Chapter 7

Question 1

For construction work in progress, the net cost for the period of construction of borrowed funds used for construction purposes and a reasonable rate on other funds so used.

Answer 1

Allowance for Funds Used during Construction

Question 2

Short term, highly liquid investments that are both readily convertible into known amounts of cash and so near their maturity that they present insignificant risk of changes in value due to changes in interest rates.

Answer 2

Cash Equivalents

Question 3

Bonds for whose payment the full faith and credit of the issuing body is pledged. More commonly, but not necessarily, general obligation bonds are considered to be those payable from taxes and other general revenues. In some states, these bonds are called tax supported bonds.

Answer 3

General Obligation (GO) Bonds

Question 4

The amount paid or liability incurred by an accounting entity to acquire an asset and make it ready to render the services for which it was acquired.

Answer 4

Historical Cost

Question 5

Funds are classified as major if they are significantly large with respect to the whole government. A fund is “major” if (1) total assets, liabilities, revenues, or expenditures/expenses of the individual governmental or enterprise fund are at least 10 percent of the corresponding total of assets, liabilities, revenues, or expenditures/expenses for all funds of that category or type (total governmental or total enterprise funds), and (2) total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds combined.

Answer 5

Major Funds

Question 6

The total of assets given and/or liabilities assumed to acquire an asset. In utility accounting, the original cost is the cost to the first owner who dedicated the plant to service of the public.

Answer 6

Original Cost

Question 7

The accounting principles prescribed by federal or state regulatory commissions for investor-owned and some governmentally owned utilities. Also called statutory accounting principles (SAP). RAP or some SAP may differ from GAAP.

Answer 7

Regulatory Accounting Principles (RAP)

Question 8

Bonds whose principal and interest are payable exclusively from earnings of a public enterprise. In addition to a pledge of revenues, such bonds sometimes contain a mortgage on the enterprise’s property and are then known as mortgage revenue bonds.

Answer 8

Revenue Bonds

Question 9

An account that captures the premium paid on a utility plant purchased by a government. Similar to goodwill except that the premium is the difference between the purchase price and the depreciated original cost of the utility rather than the difference between the purchase price and fair value.

Answer 9

Utility Plant Acquisition Adjustment