Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
15 Cards in this Set
- Front
- Back
|
A government that is unable to satisfy claims against it a) Is prohibited from filing bankruptcy. b) May seek protection under the Federal Bankruptcy Code, using the same section that is used by businesses. c) May seek protection under the Federal Bankruptcy Code, using a s pecial section directed to governments. d) Is automatically placed under the jurisdiction of a higher le vel of government. |
C |
|
|
To seek protection under the Federal Bankruptcy Code, a government must a) Be unable to provide the level of services it has provided in the recent past. b) Be unable to pay its debts in the current year. c) Have budgeted expenditures in excess of revenues. d) Both (b) and (c). |
B |
|
|
General long-term debt of a government includes a) All future financial obligations. b) All future financial obligations that result from past tr ansactions. c) All future financial obligations that result from past tr ansactions for which the government has already received a benefit. d) All future financial obligations that are backed by the gove rnment’s general credit and revenue raising power and that result from past transactions for which the government has already received a benefit. |
D |
|
|
When the proceeds of long term debt are reported in governmenta l fund financial statements a) They are reported only as an increase in liabilities in the funds. b) They are reported only as revenues in the funds. c) They are reported only as an other financing source—debt proc eeds. d) They are reported only as an other financing use—debt proceeds . |
C |
|
|
In governmental fund financial statements, the assets acqu ired under a capital lease would be reported at a) The total of all payments required under the lease. b) The present value of the required lease payments. c) The undiscounted total of required lease payments. d) They are not reported in the fund financial statements . |
D |
|
|
In the government-wide financial statements, the assets acq uired under a capital lease would be reported at a) The total of all payments required under the lease. b) The present value of the required lease payments. c) The undiscounted total of required lease payments. d) They are not reported in the government-wide financial s tatements. |
B |
|
|
Salvador County issued $25 million of 5 percent demand bonds for construction of a county maintenance building. The county has no take-out agreem ent related to the bonds. It estimates that 20 percent of the bonds would be demanded (c alled) by the buyers if interest rates increased by at least one percentage point. At ye ar-end, rates on comparable debt were 7 percent. How should these demand bonds be reported in the government-wide financial statements at year-end? a) $25 million in the long-term liabilities section of the government al activities column. b) $5 million in the current liabilities section of the governmenta l activities column AND $20 million in the long-term liabilities section of the government al activities column. c) $5 million in the governmental activities column AND $20 million would be reported in the schedule of changes in long-term obligations. d) $25 million in the current liabilities section of the government al activities column. |
D |
|
|
Salvador County issued $25 million of 5 percent demand bonds for construction of a county maintenance building. Before year-end the county entered into a two-year noncancellable take-out agreement with a local bank with a 10-year paybac k period. The county estimates that 20 percent of the bonds would be demanded (called) by t he buyers if interest rates increased by at least One percentage point. At year-end, ra tes on comparable debt were 7 percent. How should these demand bonds be reported in the county’s government-wide financial statements at year-end? a) $25 million in the long-term liabilities section of the government al activities column. b) $5 million in the current liabilities section of the governmenta l activities column AND $20 million in the long-term liabilities section of the government al activities column. c) $5 million in the governmental activities column AND $20 million would be reported in the schedule of changes in long-term obligations. d) $25 million in the current liabilities section of the government al activities column. |
A |
|
|
Salvador County issued $25 million of 5 percent demand bonds for construction of a county maintenance building. The county has no take-out agreem ent related to the debt. It estimates that 20 percent of the bonds would be demanded (called) by t he buyers if interest rates increased by at least one percentage point. At year-end, rates on comparable debt were 7 percent. How should these demand bonds be reported in the governmental fund financial statements at year-end? a) $25 million in the capital projects fund. b) $5 million in the capital projects fund AND $20 million would b e reported in the schedule of changes in long-term obligations. c) $20 million in the capital projects fund AND $5 million would b e reported in the schedule of changes in long-term obligations. d) $25 million in the schedule of changes in long-term obligation s. |
A |
|
|
Voters of Valdez School District, a public school district, app roved construction of a new high school at a cost not to exceed $20 million. The district will finance the construction by issuing $20 million of 6 percent term bonds payable in 20 years. Be cause the site had already been prepared, the school district began construction immedi ately but the bonds would not be issued for nearly a year. Shortly before the fiscal ye ar-end, the school district borrowed $5 million from a local bank due in one year with interest at 6.2 percent. The note will be repaid from bond proceeds. The school district secured a financing agreement with the bank to convert the debt to a 10-year debt if the school district is unable to sell the bonds by the due date. At year-end, how should the $5 million note be displayed i n the governmental fund financial statements? a) Capital projects fund—Notes payable $5 million; Nothing in the schedule of changes in long-term obligations. b) Capital projects fund—Notes payable $5 million; $15 million in t he schedule of changes in long-term obligations. c) Capital projects fund—Encumbrances of $5 million; $15 million in the schedule of changes in long-term obligations. d) Nothing in the capital projects fund AND $5 million notes paya ble in the schedule of Changes in long-term obligations. |
D |
|
|
Dumas County has a December 31 fiscal year-end. In Novemb er, the county borrowed $8 million from a local bank, due in six months at 6 percent i nterest, to finance general government operations. The county pledges property tax revenues to secure the loan. At year-end, how should the county display the bank note in the governm ental fund financial statements? a) Nothing in the General Fund; Nothing in the schedule of changes in long-term obligations. b) General fund--$8 million in other financing sources; Nothing in the schedule of changes in long-term obligations. c) General fund--$8 million in other financing sources; $8 milli on in the schedule of changes in long-term obligations. d) General fund--$8 million in notes payable; Nothing in the sche dule of changes in long- term obligations. |
D |
|
|
Governments enter into capital leases rather than conventi onal buy and borrow arrangements for which of the following reasons? Capital leases a) May be an effective means of circumventing debt limitati ons. b) Are less expensive overall than buy and borrow arrangements . c) Reduce the cash outflows related to the asset acquisition. d) Have less effect on governmental fund balances than buy and borrow arrangements. |
A |
|
|
Olden City entered into a capital lease agreement for several new dump trucks to be used in general government activities. The city maintains its book s and records in a manner that facilitates the preparation of the fund financial stateme nts. Acquisition of these dump trucks would require entries in which of the following funds and/or schedules? a) General fund only. b) General fund AND schedule of changes in long-term obligations . c) General fund AND schedule of changes in capital assets. d) General fund, schedule of Changes in Capital assets AND s chedule of changes in long- term obligations. |
D |
|
|
North City enters into a lease agreement that contain s a nonappropriation clause. The clause a) Has been held by courts in 26 states to effectively cancel the lease. b) Stipulates that the yearly lease payment must be appropriated by the city council each year. c) Prohibits the city from replacing leased property with si milar property. d) Permits the city to lease at lower rates than would b e possible without the presence of the clause. |
B |
|
|
Why would a government issue revenue bonds (which generally ar e issued at a higher rate of interest than general obligation bonds) even though the government knows that if revenues from the project are not sufficient to cover principal and in terest payments, the government will use resources from general government activities to fund the principal and interest payments? a) Revenue bonds may not require approval of the voters. b) Revenue bonds may not be considered in legal debt limitation s. c) Revenue bonds may permit the interest costs to be passed on to the users of the services financed. d) All of the above. |
D |
