accounting 4070 name row sectioncba2.unomaha.edu/faculty/jarmitag/web/407test - 2b.pdf · capital...

Accounting 4070 Name _____________________

2b

Row _______ Section _______

I. Multiple Choice. (2 points each, 38 points total) Read the following questions carefully and

indicate your answer by circling the letter preceding the one best answer to each question.

1. Which of the following assets could appear in the governmental fund balance sheet?

a. Inventories.

b. Capital assets.

c. Deferred charges for issuance of bonds costs.

d. Infrastructure assets.

2. Which of the following are reported in the functions/programs section of the statement of

activities at the government-wide level where they reduce the net expense of each function or

program to produce a net revenue?

a. Program revenues.

b. Indirect revenues.

c. General revenues

d. Nonexchange revenues.

3. Where is tax supported long term debt reported?

a. General Fund

b. Special Revenue Funds

c. Government-wide financial statements

d. Debt Service Funds

4. In which of the following places are general fixed assets reported?

a. General Fund

b. Special revenue fund

c. Government-wide financial statements

d. Capital project fund

5. If Fund Balance was debited in the process of recording a budget for the General Fund of a

governmental unit, it can be assumed that:

a. Estimated Revenues exceed Appropriations.

b. Estimated Expenses exceed Actual Revenues.

c. Actual Expenses exceed Estimated Expenses.

d. Appropriations exceed Estimated Revenues.

6. The Fund Balance-Reserved for Encumbrances account is properly considered to be a(an):

a. current liability if paid within a year; otherwise, long-term debt.

b. equity account; a reservation of fund equity.

c. budgetary account.

d. long-term liability.

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7. A certain government passed its budget for the fiscal year ended December 31, 2004.

Estimated Revenues amounted to $13,000,000; Appropriations amounted to $11,900,000;

Estimated Other Financing Uses amounted to $800,000; and Estimated Other Financing

Sources amounted to $100,000. In the budgetary entry:

a. Fund Balance would be credited for $400,000.

b. Fund Balance would be credited for $1,800,000.

c. Fund Balance would be unchanged.

d. Fund Balance would be debited for $1,800,000.

8. A Fund Balance-Reserved for Encumbrances (current year) account in excess of the balance

of the Encumbrances account indicates:

a. An excess of Vouchers Payable over Encumbrances Control.

b. An excess of purchase orders released over invoices received.

c. An excess of invoices received over purchase orders released.

d. A recording error.

9. Which of the following results in an expenditure?

a. Place a purchase order.

b. Receive goods previously ordered.

c. Change in an appropriation previously adopted.

d. Payment of an invoice previously received.

10. The Fire Department of a certain city received an appropriation in the amount of

$12,000,000 for the fiscal year ended December 31, 2004. During the month ended January

31, 2004, the following transactions occurred: (a) purchase orders were issued in the amount

of $400,000; (b) purchase orders, related to (a) above, were filled in the amount of $370,000;

the related invoice amount was $368,000; invoices were paid in the amount of $350,000; (c)

salaries were accrued and paid in the amount of $580,000; (d) the appropriation was increased

in amount of $10,000. The amount available for the Fire Department as of January 31, 2004

would be:

a. $10,682,000.

b. $11,002,000.

c. $11,032,000.

d. $11,036,000.

11. The City of X adopted an appropriations ordinance in the amount of $25,000,000 for the

General Fund for a certain fiscal year. Revenues other than property taxes amounted to

$12,000,000. The total market value of taxable property in the city amounted to $1.8 billion.

The assessment ratio (assessment percentage of market value) of all cities in the state is 33 1/3

percent. Homestead, veterans, and other exemptions amount to $40 million, based on

assessed value. It is estimated that three percent of assessed taxes will not be collected. The

property tax per $100 net assessed value would be:

a. $2.28.

b. $2.39.

c. $2.50.

d. $3.00.

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12. The City of Z reported appropriations in the amount of $12,000,000 for its General Fund for

the fiscal year ended December 31, 2002. During that year, expenditures amounted to

$11,400,000 (related to current year purchase orders) and $400,000 (related to prior year

purchase orders). In addition, $500,000 in encumbrances had been issued this year, but not

filled. Z follows the budgetary procedure for outstanding encumbrances like we did in class.

In its Budgetary Comparison Schedule, the amount reported for expenditures on a budgetary

basis would be:

a. $11,400,000.

b. $11,800,000.

c. $11,900,000.

d. $12,300,000.

13. Which of the following projects would normally be accounted for in a capital projects fund?

a. The purchase of furniture for the mayor's office.

b. The construction of a parking lot for use by employees of the City Water Utility.

c. The construction of a police station addition.

d. Payment of interest on bonds issued to finance the construction of a new city hall.

14. Proceeds of tax supported bonds are recognized in a capital projects fund as a(an):

a. Revenue.

b. Liability.

c. Other Financing Use.

d. Other Financing Source.

15. Which of the following is true regarding capital projects funds?

a. Capital projects funds are considered to be governmental funds.

b. Capital projects funds use the total economic resources measurement focus and accrual

basis of accounting.

c. Both of the above are true.

d. Neither of the above is true.

16. The liability for general obligation bonds should be recorded in

a. General Fund.

b. Governmental activities journal.

c. Capital projects fund.

d. Debt service fund.

17. If a City has an unpaid capital lease obligation at the beginning of their fiscal year, the journal

entry in the Debt Service Fund to record the lease payment at the end of that fiscal year will

include

a. A debit to ExpendituresPrincipal of Capital Lease Obligation.

b. A credit to ExpendituresPrincipal of Capital Lease Obligation.

c. A debit to Capital Lease Obligations Payable.

d. None of the above.

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18. On the due date for bond interest, the debt service fund journal entry (or entries) will include:

a. A debit to Appropriations.

b. A debit to OFS - Interfund Transfers In.

c. A debit to Interest Expense.

d. A debit to Expenditures—Bond Interest.

19. Revenue bonds sold by a water utility fund, upon sale, would be recorded

a. In an enterprise fund as a liability.

b. In an enterprise fund as "Proceeds of Bonds."

c. In the governmental activities accounts as a liability.

d. In an enterprise fund as a revenue.

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II. Problems.

1. (7 points) Sekonic County had outstanding encumbrances of $2,300 at December 31, year 5, the

end of their fiscal year. All the goods on order were received on January 16, year 6, with an

invoice price of $2,450 due to a price increase. Hilton County’s policy is to honor outstanding

encumbrances in the following year.

Required: Prepare all journal entries necessary to be recorded in year 6 for these events.

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2. (9 points) Compute the legal debt margin for the City of Bogen given the following information

regarding its bonded debt.

a. The legal debt limit imposed by state law is 10 percent of total assessed valuation.

b. Bonds authorized and outstanding, and assets segregated for retirement of that debt is as

follows:

Description of Debt Issue

Authorized and

Outstanding

Bonds

Assets Segregated

for Debt

Retirement

General obligation street construction 4.25%, 15 year

term bonds $12,000,000 $800,000

General obligation special assessment sidewalk

construction 4.75%, 10 year serial bonds 2,000,000

General obligation park acquisition 4.5%, 20 year term

bonds 6,000,000 $5,500,000

Water Utility revenue 6.25%, 15 year term bonds 5,000,000 $2,225,000

Industrial development 5.75% revenue serial bonds 6,000,000

Total $31,000,000 $13,525,000

c. Total assessed valuation of property within the City of Bogen is $200,000,000.

d. State law requires that only debt backed by the full faith and credit of a city is subject to the

debt limit for that city.

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3. (26 points) Bronica County had the following transactions related to the construction of a new

courthouse. Record all entries needed in the capital projects fund. Do not record entries in any

other funds or the government-wide records.

a. On January 2, year 6, 20 year, 6% General Obligation Serial Bonds with a face value of

$5,000,000 are issued at 101. Interest payments are made on Jan. 1 and July 1 of each year. The

County Charter requires any premium on a bond issue be transferred into a debt service fund and

used only for bond retirement.

Account Name Dr. Cr.

b. On January 18, year 6, land is purchased for the new courthouse at a cost of $ 212,000.


c. On February 2, year 6, architecture and engineering fees for the design of the new court house are

paid in the amount of $300,000.


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d. On February 25, year 6, a contract is signed for construction of the new courthouse in the amount

of $4,200,000.


e. On March 3, year 6, supplies for the project are ordered in the amount of $100,000.


f. On March 28, year 6, the supplies were delivered. The invoice amount was $101,300 and was

paid.


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g. On July 14, year 6, the county receives an invoice for progress completed to date on the

courthouse construction project in the amount of $ 1,200,000. This amount was vouchered less a

retainage of 5%.


h. On July 29, year 6, the vouchered payment to the contractor was made.


i. On November 11, year 6, the project was completed and the county received the final invoice for

$4,700,00. That invoice was paid along with the retainage.


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j. On November 12, year 6, the capital projects fund was closed out with any remaining funds being

transferred to a debt service fund.


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4. (20 points) On July 15, 2005, the City of Nikkor issued tax-supported term bonds having a face

value of $10,000,000 and maturing in 20 years. The bonds are dated July 15, 2005, and pay

interest of 6 percent semiannually on January 15 and July 15 of each year. The bonds were sold at

a price of 102 and were intended to finance construction of a new city jail. The premium on sale

of the bonds was recorded directly in the debt service fund and was immediately invested for

eventual retirement of the debt.

For the fiscal year ending June 30, 2006, the City Council approved a budget for the newly

established Term Bond Debt Service Fund in the amount of $444,500, which includes $432,500

that will be transferred from the General Fund as follows: (1) $300,000 on January 14, 2006 for

the January 15, 2006 interest payment due and (2) $132,500 on June 30, 2006 for investment in

the debt service fund for retirement of principal, and $12,000 of estimated revenue for interest on

investment of premium.

Required: Make all journal entries, including the budget entry and closing entry, required in the

Term Bond Debt Service Fund for the fiscal year ending June 30, 2006. Investment

revenue during the year was $11,800, all of which added to the investment balance.

Date Account Name Dr. Cr.

(continue on next page)

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Problem 4 (continued)


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Answers

Multiple Choice

1. a 11. b

2. a 12. c

3. c 13. c

4. c 14. d

5. d 15. a

6. b 16. b

7. a 17. a

8. d 18. d

9. b 19. a

10. c

Problems

1.

1-1-06 Encumbrances year 5 2,300

Fund Balance 2.300

1-16-06 Reserve for Encumbrances year 5 2,300

Encumbrances year 5 2,300

Expenditures year 5 2,300

Expenditures year 6 150

Cash 2,450

2.

Legal debt limit = 10% of $200,000,000 assessed

valuation =

$20,000,000

Debt subject to legal limit:

General obligation street bonds $12,000,000

Special assessment sidewalk construction 2,000,000

General obligation park bonds* 2,000,000

Total debt subject to limit 16,000,000

Legal debt margin $ 4,000,000

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3.

a.


Cash 5,050,000

OFS – Bond Proceeds 5,000,000

Due to DSF 50,000

Due to DSF 50,000

Cash 50,000

b.


Expenditures 212,000

Cash 212,000

c.



Cash 300,000

d.


Encumbrances 4,200,000

Reserve for Encumbrances 4,200,000

e.


Encumbrances 100,000

Reserve for Encumbrances 100,000

f.


Reserve for Encumbrances 100,000

Encumbrances 100,000


Cash 101,300

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g.




Expenditures 1,200,000

Vouchers Payable 1,140,000

Retainage Payable 60,000

h.


Vouchers Payable 1,140,000

Cash 1,140,000

i.





Retainage Payable 60,000

Cash 3,060,000

j.


OFU – Transfers Out 186,700

Cash 186,700

OFS – Bond Proceeds 5,000,000

OFU – Transfers Out 186,700


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4.


1 Jul 05 Estimated OFS 432,500

Estimated Revenue 12,000

Appropriations 300,000

Fund Balance 144,500

Due From General Fund 432,500

OFS – Transfers In 432,500

15 Jul 05 Cash 200,000

OFS – Bond Premium 200,000

Investments 200,000

Cash 200,000


14 Jan 06 Cash 300,000


15 Jan 06 Expenditures – Interest 300,000

Cash 300,000

30 Jun 06 Cash 132,500


Investments 132,500

Cash 132,500

Investments 11,800

Revenue 11,800

Closing Appropriations 300,000

Entry OFS – Transfers In 432,500

OFS – Bond Premium 200,000

Revenue 11,800

Estimated OFS 432,500

Estimated Revenue 12,000

Expenditures – Interest 300,000

Fund Balance 199,800

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