accounting 4070 name row sectioncba2.unomaha.edu/faculty/jarmitag/web/407test - 2b.pdf · capital...
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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.
2
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.
3
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.
4
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.
5
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.
6
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.
Account Name Dr. Cr.
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.
Account Name Dr. Cr.
8
d. On February 25, year 6, a contract is signed for construction of the new courthouse in the amount
of $4,200,000.
Account Name Dr. Cr.
e. On March 3, year 6, supplies for the project are ordered in the amount of $100,000.
Account Name Dr. Cr.
f. On March 28, year 6, the supplies were delivered. The invoice amount was $101,300 and was
paid.
Account Name Dr. Cr.
9
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%.
Account Name Dr. Cr.
h. On July 29, year 6, the vouchered payment to the contractor was made.
Account Name Dr. Cr.
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.
Account Name Dr. Cr.
10
j. On November 12, year 6, the capital projects fund was closed out with any remaining funds being
transferred to a debt service fund.
Account Name Dr. Cr.
11
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)
12
Problem 4 (continued)
Date Account Name Dr. Cr.
13
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
14
3.
a.
Account Name Dr. Cr.
Cash 5,050,000
OFS – Bond Proceeds 5,000,000
Due to DSF 50,000
Due to DSF 50,000
Cash 50,000
b.
Account Name Dr. Cr.
Expenditures 212,000
Cash 212,000
c.
Account Name Dr. Cr.
Expenditures 300,000
Cash 300,000
d.
Account Name Dr. Cr.
Encumbrances 4,200,000
Reserve for Encumbrances 4,200,000
e.
Account Name Dr. Cr.
Encumbrances 100,000
Reserve for Encumbrances 100,000
f.
Account Name Dr. Cr.
Reserve for Encumbrances 100,000
Encumbrances 100,000
Expenditures 101,300
Cash 101,300
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g.
Account Name Dr. Cr.
Reserve for Encumbrances 1,200,000
Encumbrances 1,200,000
Expenditures 1,200,000
Vouchers Payable 1,140,000
Retainage Payable 60,000
h.
Account Name Dr. Cr.
Vouchers Payable 1,140,000
Cash 1,140,000
i.
Account Name Dr. Cr.
Reserve for Encumbrances 3,000,000
Encumbrances 3,000,000
Expenditures 3,000,000
Retainage Payable 60,000
Cash 3,060,000
j.
Account Name Dr. Cr.
OFU – Transfers Out 186,700
Cash 186,700
OFS – Bond Proceeds 5,000,000
OFU – Transfers Out 186,700
Expenditures 4,813,300
16
4.
Date Account Name Dr. Cr.
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
Date Account Name Dr. Cr.
14 Jan 06 Cash 300,000
Due From General Fund 300,000
15 Jan 06 Expenditures – Interest 300,000
Cash 300,000
30 Jun 06 Cash 132,500
Due From General Fund 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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