1. Although many governments prepare budgets for both capital projects and debt service funds and integrate them into their accounts, budgetary control over these funds is not as essential as it is for other governmental funds. Do you agree? Explain. If budgets are prepared for capital projects funds, in what significant way may they differ from those prepared for other funds?

3. It is sometimes said that in debt service funds the accounting for interest revenue is inconsistent with that for interest expenditure. Explain. What is the rationale for this seeming inconsistency?

6. How should governments report their capital projects and debt service activities in their government-wide statements?

7. A government issues bonds at a discount. Where would the government report the discount on its (a) fund statements and (b) government-wide statements?

8. What is arbitrage? Why does the Internal Revenue Service place strict limits on the amount of arbitrage that a municipality can earn?

9. Under what circumstances can a government refund outstanding debt and thereby take advantage of a decline in interest rates?