22. A city was awarded a $600,000 federal grant to help finance a bridge construction project
60% (nonrefundable) at the beginning of the project in Year 1, and (2) 40% when the project
is completed. Capital Projects Fund revenue should be recognized in Year 1 in the amount of
A. $600,000.
B. $360,000.
C. $240,000.
D. $0.
23. Issuance of a short-term bond anticipation note—to provide temporary financing for a
general government capital project—that does not meet the requirements for treatment as
long-term debt:
A. does not increase fund balance of the Capital Projects Fund (CPF).
B. increases fund balance of the CPF because they are issued in anticipation of issuing long-
term debt.
C. would affect the General Long-Term Liabilities (GLTL) list.
D. would normally be repaid from a Debt Service Fund (DSF).
24. A county was awarded a $900,000 expenditure-driven grant in year 1 for a capital project that
is expected to take three years to complete. As of the end of Year 1 the county had incurred
expenditures of approximately $50,000. The county should recognize Capital Projects Fund
revenue at the end of Year 1 in the amount of
A. $0.
B. $50,000.
C. $300,000.
D. $900,000.
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25. Ledford County issued $2,000,000 of general obligation bonds for the construction of a new
recreation center. The bonds were sold at a 1% discount and the county incurred $150,000 in
underwriter’s fees, both of which were withheld from the settlement proceeds. The journal
entry required in the Capital Projects Fund for the issuance of the bonds would be
Debit Credit
A
.
Cash
Other Financing Sources
$2,000,000
$2,000,000
B. Cash
Other Financing Sources
$1,830,000
$1,830,000
Expenditures
Other Financing Sources – Discount
150,000
20,000
Other Financing Uses – Discount
Other Financing Sources – Bonds
20,000
$2,000,000
26. A Capital Project Fund received a $300,000 transfer from the General Fund and a $500,000
1 expenditures and $300,000 when the project is completed (which is anticipated to be at the
end of Year 2). Capital Project Fund revenues reported at the end of Year 1 should be
A. $0.
B. $200,000.
C. $300,000.
D. $800,000.
27. If a governmental entity issued $3,000,000 in bonds, received a $500,000 federal capital
grant , and transferred $750,000 to a Capital Projects Fund from the General Fund, the
Capital Projects Fund financial statements should report Other Financing Sources (OFS) of
A. $500,000.
B. $750,000.
C. $3,750,000.
D. $4,250,000.
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28. Assume that a government received a $5,000,000 expenditure-driven grant in Year 1 for a
project that was expected to take three years to complete. Further assume that qualifying
expenditures for the project, which actually took four years to complete, were as follows:
Year 1 – $1,000,000; Year 2 – $2,500,000; Year 3 – $1,000,000; Year 4 – $400,000. The
government should report grant revenues in Year 2 in the amount of
A. $1,000,000.
B. $2,500,000.
C. $3,500,000.
D. $5,000,000.
29. If a government earns and collects interest on Capital Projects Fund investments in the same
fiscal year, the fund financial statements should report
A. A transfer to the General Fund.
B. A revenue.
C. An unearned revenue.
D. An other financing source.
30. 2Arbitrage is:
A. a means of settling payroll disputes between professional athletes and their respective
teams.
B. the difference between the amount of interest paid on long-term debt and the amount of
interest received when investing the proceeds of that long-term debt.
C. the amount of tax plus interest paid by governments on the total of the excess of revenues
and other financing sources over expenditures and other financing uses in the
governmental funds and operating income in the proprietary funds.
D. a payment in lieu of tax from the federal government to a local government for some
services provided to the federal government by the local government.
31. The city is installing curbs and sidewalks in a subdivision as part of a special assessment
capital improvement project. The capital improvements are being financed by an $800,000
eight year, 10%, special assessment note payable. The note and interest are to be repaid from
special assessments levied against the property owners of the subdivision. The total amount
of special assessments is $840,000 and will be collected evenly over eight years. The
government should report Capital Projects Fund revenues for the current year equal to
A. $0.
B. $105,000.
C. $800,000.
D. $840,000.
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32. The city is installing curbs and sidewalks in a subdivision as part of a special assessment
capital improvement project. The capital improvements are being financed by an $800,000
eight year, 10%, special assessment note payable issued for cash at the Last National Bank at
the beginning of the project earlier this year. The note and interest are to be repaid from
special assessments levied against the property owners of the subdivision. The total amount
of special assessments is $840,000 and will be collected evenly over eight years. The city
spent $600,000 to install curbs and sidewalks during the year. For the year, the city should
report what change in fund balance for the Capital Projects Fund?
A. $(600,000).
B. $200,000.
C. $240,000.
D. $840,000.
33. 3Which of the following is (are) reported on the Balance Sheet for in a Capital Projects
Fund?
A. Construction in progress.
B. Bonds payable issued to finance a project.
C. Bonds issue costs to finance a project.
D. Cash and investments to be used to finance construction of a major GCA.
34. The Board of Commissioners took formal action to dedicate resources for a particular project
in the Capital Projects Fund. Those resources cannot be redirected for another use unless an
equivalent formal action is taken. As of the end of the fiscal year, a portion of these resources
remain in fund balance. The proper fund balance classification for these resources would be
A. Nonspendable.
B. Restricted.
C. Committed.
D. Assigned.
35. A Capital Projects Fund may report a positive amount in each of the following fund balance
classifications except
A. Restricted.
B. Committed.
C. Assigned.
D. Unassigned.
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36. General obligation bonds were issued to finance a particular governmental capital project
fund. This resource, in the context of its impact on fund balance, would be classified as
A. A nonspendable resource.
B. A restricted resource.
C. A committed resource.
D. An assigned resource.
37. As of the end of the fiscal year, a Capital Projects Fund has material balances of supplies
inventory. Which fund balance classification would reflect the inventory of supplies?
A. Nonspendable.
B. Restricted.
C. Committed.
D. Assigned.
38. A Capital Projects Fund has outstanding encumbrances of $75,000 as of the end of the fiscal
year. Assume that all resources in the Capital Projects Fund are considered to be restricted.
How should these encumbrances be reported in the year-end external financial statements?
A. As a specific identifiable component of restricted fund balance.
B. As a specific identifiable component of committed fund balance.
C. As a specific identifiable component of assigned fund balance.
D. The encumbrances would only be reported in the note disclosures.
39. A governmental entity is funding a capital project with the issuance of general obligation
bonds, as well as a federal grant. The grant would be reported on the operating statement as
A. An other financing source.
B. A revenue.
C. A nonoperating revenue.
D. An other financing use.
40. Construction in Progress would be reported as an asset in
A. A Capital Projects Fund.
B. The General Fund.
C. The General Capital Asset accounts.
D. Construction in Project is not an asset in governmental accounting.
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41. Assume a Capital Projects Fund of Henry County is holding investments as of the end of the
fiscal year. Which of the following statements is true related to the interest earned on the
investments?
A. Henry County would report accrued interest receivable and interest revenue in the Capital
Projects Fund as of the end of the fiscal year.
B. Henry County would only report interest revenue when the investment matured.
C. Henry County may choose to report interest revenue on the modified accrual basis or on
the cash basis.
D. The interest earned would be reported in the General Fund since it cannot be used to
finance a capital project.
42. The external financial statements for its Capital Projects Funds of a governmental entity may
include the following except
A. A budget-to-actual statement of revenues, expenditures, and changes in fund balance.
B. A statement of revenues, expenditures, and changes in fund balance.
C. A statement of cash flows.
D. Balance Sheet.
43. Which of the following accounts would appear in a Capital Projects Fund?
A. Contracts payable–retained percentage.
B. Bonds payable issued to finance a project.
C. Construction in progress.
D. Buildings.
44. Which of the following accounts would not appear in a Capital Projects Fund?
A. Other financing sources–bond proceeds.
B. Bond anticipation note payable.
C. Bonds payable.
D. Other financing sources–bond premium.
45. A government was billed $3,000,000 during the year on its capital project, of which
$2,700,000 was paid. The total contracted cost is $5,200,000. The government does not plan
to pay the $300,000 balance currently owed to the contractor until the project has been
completed and approved. The government should report Capital Projects Fund expenditures
for the current year equal to
A. $2,700,000.
B. $3,000,000.
C. $4,900,000.
D. $5,200,000.
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46. Which of the following should not be reported as other financing sources (uses) in a Capital
Projects Fund?
A. Face value of general obligation bonds issued to finance a general government capital
project.
B. Premium on general obligation bonds issued to finance a general government capital
project.
C. Proceeds from special assessments levied against property owners to finance construction
of a general government capital project initially financed with long-term debt.
D. Transfer from General Fund.
47. Which of the following should not be reported as other financing sources (uses) in a Capital
Projects Fund?
A. Face value of general obligation bonds issued to finance a general government capital
project.
B. Premium on general obligation bonds issued to finance a general government capital
project.
C. Payment of construction costs.
D. Transfers.
48. The city’s Capital Projects Fund had an excess of expenditures over revenues for the current
year. Which of the following explanations for the excess is not plausible?
A. The city financed a substantial portion of the project in the previous year.
B. The city financed a significant portion of the project by issuing long-term bonds during
the year
C. The city financed a significant portion of the project from transfers from the General
Fund.
D. All of the above are plausible explanations.
49. A deficit unassigned fund balance was reported in a city Capital Projects Fund balance sheet.
Which of the following explanations for the deficit is not plausible?
A. The city financed a substantial portion of the project in the previous year.
B. The city financed current year expenditures by issuing bond anticipation notes that are
not general long-term liabilities.
C. The city entered into a two-year construction contract. Transfers from the General Fund
will be made each year to cover actual expenditures.
D. The city had a large assigned fund balance.
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1. Revenues in a Debt Service Fund are recognized when
A. They are collected in cash.
B. They are measurable and available.
C. They are measurable and earned.
D. Debt service payments are due.
2. Equity in a Debt Service Fund is known as
A. Restricted net position.
B. Fund balance.
C. Net investment in capital assets.
D. Unrestricted net position.
3. What measurement focus does a Debt Service Fund use?
A. Full accrual resources.
B. Current financial resources
C. Economic financial resources
D. Cash resources
4. All of the following statements regarding a Debt Service Fund are true except
A. A Debt Service Fund is rarely used to account for all of a governmental entity’s general
obligation bond repayments.
B. Debt service on capital lease obligations is generally not accounted for in a Debt Service
Fund.
C. A government may have several Debt Service Funds.
D. A government may use one Debt Service Fund to account for multiple general
government debt issuances.
5. A government is required to use a Debt Service Fund in which of the following cases?
A. Capital leases.
B. When financial resources are being accumulated for long-term general government
principal and interest maturing in future years.
C. Debt refunding.
D. All general obligation long-term debt.
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6. Which of the following transactions would not be reported as expenditures in a Debt Service
Fund?
A. Issuance costs incurred in a refunding bond issuance.
B. Payments to escrow agents with resources from the General Fund.
C. Arbitrage rebate.
D. Repayment of BANs issued to finance a capital project.
7. Which of the following types of transactions would not potentially be reported as
expenditures in a Debt Service Fund?
A. Retirement of debt principal.
B. Interest on long-term debt.
C. Discounts on refunding debt.
D. Bond issuance costs.
8. Debt Service Fund expenditures reported on the Statement of Revenues, Expenditures, and
Changes in Fund Balance commonly exclude
A. Fiscal agent fees.
B. Interest expenditures.
C. Principal retirement expenditures.
D. Gains and losses on early retirement of debt.
9. Principal and interest expenditures on general long-term debt should be recognized in the
period
A. That the costs are incurred.
B. Prior to the year in which they are due, i.e., when they become short-term debt.
C. That they are legally due and payable.
D. That they are paid.
10. 4Debt service expenditures on general long-term debt principal should be recognized in the
period that the liability:
A. accrues, if paid.
B. accrues, whether or not paid.
C. is legally due, if paid.
D. is legally due, whether or not paid.
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11. Calhoun County has a principal and interest payment due in the following fiscal year.
However, the county has raised the cash necessary to make the payment in the current fiscal
year. Assuming all other requirements have been met, at what point must the principal and
interest payment come due in the next year to recognize the expenditure in the current fiscal
year?
A. The principal and interest payment must be due before the end of the next fiscal year.
B. The principal and interest payment must come due not later than the mid-point of the next
fiscal year.
C. The principal and interest payment must come due no later than the end of the first
quarter in the next fiscal year.
D. The principal and interest payment must come due not later than one month into the next
fiscal year.
12. In order to recognize a debt service payment that comes due in the next fiscal year as an
expenditure in the current fiscal year, which of the following conditions need not hold true?
A. The payment must come due early (not more than one month) in the next fiscal year.
B. Resources to make the payment need to have been raised in the current fiscal year to
make the payment.
C. The resources for the payment need to be transferred to the appropriate Debt Service
Fund.
13. Assume that the fair market value of investments in a Debt Service Fund decreased by
$25,000 as of the end of the fiscal year. What entry would be necessary to reflect this
change?
A. Debit interest revenue and credit investments.
B. Debit interest expense and credit investments.
C. Debit interest expense and credit cash.
D. No entry is necessary as they investments have not actually been sold.
14. Each of the following are appropriate fund balance classifications for a Debt Service Fund
except
A. Restricted.
B. Committed.
C. Assigned.
D. Designated.
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