M6 -Governmental Funds Financial Statements: Part 2

Question 1

When a capital lease of a governmental unit represents the acquisition of a general fixed asset, the acquisition should be reflected in fund financial statements as:

Answer 1

Both an expenditure and an other financing source

DR: Expenditure - Capital Lease
CR: Other financing source - Capital Lease

Question 2

Since the measurement focus is sources and uses of financial resources, bond premium/discount is not amortized in its governmental funds, including the debt service fund. (true or false)

Answer 2

true

Question 3

Stone Corp. donated investments to Pine City and stipulated that the income from the investments be used to acquire art for the city’s museum. Which fund should be used to account for the investments?

Answer 3

Permanent fund

Permanent funds are used to account for principal that is restricted and may not be expensed. Earnings may be used for purposes that benefit the public. A museum would serve to benefit the public, so the investments must be accounted for in the permanent fund.

Question 4

In a permanent funds, investments are typically required to be accounted for at

Answer 4

Fair value

Question 5

In what fund type should the proceeds from special assessment bonds issued to finance construction of sidewalks in a new subdivision be reported?

Answer 5

Capital Projects Fund

General governmental infrastructure financing and expenditure, such as sidewalks, is appropriately classified in a capital projects fund.

Question 6

Proceeds from general obligation bonds which are to be used to finance the construction of a civil center should be recorded in?

Answer 6

The capital projects fund

as “other financing sources-bond issue proceeds.”

Question 7

The proceeds of a grant to finance the construction of a center for rehabilitation of drug addicts should be accounted for in?

Answer 7

the capital projects funds as “revenues”

Question 8

Tang city received land from a donor who stipulated that the land must remain intact, but any income generated from the property may be used for general government services. In which fund should Tang city record the donated land?

Answer 8

Permanent

Permanent funds should be used to report resources that are restricted to the extent that only earnings and not principal, may be used for the purposes that support the government (that benefit the public)

Question 9

A city received a $9,000,000 federal grant to finance the construction of a homeless shelter, in which fund should the proceeds be recorded?

Answer 9

Capital Project