Question: Select the best answer. 1. A town
Select the best answer. 1. A town signs a 10-year capital lease by which it acquires equipment with a market value of $1 million. The lease incorporates an implicit interest rate of 8 percent per year. Accordingly, annual lease payments are $149,029. When the town makes its second annual lease payment, it would report in its government-wide statements a. Interest expense of $80,000 b. Rent expense of $149,029 c. Interest expense of $74,478 d. Rent expense of $100,000 2. State courts that have held that capital leases do not qualify as long-term debt subject to debt limitations commonly base their decision on the inclusion in the lease agreement of a a. Nonsubstitution clause b. Nonappropriation clause c. Nonparticipation clause d. Forward funding clause 3. Revenue bonds, compared with general obligation bonds, generally a. Are paid out of property or sales tax revenues b. Bear lower interest rates c. Are subject to the same debt limitations d. Are not backed by the full faith and credit of the issuing government 4. A town is located within both a school district and a county. The assessed property valuations and bonded debts of the three governments are as follows (in millions): 
The combined direct and overlapping debt of the town is a. $40 million b. $51 million c. $91 million d. $148 million 5. Clifford City has issued $10 million of revenue bonds to help finance a factory for Travis, Inc., a private manufacturing company. The city owns the factory and leases it to the company. The bonds are payable exclusively from the lease payments. In the event the company defaults on its lease payments, the bondholders have claims only on the factory. The city has no obligation for the bonds other than to transmit to the bondholders the lease payments that it receives from the company. In its annual financial statements the city should report the bonds a. On its government-wide statement of net position but not in any fund statements b. Only in notes c. Only as required supplementary information d. Both on its government-wide statement of net position and in its proprietary funds balance sheet 6. Which of the following is not a common reason for issuing revenue bonds rather than general obligation bonds? a. To obtain lower interest rates b. To incorporate debt service costs into user fees c. To avoid debt limitations or voter approvals d. To shift a portion of the burden of paying for the project to parties who reside outside the issuer’s jurisdiction but nevertheless benefit from the project 7. On December 1, 2018, a city issued $20 million in BANs and $6 million in RANs. By April 15, 2019, the date the city issued its financial statements for the fiscal year ending December 31, 2018, the city had neither converted the BANs into long-term bonds nor entered into a refinancing agreement to do so. However, the city repaid the RANs on February 28, 2019. The amount the city should report as an obligation of its general fund in its December 31, 2018, financial statements is a. $0 b. $6 million c. $20 million d. $26 million 8. A state agency issues moral obligation debt. This debt a. Is probably backed by the full faith and credit of the state b. Is probably subject to the same debt limitations as if it had been issued by the state itself c. Probably bears a lower interest rate than if there were no moral obligation associated with it d. Imposes greater pressure on the agency to repay the debt than if there were no moral obligation associated with it 9. Certificates of participation have the most in common with a. Revenue bonds b. Pension annuities c. Participating preferred stock d. Operating leases 10. A city issues the following bonds: Revenue bonds to fund improvements to the town-owned electric utility $50 million Conduit bonds issued to assist a fast-food franchisee to construct a restaurant for $7 million The amount that the city should report as an obligation in its government-wide statement of net position and its proprietary funds balance sheet is 
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Assessed Valuation Bonded Deht Twn $ 300 $40 $90 $18 School district $1,600 $2,400 Counly Govemment-Wide Proprietary Fund $S7 million $57 million $S7 milion b. so C. S50 million SS0 million
> What is beacon marketing? What are digital wallets?
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> Refer to the financial statements of the March of Dimes for 2013 presented in Table 12-8. 1. Did the organization exert a greater fiscal effort on fund-raising in 2013 than it did in 2012? 2. Did it direct more of its revenues toward mission-oriented pro
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> As the comptroller of a hospital, you were just informed that one of the surgeons failed to remove an instrument from a patient’s innards. The hospital is certain to be sued. How should this information affect the hospital’s financial statements?
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> 1. Prepare journal entries to take into account the following events and transactions. a. In January 2017, the Wildlife Preservation Society received a grant from the Westwood Foundation of $6 million to be paid in three annual installments of $2 million
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> Many critics of GASB Statement No. 14 and its amendment, GASB Statement No. 39, believe that the standards cast too wide a net—that it requires governments to include in their reporting entity organizations over which the primary government has little co
> A city established a public housing authority to fund the construction of low‐income residential homes within city limits. The authority is governed by a nine‐person board of trustees. New trustees are nominated by the board itself, but are formally appo
> Do the notes to the financial statements indicate the component units and other related entities that are included within the reporting entity? Do they indicate any units that are not included? Do they explain why these units are included or excluded?
> Distinguish between a defined benefit plan and a defined contribution plan. Why does a defined benefit plan present far more complex accounting issues than a defined contribution plan?
> What is meant by “retrospective” insurance premiums, and how should they be reported?
> The Sweetwater County Sheriff’s Office maintains a fund to which it transfers the phone company commissions it earns on inmates’ pay-phone calls. The monies collected are used to provide inmate “amenities”—books and magazines, writing paper, postage stam
> Many states have established “college tuition” programs that enable parents to accumulate funds to pay for their children’s college education. The plans vary from state to state but typically they have features that protect against the rising costs of tu
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> A school district prepares its budget on a cash basis. It is contemplating the changes or actions that follow. For each, indicate the impact that the change would have (1) on year‐ending June 30 2017, general fund expenditures or transfers and (2) on y
> Does the government maintain any fiduciary funds? If so, for what purposes?
> Does the government maintain any permanent funds? If so, are they major or nonmajor funds and for what purposes?
> In what way must a government account for premium revenue differently if it accounts for self-insurance in an internal service fund rather than in its general fund?
> What is a service concession arrangement? Why do governments enter in to these agreements?
> It is often said that “self-insurance” is an oxymoron. Why? If it is, what are the implications for a government that is permitted to recognize self-insurance premiums as a general fund expenditure when paid to an internal service fund?
> It is sometimes asserted that the absence of specific principles as to what constitutes “cost” detracts from the objectivity of the financial statements of not only internal service funds but also financial statements of the general fund. In what sense m
> For what types of activities are internal service funds used to account? Provide several examples. Is a government required to account for the activities you cite in an internal service fund, or may it account for them instead in its general fund?
> Hospitals and other health care organizations provide services knowing that they will collect from third-party payers, such as insurance companies, considerably less than their established billing rates. In addition, they provide services to uninsured pa
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> Although proprietary fund accounting is similar to business accounting, there are considerable differences in standards pertaining to the statement of cash flows. What are the main differences?
> What are the major differences in expenditures/expenses (i.e., reconciling items) as they are reported in the governmental fund and the government‐wide statements?
> How would you compare the accounting for enterprise funds with that of (a) businesses and (b) governmental funds? Summarize the reasons both for and against accounting for enterprise funds differently than governmental funds.
> You are the independent CPA for a medium-sized city. The city manager asks your guidance as to whether, according to generally accepted accounting principles, the municipal golf course should be accounted for in an enterprise fund. What would be your res
> The City of Lewisville collected $600,000 in tap fees last year. Of this amount, $400,000 covered the direct costs of connecting customers to the city’s water lines. The balance contributed to improvements in and maintenance of the overall water system.
> Do you think the current criteria for establishing enterprise funds are adequate? For example, are they too flexible in that governments may account for a wide range of activities in enterprise funds? Or are they too rigid in that governments must accoun
> The Green Hills Water District was established on January 1 to provide water service to a suburban development. It accounts for its operations in a single enterprise fund. During the year it engaged in the following transactions: 1. It issued $6,000,000
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> In anticipation of issuing of long-term bonds, a state issues on May 1, 2018, $200 million of 60-day BANs to finance highway construction. It expects to roll over the BANs into long-term bonds within 60 days. Its fiscal year ends on May 31. The state iss
> What is the difference between restricted assets and assets limited as to use?
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> Select the best answer. 1. Which of the following is true with respect to bankruptcy? a. Per the federal bankruptcy code, a municipality can be declared bankrupt but not insolvent. b. Many major cities have avoided bankruptcy by being placed under the c
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> If, under GAAP, capital leases are considered long-term obligations, why, in many jurisdictions, are they not subject to debt limitations?
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> What unique issues arise when a government, as opposed to a business, is declared bankrupt?
> Suppose that a city has in its portfolio debt securities that it intends to hold to maturity. Interest rates increase. Therefore the market value of the securities decreases, and accordingly the city, must recognize an investment loss. Correspondingly, t
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> In addition to bonds payable, what other kinds of long-term debt for governmental activities did the city report in its statement of net position?
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> Why are general capital assets not recorded in governmental funds?
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