34) Which of the following statements is true?
A) Debt margin is reported in the governmental activities column of the government-wide
statements.
B) Debt limit represents the total amount of indebtedness of specified kinds that is allowed by law
to be outstanding at any one time.
C) Overlapping debt is a calculation of the difference between the amount of debt limit calculated
as prescribed by law and the net amount of outstanding indebtedness subject to limitation.
D) All of the given statements are true.
35) When Sunny City makes its annual lease payment on an unpaid lease obligation, the journal
entry for the governmental activities accounts will include:
A) A debit to Lease Obligation Payable.
B) A credit to Lease Obligation Payable.
C) A debit to Lease Expense.
D) A debit to Expenditures—Principal of Lease Obligation.
36) When Sunny City makes its annual lease payment on an unpaid lease obligation, the journal
entry for the debt service fund accounts will include:
A) A debit to Lease Obligation Payable.
B) A credit to Lease Obligation Payable.
C) A debit to Lease Expense.
D) A debit to Expenditures—Principal of Lease Obligation.
37) Pollution remediation obligations should be recognized if which of the following obligating
events has occurred?
A) A violation of a pollution prevention permit has occurred.
B) The government is named or will be named as the responsible or potentially responsible party to
a remediation.
C) The government is compelled to take remediation action due to imminent endangerment to the
public health.
D) All of the given items are obligating events that would require recognition of a pollution
remediation obligation.
38) A debt service fund is a:
A) Nonexpendable fund.
B) Governmental fund.
C) Fiduciary fund.
D) Proprietary fund.
39) On the due date for a bond interest and principal payment, the debt service fund journal entry
(or entries) will include:
A) A debit to Bonds Payable.
B) A debit to Interfund Transfers Out.
C) A debit to Expenditures—Bond Interest.
D) A debit to Interest Expense.
40) Which of the following statements is always true concerning the reporting of debt service
funds?
A) Debt service funds are reported in a separate column in the governmental fund financial
statements.
B) Debt service funds are reported in a separate column in the government-wide financial
statements.
C) Debt service funds are reported in the Other Governmental Funds column in the governmental
fund financial statements.
D) Debt service funds are reported in the Governmental Activities column in the government-wide
financial statements.
41) Which of the following debt service fund accounts would not be closed at the end of each fiscal
year?
A) Estimated Revenues.
B) Fund Balance.
C) Revenues.
D) Expenditures—Bond Interest.
42) The Town of Windsor issued the following during the year: (1) $600,000 in bonds for the
installation of street lights, to be assessed against properties benefited, but secondarily backed by
the town; (2) $800,000 in bonds for construction of a public golf course to be self-supported from
fees collected from golf course users. How much should be accounted for through debt service
funds for payments of principal over the life of the bonds?
A) $0.
B) $600,000.
C) $800,000.
D) $1,400,000.
43) Special assessments levied for debt service of bonds issued for a special assessment capital
project will be accounted for by a debt service fund under which of the following situations?
Government is secondarily obligated
for the debt
Government is not secondarily obligated
for the debt
A
Yes
Yes
B
Yes
No
C
No
Yes
D
No
No
A) A.
B) B.
C) C.
D) D.
44) The liability for general obligation bonds should be recorded in the:
A) General Fund.
B) Capital projects fund.
C) Governmental activities journal.
D) Debt service fund.
45) On the due date for bond interest, the debt service fund journal entry (or entries) will include a
debit to:
A) Expenditures—Bond Interest.
B) Interfund Transfers In.
C) Appropriations.
D) Interest Expense.
46) When bonds are sold at a premium for a capital project, the premium amount generally:
A) Increases the cash available to the capital projects fund.
B) Is transferred to the debt service fund.
C) Is applied against the principal balance by the fiduciary agent.
D) Is recorded in a fiduciary fund since it does not belong to the capital projects fund.
47) The City of New Haven issued $20 million of tax-supported bonds at 102 to finance a new jail.
Upon issuance, how will the premium be recorded?
A) A $400,000 revenue to the capital projects fund and a $400,000 revenue in governmental
activities.
B) A $400,000 revenue to the debt service fund and a $400,000 premium on bonds payable in
governmental activities.
C) A $400,000 expenditure in the debt service fund and a $400,000 expense in governmental
activities.
D) A $400,000 other financing source to the debt service fund and a $400,000 premium on bonds
payable in governmental activities.
48) Typically, proceeds from general obligation bonds will be recorded in the:
A) Debt service fund.
B) General obligation bond fund.
C) Permanent fund.
D) Capital projects fund.
49) Which of the following statements is not true for debt service funds?
A) Special assessment debt for which the government has some obligation is paid through the debt
service fund.
B) Interest payable may be reported as a liability of the debt service fund.
C) Bond principal is shown as a liability of the debt service fund only when that principal is due
and payable.
D) All tax-supported bond principal is shown as a liability of the debt service fund.
50) Debt service funds are used to account for which of the following?
A) Payment of only interest on general long-term debt.
B) Payment of only principal on general long-term debt.
C) Payment of principal and interest on general long-term debt.
D) Payment of principal and interest on all debt of the government.
51) Which of the following assets would not be found in the balance sheet of a debt service fund?
A) Cash with fiscal agent.
B) Investments.
C) Equipment.
D) Interest Receivable.
52) The City of Spartan’s fiscal year ends on December 31. On October 1, 2020, the city issued
$1,000,000 of 6%, 10-year term bonds with semiannual interest payments due on April 1 and
October 1 each year, beginning on April 1, 2021. What amount of expenditures should the city
recognize in its debt service fund for the years 2020 and 2021?
A) $60,000 in 2020; $60,000 in 2021.
B) $30,000 in 2020; $60,000 in 2021.
C) $15,000 in 2020; $6,000 in 2021.
D) $0 in 2020; $60,000 in 2021.
53) The City of Spartan’s fiscal year ends on December 31. On October 1, 2020, the city issued
$1,000,000 of 6%, 10-year term bonds with semiannual interest payments due on April 1 and
October 1 each year, beginning on April 1, 2021. What amount of expense should the city
recognize in its governmental activities journal for the years 2020 and 2021?
A) $60,000 in 2020; $60,000 in 2021.
B) $30,000 in 2020; $60,000 in 2021.
C) $15,000 in 2020; $60,000 in 2021.
D) $0 in 2020; $60,000 in 2021.
54) Which of the following debt service funds would normally have the largest balance in its Fund
Balance account?
A) Serial bond debt service fund.
B) Deferred serial bond debt service fund.
C) Irregular serial bond debt service fund.
D) Term bond debt service fund.
55) If a city has an unpaid lease obligation at the beginning of its fiscal year, the journal entry in the
debt service fund to record the lease payment during that fiscal year will include:
A) A debit to Lease Obligations Payable.
B) A credit to Expenditures—Principal of Lease Obligation.
C) A debit to Expenditures—Principal of Lease Obligation.
D) A debit to Interest Expense on Leases.