ACC 410 WEEK 4 QUIZ 3
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Accounting for Capital Projects and Debt Service
TRUE/FALSE (CHAPTER 6)
- The resources to service all general long-term debt of governments 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.
- Special assessments are imposed nonexchange transactions, similar to property tax levies.
- The interest paid on debt issued for public purposes by state and local governments is generally subject to federal taxation.
- Nongovernmental not-for-profits must account for defeasances differently than governments do.
- In the statement of revenues, expenditures, and changes in fund balance of a debt service fund, the fund balance amount should be reported as restricted for debt service.
- Governments should account for special assessment debt service transactions in a debt service fund, even if they are not obligated to pay the debt.
- Arbitrage is the process of negotiating resolution of conflicts between the federal government and municipalities over the applicability of federal regulations.
- Sound fiscal policy dictates that the maturity of debt should be no longer than the life of the assets it is used to finance.
- Proceeds of debt issued to finance a capital project should be reported in a capital projects fund as a liability until the project is completed.
- Special assessment debt to be paid from a water utility fund should be accounted for in that fund along with the related capital improvements.
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