted." b. The government may account for the $10 million in a capital projects fund, and in its government-wide statements it may report the $10 million as "restricted." c. The government mury of account for the $10 million in a capital projects fund, and in its government-wide statements it may not report the S10 million as "unrestricted." d. The government may account for the $10 million in a capital projects fund, but in its government-wide statements it may not re- port the $10 million as "restricted." 2. If a government can distinguish underwriting and other issue costs from bond premiums and discounts, it should a. report them as expenditures b. add them to the face value of the bond c. report them in a separate account and am- ortize them over the life of the bond d. deduct them from the bond premiums or add them to the bond discount 3. When a government issues bonds at premiums or discounts and records the proceeds in a capital projects fund, it should 1. transfer an amount equal to the premiums from the capital projects fund to a debt service fund and an amount equal to the discounts from a debt service fund to the capital projects found b. transfer an amount equal to the premiums from the capital projects fund to a debt service fund but make no transfer of an amount equal to the discounts from a debt service fund to the capital projects fund c. make no transfers between the capital proj- ects fund and a debt service fund 5. Which of the following accounts is least likely to be shown on the balance sheet of a debe service fund? a. bonds payable b. investments (at market value) c. cash d. special assessments receivable 6. Special assessment debt need not be reported on the balance sheet of a city if the debt is to be paid from assessments on property owners and a. the city has not guaranteed payment of the debt b. the city has guaranteed payment of the debt but the probability of the city having to make good on the guarantee is remote c. the city serves only as a collection agent with no substantive responsibility other than to transfer the funds collected to a bond trustee d. none of the above 7. In its fund statements a government should recognize revenue from special assessments 1. entirely in the year in which the assessment is imposed b. in the years in which the assessments are paid c. in the years in which the assessments are due d in the years in which the assessments be come available for expenditure 8. In the year it imposes a special assessment, a government should recognize in its government- wide statements a. the full amount of the assessment as both revenue and an asset b. the present value of the assessment as both revenue and an asset c. only the amount of the assessment that is due in the current year as revenue, but the full amount of the assessment as an asset d. only the amount of the assessment that is due in the current year as both revenue and an asset 9. Under existing federal statutes, arbitrage as it applies to state and local governments a. is illegal b. is illegal unless the government can dem- onstrate a "just cause" for engaging in it c. is legal in some circumstances, but the government may be required to remit arbi- trage earnings to the federal government d. is illegal unless there is no more than a 2% difference between interest earned and in- terest paid 10. Bond refundings are most likely to result in an economic gain when a. the bonds are subject to arbitrage b. there is an inverted yield curve c. the bonds were initially issued at a premium d. the bonds are subject to a call provision