Questions 1-10 multiple choice. This the Only information given.

EXERCISES AND PROBLEMS 139 b. net assets, restricted c.net sets, wrestricted d. capital assets 3. The repayment of bond principal should be reported in the fund statements of a debt service fund as 2. an expenditure b. an "other financing use" c. a reduction of bonds payable d. a direct charge to fund balance 4. A state issues bonds, at a premium, to finance road construction projects. The premium affects a. interest expenditure, as reported in the state's debt service fund b. nonreciprocal transfers-out, as reported in the state's general fund c. capital assets, as reported in the state's government-wide statement of net assets d. net assets invested in capital assets, net of related debt in the state's government-wide statement of net assets 5. In the period that a government issues bonds at a discount, either all or a portion of the dis- count should be reported as 2. a reduction of fund balance in the balance sheet of a capital projects fund b. an expenditure in the statement of revenues, expenditures, and changes in fund balance of a capital projects fund c. an expense in the government-wide state- ment of activities d. an asset in the government-wide statement of net assets Select the best answer. 1. Which of the following items is least likely to appear on the balance sheet of a capital proj- ects fund? 3. cash b. investments c. construction in process d. reserve for encumbrances 2. The fund balance of a debt service fund is most likely to be incorporated into the reporting entity's government-wide statement of net assets as 6. A city issued bonds on July 1. Interest of $600,000 is payable the following January 1. On December 31 the city transfers the re- quired $600,000 from its general fund to its debt service fund. On its December 31 debt service fund statement of revenues, expendi- tures, and changes in fund balance, the city a. must report interest expenditure of SO b. must report interest expenditure of $600,000 c. must report interest expenditure of $500,000 d. may report interest expenditure of either S0 or $600,000 a. net assets invested in capital assets, net of related debt 7. A city issues S10 million of debt that it uses to acquire an office building. In the year that it CHAPTER 6/GONTINENTAL ACTIVITICUL PECTS AND DET SERVICE 140 CUPTER 6/ GOVERNMENTAL ses the debt and arguires the building, the city neither charges depreciation on building nor repas any of the debt principal Assume that the city accounts for all capital acquisitions in a capital projects fund and payments of interest in a debe service und The transaction increases expenditures of the capital proj ect fund b. increases other financing sources of the debt service fund c. increases fund balance of the capital projects fund d. increases expenditures of the debt service fund them. It would acquire the negre by issuing new 10-year, 5% The transaction would most likely resul Economic gain, but an accounting Economic loss, but an accounting conomie gain and an accounting sicher an economic gain or loss, but accounting loss E 8. A city assesses property owners 550 million to extend sewer lines to their neighborhood. By year-end, however, it has not yet begun CD- struction of the new lines and has not yet collected any of the assessments. It accounts for its waste water services in an enterprise fund. In its year-end enterprise fund financial statements, the government should .. recognize the assessments as assessments receivable and deferred revenue b. recognize the assessments as assessments receivable and revenue C. recognize the assessments as assessments receivable and liability for future con struction costs d. should not recognize the assessments until they are available for expenditure 9. A county engages in an in-substance dcfeasance of its bonds. The transaction results in an eco- nomic gain, but an accounting loss. In its gove- ment-wide statements, the county should 1. recognize the loss entirely in the year of the dcfeasance b. amortize the loss over either the remaining life of the existing debt or the new debe c. report the loss as a direct charge to net assets d. not recognize the loss, but instead continue to report the defeased bonds (as well as the new bonds) as liabilities 10. A government issued, at par, S10 million 20-year, 6% bonds. The bonds do not conta a call provision. Ten years later, prevailin interest rates have fallen to 5%. The govem ment is considering whether to purchase th outstanding bonds at their market price an