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17 Cards in this Set
- Front
- Back
Which of the following funds is most likely to receive the pro ceeds of revenue bonds? a) General fund. b) Capital projects fund. c) City utility enterprise fund. d) Highway department special revenue fund. |
C |
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Obligations of property owners within a particular government for their proportionate share of debts of other governments with whom their government shares bou ndaries are called a) Overlapping debt. b) Conduit debt. c) Committed debt. d) Moral obligation debt. |
A |
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Overlapping debt should be reported in which of the following wa ys? a) It should be reported in the schedule of changes in long-ter m obligations. b) It should be disclosed as a note to the financial stat ements. c) It should be reported in a schedule in the statistica l section of the annual report. d) It should not be reported anywhere in the annual report. |
C |
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Obligations issued in the name of a government on behalf of a nongovernmental entity are called a) Overlapping debt. b) Conduit debt. c) Committed debt. d) Moral obligation debt. |
B |
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Pacheco City issued $20 million of bonds at par. The city loaned the proceeds to Sharpe Cheese Processors to expand the size of its facility, whi ch would allow Sharpe to hire additional workers. The loan payments from Sharpe to the ci ty are established to match the principal and interest payments on the bond issue. The bonds are payable exclusively from the loan repayments by Sharpe. The bonds are secured by the addi tional plant facilities built by Sharpe. Where should the city report the bonds in its a nnual financial report? a) In the government-wide financial statements. b) In the notes to the financial statements. c) In the proprietary fund financial statements. d) In any of the above ways. |
D |
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Industrial development bonds are issued in the name of a governm ent with the proceeds used to attract private businesses to a community. Which of the following is a true statement about industrial development bonds? a) The proceeds are used by the private corporations and princ ipal and interest payments are made by the private corporation. The government backs the bond s in the event of default by the private corporation. b) The proceeds are used by the private corporations and princ ipal and interest payments are made by the private corporation. The government does not back the bonds in the event of default by the private corporation. c) The proceeds are used by the government to build infrastructur e to service private corporations, with principal and interest payments made by the government out of the additional tax revenues received from the private corporation. d) The proceeds are used by the government to build infrastructur e to service private corporations, with principal and interest payments made by the private corporation in lieu of property taxes. |
B |
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Easterly City has $47 million of debt recorded in its sched ule of changes in long-term obligations, made up of $30 million of general obligation debt, $1 million of compensated absences payable, $4 million of claims and judgments, and $12 mi llion of obligations under capital leases. The state limits the amount of general obligation debt that can be issued by a city to 20 percent of the assessed value of its taxable pr operty. The assessed value of property in Easterly City is $250 million. The city’s leg al debt margin is a) $ 3 million. b) $ 20 million. c) $ 30 million. d) $50 million. |
B |
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A state created a housing authority to provide financing fo r low-income housing. The authority issues bonds and uses the proceeds for that purpos e. Currently the authority has outstanding $200 million in bonds backed by the state’s promise to cover debt service shortages should they arise. The state constitution speci fically limits the state to no more than $2 million in general obligation debt. How can the state officials defend the $200 million in debt outstanding? a) The debt is not general obligation debt. b) The state is only morally obligated for the debt. c) The debt is the debt of the authority, not the state. d) All of the above. |
D |
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Debt that is issued by one entity but backed by the promise o f another entity to make up any debt service deficiency is a) Committed debt. b) Overlapping debt. c) Conduit debt. d) Moral obligation debt. |
D |
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Beaver city entered into a long-term capital lease for some office equipment. The city maintains its books and records in a manner to facilitate preparation of fund financial statements. What entry should be made in its general fund to record this event? a) Debit Expenditures; Credit Other financing sources—leases. b) Debit Equipment; Credit Other financing sources—leases . c) Debit Equipment; Credit Leases payable. d) No entry, because this event had no effect on financial r esources. |
A |
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A city’s electric utility enterprise fund made its annual interest payment on its outstanding $20 million of 6 percent bonds, which were originally issued at a premium. The city maintains its books and records in a manner that facilit ates preparation of fund financial statements. The entry to record the interest payment woul d include a credit to cash for the amount of the interest checks written and debit(s) to a) Interest expenditure AND bond premium. b) Interest expense AND bond premium. c) Interest expenditure only. d) Interest expense only. |
B |
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Which of the following is likely to be used by a bond rating a gency to rate a government’s general obligation bonds? a) A review of the basic financial statements. b) Consideration of economic statistics such as unemployment rat es. c) Consideration of legal debt margin. d) All of the above. |
D |
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In a bond covenant, a city agreed to create and maintai n a $2 million reserve. These funds can be used a) Only to make the final year’s interest and principal payment s on the bonds. b) Only to make the interest and principal payments on the bonds in a year in which the city is unable to make them from other resources. c) To make either the final year’s interest and principal payme nts on the bonds or to make the payments in any year that the city is unable to make the m from other resources. d) By the city as it chooses since the funds legally belong t o the city. |
C |
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Bond insurance issued by credit enhancement agencies a) Assures the holder of the debt that all interest and principal payments will be made. b) Ensures that the bonds receive the highest possible rating. c) May seem cost prohibitive to many governments. d) All of the above. |
D |
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The work of bond rating agencies is important because a) They ensure that all principal and interest payments on bonds issued will be made. b) The rating they assign proves the quality of a particular debt instrument. c) They affect the debt’s marketability and hence its intere st rate. d) Bonds cannot be issued without them. |
C |
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A major exception to the general rule of expenditure accrual for governmental funds of a state or local government relates to unmatured Interest on General Principal of general Long-term debt Long-term debt a) Yes No b) No Yes c) Yes Yes d) No No |
C |
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Flora City is accumulating financial resources that are legally restricted to payments of general long-term debt principal and interest maturing in futur e years. At year-end, $7,000,000 has been accumulated for principal payments, and $2,200,000 h as been accumulated for interest payments. These restricted funds should be accounted for in the General Fund Debt Service Fund a) $0 $9,200,000 b) $9,200,000 $0 c) $2,200,000 $7,000,000 d) $7,000,000 $0 |
A |