GAC GAC Debt Management & Capital Financing 2

Question 1

An advance refunding of municipal bonds involves:

Accepted Answer

Issuing new bonds whose proceeds are escrowed to pay off existing bonds at a future call date

Answer

In an advance refunding, new bonds are issued and proceeds placed in escrow to repay the original bonds at their first call date or maturity, which may be years away.

Question 2

Which GASB standard addresses accounting and financial reporting for debt refundings, requiring deferred recognition of the difference between the reacquisition price and the net carrying amount?

Accepted Answer

GASB Statement No. 23

Answer

GASB Statement No. 23 requires that the difference between the reacquisition price and the net carrying amount of refunded debt be deferred and amortized over the shorter of the life of the old or new debt.

Question 3

A government's debt limit is typically expressed as a percentage of:

Accepted Answer

Assessed or equalized property value

Answer

Most state constitutional debt limits for general obligation bonds are expressed as a percentage of the jurisdiction's total assessed or equalized value of taxable property.

Question 4

Tax Increment Financing (TIF) is a mechanism that funds redevelopment by:

Accepted Answer

Capturing future increases in property tax revenues from a designated development area

Answer

TIF captures the incremental increase in property tax revenues generated by rising property values in a redevelopment area to finance the upfront infrastructure costs.

Question 5

Under GASB, which disclosure is required in the notes to financial statements regarding long-term debt?

Accepted Answer

A schedule showing changes in long-term liabilities during the year, including additions, reductions, ending balances, and the due-within-one-year portion

Answer

GASB requires governments to disclose a roll-forward schedule of long-term liabilities showing beginning balances, increases, decreases, ending balances, and the portion due within one year.

(GAC) Governmental Accounting Certification Practice Test

(GAC) Governmental Accounting Certification Practice Test

GAC GAC Debt Management & Capital Financing 2