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Chapter 6
6-1
a.Are capital projects necessarily budgeted on a period (e.g. annual)basis?
b.Are bonds always issued at par?
d.How are outlays for acquisitions of long-lived assets reflected in governmental funds?
e.Do capital projects funds account for capital projects (i.e. the work in process or the completed projects)?
f.For what purposes must the resources in the capital projects fund be used? Can they be used for any other purposes?
6-3
a.
1.Did you remember to record the estimated bond proceeds, the state grant and the transfer from the general fund?
2.When should the revenue that was previously deferred (per item #3) be recognized as actual revenue?
b.Do you report the following amounts:
total revenues of $1.2 million
total expenditures of $5.88 million
total other financing sources of 8.68 million?
c. Do you report total assets of $4.4 million and total liabilities of $.4 million?
6-4
b. Do you report the following amounts (in millions):
¯Actual ¯Budgeted
Total revenues $2.56 $1.88
Total expenditures 2.38 2.38
Total other financing sources 0.12 0.50
c. Do you report total assets of $8.54 million and total liabilities of $8.24 million?
6-5
- Do total assets equal $22.27? Do total liabilities equal $3.83? Do expenses exceed revenues by $0.53?
6-6
a.On a modified accrual basis is interest expenditure measured by the amount paid or the true economic cost of the funds borrowed?
- Is the interest expense equal to the effective yield times the book value of the loan?
6-7
What are the current standards as to when a government must account for special assessment debt as its own general obligation debt?
6-8
a.What determines the fair value of bonds?
c.What special requirements are imposed on the medical center?
d.What feature of the bond may impose a ceiling on their market value?
6-9
c.Did you recognize the loss as a deferred loss or an actual loss?
d.What is the present (economic) value of the existing debt (discounted at the prevailing annual rate (divided in two since compounding is semi-annually), taking into account both the required interest payments and the required principal payment? What is the present (economic) value of the $1.1 million of the debt to be issued to redeem the bonds today? What is the difference between the two?
e.If the county knew that the bonds would be outstanding for only 10 years (20 periods), then over how many years (periods) would it amortize the initial discount of $100,000? What would be the total annual interest expense (payment plus amortization of discount)?
f.Did the loss occur in the current year or over the prior 10 years?
6-10
a.What is the present (economic) value of the existing debt (discounted at the prevailing annual rate (divided in two since compounding is semi-annually), taking into account both the required interest payments and the required principal payment? What would be the present (economic value) of any new debt issued to secure the funds necessary to refund the old debt?
b.What is the present (economic) value (based on the prevailing interest rates) of the amount required to make the ten interest payments on the existing debt and a single principal payment of $105 million? How does this amount compare with the present (economic) value of the existing debt as computed in part a.
6-11
a.What does the city most likely do with cash that it is has received but not yet used to service debt?
b.In what type of transaction does a city make payments to a refunded bond escrow account?
c.What does an economic gain or loss represent? By contrast, what does an accounting gain or loss represent? In light of how an accounting gain or loss is determined, and in light of how bonds are reported (or not reported) in governmental funds as opposed to enterprise funds, why are gains or losses reported differently in the two types of funds?
d.What types of funds are the ultimate source of principal and interest payments?
e.Under what circumstances is a city required to make arbitrage payments to the federal government. If the city's investment earnings exceed expectations is it likely that its required payment to the federal government will increase or decrease?