When a Capital Project Has Been Constructed Entirely with Bond

question 34

Multiple Choice

When a capital project has been constructed entirely with bond proceeds and funds are left over at the end of the project,which of the following would normally take place?

• A) The funds would be transferred to a debt service fund; the capital projects fund would debit Other Financing Uses-Transfers Out and the debt service fund would credit Other Financing Sources-Transfers In.
• B) The funds would be transferred to a debt service fund; the capital projects fund would debit Expenditures and the debt service fund would credit Revenues.
• C) The funds would be transferred to the General Fund and expended for any purpose desired by the management of the government.
• D) The funds would be returned to the bondholders.

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Definitions:

Single Product

A business strategy or market condition where a company focuses on and sells only one product.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the price of a product.

Net Operating Income

The profit a company makes after deducting operating expenses from gross income, excluding interest and taxes.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product cost calculations, excluding fixed overhead.