Chapter 6 (ACCT-410)

Chapter 6 (ACCT-410) - 6 Chapter Accounting for Capital...

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6 Chapter Accounting for Capital Projects and Debt Service TRUE/FALSE (CHAPTER 6) 1. The resources to service all general long-term debts of the governmental entity are typically accounted for in debt service funds. When governments establish capital projects funds, they may choose to maintain a separate fund for each major project, or they may choose to combine two or more projects in a single fund. Governments are required to integrate budgetary account information in their debt service and capital projects funds only when control cannot readily be established by means other than a budget. Capital projects funds do not report long-term obligations in the fund. When bonds are issued at a premium, the capital projects fund can transfer those excess resources to the debt service fund. When bonds are issued at a discount, the debt service fund usually transfers an amount to the capital projects fund to make up for the deficiency. In accounting for costs incurred on a major construction project in a capital projects fund, the construction outlays would be reported in the fund as general capital assets. Debt service funds are maintained to account for resources accumulated to pay interest and principal on general long-term debt that is, long-term debt associated primarily with governmental activities. In contrast to the accounting for debt service fund expenditures, the interest revenue on bonds held as investments should be accrued in the period the revenue is earned. 2. 3. 4. 5. 6. 7. 8. 9. 10. Special assessments are imposed nonexchange transactions, similar to property tax levies. 11. The interest paid on debt issued for public purposes by state and local governments is generally subject to federal taxation. 12. Nongovernmental not-for-profits must account for defeasances differently than governments. ch06 Page 1 MULTIPLE CHOICE (CHAPTER 6) 1. The capital projects fund of a governmental entity is accounted for using which of the following bases of accounting? a) Budgetary basis. b) Cash basis. c) Modified accrual basis. d) Accrual basis. 2. In which fund type would a governmental entity s capital projects fund be found? a) Governmental fund type. b) Proprietary fund type. c) Fiduciary fund type. d) Governmental activities. 3. The debt service fund of a governmental entity is accounted for using which of the following bases of accounting? a) Budgetary basis. b) Cash basis. c) Modified accrual basis. d) Accrual basis. 4. In which fund type would a governmental entity s debt service fund be found? a) Governmental fund type. b) Proprietary fund type. c) Fiduciary fund type. d) Governmental activities. 5. With regard to the resources dedicated to the acquisition of fixed assets that will be used in general government activities, which of the following is true? a) Governments must maintain capital projects funds for resources that are legally restricted to the acquisition of fixed assets. b) Governments may maintain capital projects funds for resources that
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This note was uploaded on 04/11/2010 for the course ACCT 410 taught by Professor Komani during the Spring '10 term at MD University College.

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Chapter 6 (ACCT-410) - 6 Chapter Accounting for Capital...

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