NFP - Test 2 - Ch 6 UPDATED ACTUAL
Exam Questions and CORRECT Answers
A government opts to set aside $10M of general fund resources to finance a new city hall.
Construction is expected to begin in several years, when the city has been able to accumulate
additional resources. - CORRECT ANSWER - The government may account for the $10M
in a capital projects fund, but in its government wide statements it may not report the $10M as
"restricted"
A government should distinguish underwriting and other issue costs from bond premiums and
discounts and in a governmental fund should - CORRECT ANSWER - Report them as
expenditures
When a government issues bonds at premiums or discounts and records the proceeds in a capital
projects fund, it should - CORRECT ANSWER - Transfer an amount equal to the
premiums from the capital projects fund to a debt service fund, but make no transfer of an
amount equal to the discounts from a debt service to a capital projects fund.
A city holds U.S. Treasury notes as an investment in a capital projects fund. During the year the
market value of the notes increases by $50K. Of this amount, $14K can be attributed to a decline
in prevailing interest rates and $36K to interest that has been earned but not yet received. As of
year -end the city should recognize as revenue - CORRECT ANSWER - $50K
Which of the following accounts is least likely to be shown on the balance sheet of a debt service
fund? - CORRECT ANSWER - Bonds Payable
Special assessment debt should be reported on the balance sheet of a city if the debt is to be paid
from assessments on property owners and - CORRECT ANSWER - 1. The city has
guaranteed payment of the debt and probability of the city having to make good on the guarantee
is >= 50%
2. The city has guaranteed payment of the debt but the probability of the city having to make
good on the guarantee is remote.
Exam Questions and CORRECT Answers
A government opts to set aside $10M of general fund resources to finance a new city hall.
Construction is expected to begin in several years, when the city has been able to accumulate
additional resources. - CORRECT ANSWER - The government may account for the $10M
in a capital projects fund, but in its government wide statements it may not report the $10M as
"restricted"
A government should distinguish underwriting and other issue costs from bond premiums and
discounts and in a governmental fund should - CORRECT ANSWER - Report them as
expenditures
When a government issues bonds at premiums or discounts and records the proceeds in a capital
projects fund, it should - CORRECT ANSWER - Transfer an amount equal to the
premiums from the capital projects fund to a debt service fund, but make no transfer of an
amount equal to the discounts from a debt service to a capital projects fund.
A city holds U.S. Treasury notes as an investment in a capital projects fund. During the year the
market value of the notes increases by $50K. Of this amount, $14K can be attributed to a decline
in prevailing interest rates and $36K to interest that has been earned but not yet received. As of
year -end the city should recognize as revenue - CORRECT ANSWER - $50K
Which of the following accounts is least likely to be shown on the balance sheet of a debt service
fund? - CORRECT ANSWER - Bonds Payable
Special assessment debt should be reported on the balance sheet of a city if the debt is to be paid
from assessments on property owners and - CORRECT ANSWER - 1. The city has
guaranteed payment of the debt and probability of the city having to make good on the guarantee
is >= 50%
2. The city has guaranteed payment of the debt but the probability of the city having to make
good on the guarantee is remote.
