Accounting for Governmental & Nonprofit Entities Jacqueline Reck 18e - Test Bank

Accounting for Governmental & Nonprofit Entities Jacqueline Reck 18e – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

Accounting for Governmental and Nonprofit Entities, 18e (Reck)

Chapter 5   Accounting for General Capital Assets and Capital Projects

 

1) General capital assets should be distinguished from capital assets that are specifically associated with activities financed by proprietary and fiduciary funds, since capital assets acquired by proprietary and fiduciary funds are accounted for by those funds.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Introduction to General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

2) GASB standards require that all governmental expenditures for long-lived assets be accounted for by a capital projects fund.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

3) General capital assets purchased or constructed with governmental fund resources are recorded in the governmental activities general ledger at the government-wide level.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Accounting for General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

4) The disposal of a general capital asset, resulting in no revenue or expenditure to the government, is recorded only in the governmental activities accounts.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Accounting for General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

5) Historical cost includes acquisition cost less any ancillary costs necessary to put the asset into use.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Accounting for General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

6) Depreciation of general capital assets for the period should be reported in the statement of activities at the government-wide level.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Accounting for General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

7) GASB allows governments with a population below 100,000 to choose the modified approach, whereby they are not required to record depreciation on general capital assets.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Classification of General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

8) Acquisition of a general capital asset represents an expenditure in a governmental fund, but requires capitalization of an asset at the government-wide level.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

9) While the GASB encourages capitalization of all collections or individual works of art or historical treasures, governments can opt not to capitalize if certain conditions exist.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Required Disclosures about Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

10) General capital assets acquired under lease agreements should not be recorded in the governmental activities accounts.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  General Capital Assets Acquired Under Lease Agreements

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

11) One of the required general capital asset disclosures is a schedule of the additions to, and deductions from, general capital assets during the course of a fiscal year.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Required Disclosures about Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

12) General capital assets acquired with capital projects fund resources would be recorded in essentially the same manner as if they had been acquired by the General Fund.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

13) Capital projects funds should use the accrual basis of accounting.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

14) Capital projects funds generally do not use the Encumbrances control account.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

15) In the capital projects fund general journal, Construction Work in Progress is the account used to capitalize the accumulated cost of partially-completed general capital assets.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

16) Intangible assets are defined by the GASB as capital assets that lack physical substance, have a useful life of more than one reporting period, and are nonfinancial in nature.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Intangible Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

17) Proceeds of debt issued for the construction or acquisition of capital assets are recognized by the capital projects fund as “other financing sources” and as a liability in the governmental activities journal.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

18) It is common practice for a portion of contractor payments to be withheld in the capital projects fund until final inspection and acceptance of the asset under construction has occurred.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

19) The recorded premium on tax-supported bonds issued by a capital projects fund should be amortized at both the government-wide and fund levels.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

20) Interest incurred during construction of general capital assets cannot be capitalized as part of the cost of those assets.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

21) State laws often require that assets no longer needed in a capital projects fund be transferred to the fund that will service the debt incurred for the project, a debt service fund.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-05 Prepare financial statements for a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

22) Streets, curbs, and sidewalks constructed or acquired through use of capital projects fund resources should never be reported in the financial statements of a government because they are for the use of the public, not for use by the government.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

23) When a government experiences delays associated with a bond issuance, it is common practice to obtain temporary financing by use of bond anticipation notes.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Bond Anticipation Notes Payable

Learning Objective:  05-05 Prepare financial statements for a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

24) The acquisition of long-lived assets under a lease agreement does not require any asset recognition in the accounts of any governmental fund.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  General Capital Assets Acquired Under Lease Agreements

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

25) Water rights purchased by a city would be considered an intangible asset.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Intangible Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

26) Capital projects funds differ from the General Fund and special revenue funds in that the latter categories have a year-to-year life, whereas capital projects funds have a project-life focus.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Capital Projects Funds; Multiple-Period and Multiple-Project Funds

Learning Objective:  05-05 Prepare financial statements for a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

27) If general capital assets are donated, revenue related to the donation is recognized in the governmental fund statement of revenue, expenditures and changes in fund balance.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

28) General capital assets financed wholly or partially through collections of special assessments are recorded in the same manner as any other general capital assets in the governmental activities category at the government-wide level.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Capital Projects Financed by Special Assessments

Learning Objective:  05-05 Prepare financial statements for a capital projects fund.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

29) If all asset, liability, and fund equity accounts of a capital projects fund were closed during a certain fiscal year, it is unnecessary to prepare any financial statements for that fund for that year.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Illustrative Financial Statements for a Capital Projects Fund

Learning Objective:  05-05 Prepare financial statements for a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

30) Under a service concession arrangement, a government transfers the rights and obligations of an asset to another legally separate government or private sector entity.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Service Concession Arrangement

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

31) Which of the following would be considered a general capital asset?

1. A) A vehicle purchased from General Fund revenues.
2. B) A vehicle purchased and maintained by an enterprise fund.
3. C) A computer purchased from revenues of an internal service fund and used by the supplies department.
4. D) Real estate purchased with the assets of a pension trust fund.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Introduction to General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

32) Capital assets used by governmental funds should be reported in:

1. A) The appropriate governmental funds.
2. B) The property, plant, and equipment fund.
3. C) Departmental memorandum records.
4. D) The governmental activities column of the government-wide statements.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Introduction to General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

33) GASB standards require that general capital assets be recorded in the fund statements at:

1. A) Historical cost.
2. B) Fair value at the financial statement date.
3. C) Estimated cost at the financial statement date.
4. D) None of the options are correct.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

34) GASB standards require that general capital assets be recorded in the government-wide statements at:

1. A) Historical cost.
2. B) Fair value at the financial statement date.
3. C) Estimated cost at the financial statement date.
4. D) None of the options are correct.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

35) The following items were included in Castle City’s General Fund expenditures for the year ended June.

 

Personal computer for the city treasurer	$		6,000
Furniture for the mayor’s office	$		20,000

 

How much should be classified as capital assets in Castle City’s General Fund balance sheet at June 30?

1. A) $0.
2. B) $6,000.
3. C) $20,000.
4. D) $26,000.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

36) The following items were included in Castle City’s General Fund expenditures for the year ended June

 

Personal computer for the city treasurer	$		6,000
Furniture for the mayor’s office	$		20,000

 

How much should be classified as capital assets in Castle City’s government-wide statement of net position at June 30?

1. A) $0.
2. B) $6,000.
3. C) $20,000.
4. D) $26,000.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

37) During the year, a wealthy local merchant donated a building to the City of Rosewood. The original cost of the building was $300,000. Accumulated depreciation at the date of the gift amounted to $250,000. The appraised value of the donation at the date of the gift was $600,000. At what amount should this contribution be recorded in the governmental activities accounts at the government-wide level?

1. A) $50,000.
2. B) $300,000.
3. C) $600,000.
4. D) $0.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Classification of General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

38) During the year, a wealthy local merchant donated a building to the city of Rosewood. The original cost of the building was $300,000. Accumulated depreciation at the date of the gift amounted to $250,000. The appraised value of the donation at the date of the gift was $600,000. At what amount should Rosewood record this donated property in the General Fund?

1. A) $50,000.
2. B) $300,000.
3. C) $600,000.
4. D) $0.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Classification of General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

39) Which of the following is not a required disclosure about each major class of capital assets?

1. A) Beginning-of-year and end-of-year balances showing accumulated depreciation separate from historical cost.
2. B) Capital acquisitions and sales or other dispositions during the year showing the date and method of acquisition or disposition.
3. C) Depreciation expense for the current period with disclosure of the amounts charged to each function in the statement of activities.
4. D) Disclosures describing works of art or historical treasures that are not capitalized and explaining why they are not capitalized.

 

Answer:  B

Difficulty: 1 Easy

Topic:  Required Disclosures about Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

40) The City of Oak Park constructed a new storage facility using the city’s own public works employees. Construction costs were incurred in the amount of $900,000, plus $25,000 in interest on short-term notes used to finance construction. What amount should be capitalized in the government-wide statements?

1. A) $900,000.
2. B) $925,000.
3. C) $875,000.
4. D) $0.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

41) The following general capital assets were owned by the Town of Otterville:

 

Town buildings	$	3,250,000
Intangible assets		1,000,000
Streets, sidewalks, and water lines		2,000,000

 

What amount should be recorded as capital assets in the town’s governmental activities accounts?

1. A) $0.
2. B) $3,250,000.
3. C) $5,250,000
4. D) $6,250,000

 

Answer:  D

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

42) Equipment that had been acquired several years ago by a special revenue fund at a cost of $40,000 was sold for $15,000 cash. Accumulated depreciation of $30,000 existed at the time of the sale. The journal entry to be made in the governmental activities journal will include all of the following except:

1. A) A debit to Cash for $15,000.
2. B) A debit to Accumulated Depreciation for $30,000.
3. C) A credit to Equipment for $40,000.
4. D) A credit to Other Financing Sources for $5,000.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

43) Equipment that had been acquired several years ago by a special revenue fund at a cost of $40,000 was sold for $15,000 cash. Accumulated depreciation of $30,000 existed at the time of the sale. The journal entry to be made in the special revenue fund will include:

1. A) A debit to Cash for $15,000.
2. B) A debit to Accumulated Depreciation for $30,000.
3. C) A credit to Equipment for $40,000.
4. D) A credit to Other Financing Sources for $5,000.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

44) How should a lease for a general capital asset be recorded in the governmental activities accounts at the inception of the lease?

1. A) Debit to a lease asset account.
2. B) Debit to a capital expense/expenditure account.
3. C) Credit to Lease Obligations Payable.
4. D) Both Debit to a lease asset account and Credit to Lease Obligations Payable are correct.

 

Answer:  D

Difficulty: 2 Medium

Topic:  General Capital Assets Acquired Under Lease Agreements

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

45) How should a lease for a general capital asset be recorded in the General Fund accounts at the inception of the lease?

1. A) Debit to a lease asset account.
2. B) Debit to a capital expenditure account.
3. C) Credit to Lease Obligations Payable.
4. D) Both Debit to a lease asset account and Credit to Lease Obligations Payable are correct.

 

Answer:  B

Difficulty: 2 Medium

Topic:  General Capital Assets Acquired Under Lease Agreements

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

46) The City of Castle Rock issued bonds at par for the construction of a new city office building. Receipt of the bond proceeds would result in journal entries in which funds?

1. A) Capital Projects Fund: Yes; Debt Service Fund: No
2. B) Capital Projects Fund: No; Debt Service Fund: Yes
3. C) Capital Projects Fund: Yes; Debt Service Fund: Yes
4. D) Capital Projects Fund: No; Debt Service Fund: No

 

Answer:  A

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

47) A government enters into a lease agreement for the purchase of a new snow plow. The present value of the future lease payments is $845,500 and there is a down payment at the inception of the lease of $25,000. The snow plow should be recorded in the General Fund at:

1. A) $25,000.
2. B) $870,500.
3. C) $845,500.
4. D) $0.

 

Answer:  D

Difficulty: 2 Medium

Topic:  General Capital Assets Acquired Under Lease Agreements

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

48) A government enters into a lease agreement for the purchase of a new snow plow. The present value of the future lease payments is $845,500 and there is a down payment at the inception of the lease of $25,000. The snow plow should be recorded in the government-wide statement of net position at:

1. A) $25,000.
2. B) $870,500.
3. C) $845,500.
4. D) $0.

 

Answer:  B

Difficulty: 2 Medium

Topic:  General Capital Assets Acquired Under Lease Agreements

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

49) Which of the following statements is correct regarding depreciation?

1. A) Depreciation expense should be recorded in the appropriate governmental funds, and recorded in the governmental activities accounts.
2. B) Depreciation expense must be recorded in the governmental fund, but no depreciation expense is recorded in the governmental activities accounts.
3. C) No depreciation can be recorded in any governmental fund, but depreciation expense must be recorded in the governmental activities accounts.
4. D) No depreciation can be recorded in any governmental fund, nor is it permissible to record depreciation expense in the governmental activities accounts.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

50) Four new computers, for which the cost exceeded the city’s capitalization threshold, were purchased for use in the city clerk’s office using General Fund resources. Which of the following entries would be required to completely record this transaction?

A)

General Journal	Debit	Credit
General Fund:
Expenditures	8,000
Vouchers Payable		8,000

B)

General Journal	Debit	Credit
Governmental Activities:
Expenses	8,000
Vouchers Payable		8,000

C)

General Journal	Debit	Credit
General Fund:
Expenditures	8,000
Vouchers Payable		8,000
Governmental Activities:
Expenses	8,000
Vouchers Payable		8,000

D)

General Journal	Debit	Credit
General Fund:
Expenditures	8,000
Vouchers Payable		8,000
Governmental Activities:
Equipment	8,000
Vouchers Payable		8,000

 

Answer:  D

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

51) A capital projects fund might be used to account for which of the following activities?

1. A) Maintaining sidewalks.
2. B) Building a parking garage.
3. C) Providing water and sewer services.
4. D) Servicing long-term debt.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

52) Which of the following is true regarding capital projects funds?

1. A) Encumbrances accounting is employed.
2. B) Encumbrances accounting is not normally employed, but Appropriations are recorded.
3. C) No budgetary accounts are used.
4. D) All budgetary accounts are employed and budget to actual statements are prepared.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

53) In 2020, Sunrise City signed a contract in the amount of $8,000,000 for the construction of a new city hall. Expenditures were $4,000,000 in 2020 and $2,050,000 in 2021, which included a change to the original construction design in the amount of $50,000. What amount should be added to capital assets in the governmental activities accounts in 2021?

1. A) $0
2. B) $50,000
3. C) $2,050,000
4. D) $2,000,000

 

Answer:  C

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

54) To offset engineering and design costs incurred prior to the issuance of a long-term bond issue, a capital projects fund borrowed the sum of $75,000 on a short-term basis from First National Bank. This transaction should be recorded in:

1. A) The capital projects fund.
2. B) The debt service fund.
3. C) The special revenue fund.
4. D) None of the options are correct. Debt is not recorded in governmental funds.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

55) Transfers from the General Fund to the capital projects fund to provide partial financing of a capital project would be reported by the capital projects fund as a(an):

1. A) Fund balance addition.
2. B) Revenue.
3. C) Other financing source.
4. D) Current liability.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

56) Which of the following statements is correct concerning interest expenditures incurred during the period of construction of capital projects?

1. A) Interest expenditures may not be capitalized as part of the cost of general capital assets reported in governmental activities.
2. B) Interest expenditures may be capitalized as part of the cost of general capital assets reported in the governmental activities accounts at the government-wide level.
3. C) Interest expenditures must be capitalized as part of the cost of general capital assets reported in the capital projects fund.
4. D) The capitalization of interest expenditures as part of the cost of general capital assets reported in the capital projects fund is optional.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

57) When part of a progress payment for construction is withheld until final settlement of the contract, what account is credited?

1. A) Encumbrances.
2. B) Appropriations.
3. C) Contracts Payable—Retained Percentage.
4. D) Construction Expenditures.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Retained Percentages

Learning Objective:  05-05 Prepare financial statements for a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

58) The following balances are included in the subsidiary records of Carrollwood:

 

Town hall building	$	500,000
Town pool (supported by user fees)		100,000
Police cars		20,000
Equipment		7,500
Office supplies		1,000

 

What is the total amount of general capital assets held by the town?

500. A) $527,500.
501. B) $528,500.
502. C) $627,500.
503. D) $628,500.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Introduction to General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

59) Which of the following activities or transactions would normally not be accounted for in a capital projects fund?

1. A) Construction of a new city jail.
2. B) Construction of airport runways financed by revenue bonds and to be repaid from the revenues of the city airport, an enterprise fund.
3. C) Lease of a building to be used as a city office building.
4. D) Construction of a new city park to be maintained primarily from General Fund revenues.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

60) A city recorded an asset impairment to a public works facility. Which of the following is correct concerning the recording of the amount of the asset impairment?

1. A) The General Fund would record a debit to Expenditures.
2. B) The General Fund would record a debit to Other Financing Uses—Loss due to Impairment.
3. C) The governmental activities accounts would record a debit to Loss due to Impairment.
4. D) The governmental activities accounts would record a debit to Expenses—Public Works.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Asset impairments and Insurance Recoveries

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

61) A government experienced significant loss of certain roadways and bridges as a result of major flooding. Which of the following estimation approaches would be most useful in estimating the amount of asset impairment that has occurred?

1. A) Deflated depreciated replacement cost approach.
2. B) Service units approach.
3. C) Restorative cost approach.
4. D) Each of these three approaches would be equally useful.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Asset impairments and Insurance Recoveries

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

62) Premiums received on tax-supported bonds are generally transferred to what fund?

1. A) Internal service fund.
2. B) Debt service.
3. C) General.
4. D) Special revenue.

 

Answer:  B

Difficulty: 1 Easy

Topic:  Bond Premium, Discount, and Accrued Interest on Bonds Sold

Learning Objective:  05-05 Prepare financial statements for a capital projects fund.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

63) Governments can opt not to capitalize collections or individual works of art or historical treasures if the collection is:

1. A) Held for public exhibition, education, or research in furtherance of public service rather than for financial gain.
2. B) Protected, kept unencumbered, cared for, and preserved.
3. C) Subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections.
4. D) All of the options are correct.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Required Disclosures about Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

64) Which of the following is not true for capital projects funds?

1. A) Capital projects funds use a Construction Work in Progress account to record costs until the project is completed.
2. B) Encumbrance accounting is generally used.
3. C) Capital projects funds use the modified accrual basis of accounting.
4. D) Capital projects funds have a project-life focus.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-03 Explain the purpose and features of a capital projects fund.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

65) In late April, the Acme Construction Co. submitted a $1,200,000 progress billing on a construction contract. On May 2, the bill was approved for payment, subject to a ten percent retention, as provided by the contract. Construction expenditures should be debited when:

1. A) The bill is approved for payment.
2. B) The contract is signed.
3. C) The bill is paid (except for the ten percent retention).
4. D) The final ten percent of the bill is paid.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

66) In late April, the Acme Construction Co. submitted a $1,200,000 progress billing on a construction contract. On May 2, the bill was approved for payment, subject to a ten percent retention, as provided by the contract. The amount that should be debited to Construction Expenditures is:

1. A) $0.
2. B) $12,000.
3. C) $1,080,000.
4. D) $1,200,000.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

67) At the inception of a lease for equipment the journal entry required in the capital projects fund will include which of the following?

1. A) A debit to Equipment.
2. B) A debit to Lease Expense.
3. C) A credit to Obligations under Leases.
4. D) A credit to Other Financing Sources—Lease Agreement.

 

Answer:  D

Difficulty: 2 Medium

Topic:  General Capital Assets Acquired Under Lease Agreements

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

68) Which of the following is not a requirement that must be met to elect the “modified approach” to reporting certain eligible infrastructure assets?

1. A) The government gets the permission of the Government Accounting Standards Board.
2. B) The government documents that the eligible infrastructure assets are being preserved approximately at (or above) the condition level established and disclosed.
3. C) The government manages the assets using an asset management system that includes condition assessments of the assets and summary of results using a measurement scale.
4. D) The government manages the assets using an asset management system that includes estimates each year of the annual amount needed to maintain and preserve the eligible assets at the condition level established and disclosed by the government.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Infrastructure Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

69) When a snowplow is purchased by a government, it should be recorded in the governmental activities general journal as a(an):

1. A) Expenditure.
2. B) Capital asset.
3. C) Appropriation.
4. D) Expense.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

70) A general capital asset constructed several years ago by a capital projects fund was sold by the General Fund. Entries are necessary in the:

1. A) General Fund only.
2. B) General Fund and the capital projects fund.
3. C) General Fund and governmental activities.
4. D) Governmental activities only.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

71) In which of the following would it not be appropriate to record depreciation of capital assets?

1. A) Capital projects fund.
2. B) Internal service fund.
3. C) Business-type activities.
4. D) Governmental activities.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

72) The Town of Golden purchased a squad car for the police department. If the operations of the police department are financed by general revenues, which of the following is correct concerning where the capital asset would be recorded?

1. A) General Fund: No; Governmental Activities: Yes
2. B) General Fund: No; Governmental Activities: No
3. C) General Fund: Yes; Governmental Activities: No
4. D) General Fund: Yes; Governmental Activities: Yes

 

Answer:  A

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

73) Which of the following statements regarding capital assets is not true?

1. A) Proprietary funds routinely account for capital assets used in their operations within the fund financial statements.
2. B) Fiduciary funds do not account for property, plant, and equipment within the fund financial statements.
3. C) Because governmental funds account only for current financial resources, these funds do not record capital assets acquired by the funds.
4. D) General capital assets purchased or constructed with governmental fund resources are recorded in the governmental activities general ledger at the government-wide level.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

74) When a government transfers the rights and obligations of an asset to another legally separate governmental or private sector entity, the transaction is referred to as:

1. A) A special assessment arrangement.
2. B) An infrastructure agreement.
3. C) A service concession arrangement.
4. D) A sale-leaseback agreement.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Service Concession Arrangement

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

75) Under a service concession arrangement:

1. A) The transferring government continues to report the transferred asset as a capital asset and any related contractual obligations as liabilities.
2. B) The operating government will record the transferring government’s payment or receivable, a liability for the present value of significant contractual obligations and a corresponding deferred inflow of resources for the difference between the two.
3. C) Any deferred inflow of resources is recognized as revenue at the time the arrangement takes place.
4. D) All of the given statements are true.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Service Concession Arrangement

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

76) For each of the following definitions, select the key term from the list that relate to general capital assets and capital projects.

 

1. Bond anticipation notes
2. Infrastructure assets
3. Service Concession Arrangements
4. General capital assets
5. Capital projects funds
6. Asset impairment
7. Intangible assets
8. Depreciation

 

________ 1. Assets that lack physical substance and are nonfinancial in nature

________ 2. Short-term interest-bearing instruments issued by a government with a plan to replace with longer-term debt

________ 3. Roads, bridges, curbs and gutters, streets, sidewalks, and drainage systems installed for the common good

________ 4. Capital assets of a government that are not recorded in a proprietary or fiduciary fund

________ 5. Significant, unexpected decline in the service utility of a capital asset

 

Answer:  1. G, 2. A, 3. B, 4. D, 5. F

Explanation:  No further explanation details are available for this problem.

Difficulty: 1 Easy

Topic:  General Capital Assets

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Remember

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

77) If a city’s General Fund acquires a new copier under a lease agreement:

 

1) The cost of the copier should be recorded in the ________ general journal(s).

2) The “cost” of the copier is computed as ________.

3) A governmental fund should record the cost of the copier as an Expenditure, offset by a credit to ________.

4) The liability for the lease should be recorded in the ________ general journal(s).

5) The liability should be computed as ________.

 

Answer:

1) General Fund and governmental activities.

2) The present value of rentals and other minimum lease payments, or the fair value of the leased property, whichever is less.

3) Other financing sources—lease agreements.

4) Governmental activities.

5) The present value of rentals and other minimum lease payments.

Difficulty: 2 Medium

Topic:  General Capital Assets Acquired Under Lease Agreements

Learning Objective:  05-01 Describe the nature and characteristics of general capital assets.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

78) What is the difference between using the modified approach to accounting for infrastructure assets and depreciating infrastructure assets?

 

Answer:  The modified approach to accounting for infrastructure assets does not record an adjusting entry recognizing depreciation expense and accumulated depreciation. Rather the government reports, as an expense, the costs of maintaining the infrastructure assets at an established level or condition.  By doing this the book value of the infrastructure asset remains unchanged (i.e., there is no accumulated depreciation). This is unlike the depreciation method, whereby the book value of the infrastructure assets decreases each time depreciation expense is recorded.

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets; Infrastructure Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

79) Under the modified approach, what happens if infrastructure assets are not maintained at or above the established condition level?

 

Answer:  If the government fails to maintain the assets at or above the established condition level, it must revert to reporting depreciation for its infrastructure assets and discontinue use of the modified approach.

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets; Infrastructure Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

80) If bonds are sold at a premium to finance a capital project, what important question arises concerning the premium? Discuss the proper accounting for a bond premium in the capital projects fund, the debt service fund, and the government-wide statements assuming that the premium must be reserved for debt service.

 

Answer:  If bonds sold to finance the construction of general capital assets are sold at a premium, the question arises as to whether or not the initial issue premium is required to be set aside for debt service or may remain in the capital projects fund. If bond indentures require that initial issue premiums be used for debt service, only the par value of the bonds is considered as an other financing source of the capital projects fund, and the premium is considered as an other financing source of the debt service fund. At the government-wide level, a premium would be recorded and should be amortized over the life of the bonds.

Difficulty: 2 Medium

Topic:  Bond Premium, Discount, and Accrued Interest on Bonds Sold

Learning Objective:  05-05 Prepare financial statements for a capital projects fund.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

81) Which expenditures of a capital projects fund should be capitalized to Construction Work in Progress? Is Construction Work in Progress included in the chart of accounts of a capital projects fund? If not, where would it be found?

 

Answer:  All ordinary and necessary costs to construct or acquire the asset are appropriately reported as construction work in progress. This includes all legal costs, engineering and architectural services, site preparation, materials used, and billings from contractors, among other items. Interest incurred during construction is not capitalized for general capital assets, however. Construction Work in Progress is found in the ledger for governmental activities at the government-wide level for general capital assets. This capital asset account is not found in the ledger of the capital projects fund. In the capital projects fund, all capitalizable items are debited to Construction Expenditures.

Difficulty: 2 Medium

Topic:  Accounting for General Capital Assets; Classification of General Capital Assets

Learning Objective:  05-02 Account for general capital assets, including acquisition, maintenance, depreciation, impairment, and disposition.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

82) The City of McNeely sold bonds in the amount of $25,000,000 to finance the construction of a public health center. The bonds are serial bonds and were sold at par on January 1, the first day of a fiscal year. Shortly thereafter a construction contract in the amount of $22,000,000 was signed and the contractor commenced work. By year-end the contractor had been paid in full for all billings to date amounting to $12,000,000.

 

Prepare, in general journal form, all journal entries that should have been made during the fiscal year ended December 31 to record the preceding information in the capital projects fund. (No closing entry is required).

 

Answer:                                       CAPITAL PROJECTS FUND

 

	Debits	Credits
CASH	25,000,000
OTHER FINANCING SOURCES–PROCEEDS OF BONDS		25,000,000

 

ENCUMBRANCES	22,000,000
ENCUMBRANCES OUTSTANDING		22,000,000

 

ENCUMBRANCES OUTSTANDING	12,000,000
ENCUMBRANCES		12,000,000

 

CONSTRUCTION EXPENDITURES	12,000,000
CONTRACTS PAYABLE		12,000,000

 

OTHER FINANCING SOURCES– PROCEEDS OF BONDS	25,000,000
FUND BALANCE–RESTRICTED		13,000,000
CONSTRUCTION EXPENDITURES		12,000,000

 

Explanation:  No further explanation details are available for this problem.

Difficulty: 3 Hard

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting

 

 

 

83) Prepare journal entries for the following related transactions in the fund and activity journals affected: (If no entry is required for a transaction/event, select “No Journal Entry Required” in the first account field.)

 

1. A capital projects fund issued $5,000,000, 4 percent bonds for $5,050,000 to finance improvements of a park. Premiums received are to be used to service the debt issue.
2. The Parks and Recreation Special Revenue Fund transferred $250,000 for use in construction.
3. A construction contract was awarded in the amount of $5,200,000.
4. A bill was received from the contractor for $2,600,000.
5. The contractor’s bill is paid, and 5% retainage is withheld.
6. The park renovations were completed and the final bill of $2,600,000 was received. The contractor’s bill and retainages are approved for payment in full. Total construction expenditures were allocated as follows: $5,000,000 to building, and the remainder to equipment.
7. The capital projects fund temporary accounts were closed, and the capital projects fund was closed by transferring remaining funds to the debt service fund for use in debt repayment.

 

Answer:  1.

	Debits	Credits
Capital Projects Fund:
CASH	5,000,000
OTHER FINANCING SOURCES– PROCEEDS OF BONDS		5,000,000

 

Governmental Activities:
CASH	5,050,000
BONDS PAYABLE		5,000,000
PREMIUM ON BONDS PAYABLE		50,000

 

Debt Service Fund:
CASH	50,000
OTHER FINANCING SOURCES– BOND PREMIUM		50,000

 

(Note: This assumes the premium and interest are recorded directly in the debt service fund. If the premium and interest were first recorded in the capital projects fund, the capital projects fund would also credit Due to Debt Service Fund for $50,000.)

 

 

 

2.

Capital Projects Fund:
CASH	250,000
OTHER FINANCING SOURCES– INTERFUND TRANSFERS IN		250,000

 

Special Revenue Fund:
OTHER FINANCING USES– INTERFUND TRANSFERS IN	250,000
CASH		250,000

 

3.

Capital Projects Fund:
ENCUMBRANCES	5,200,000
ENCUMBRANCES OUTSTANDING		5,200,000

 

4.

Capital Projects Fund:
CONSTRUCTION EXPENDITURES	2,600,000
CONTRACTS PAYABLE		2,600,000

 

ENCUMBRANCES OUTSTANDING	2,600,000
ENCUMBRANCES		2,600,000

 

Governmental Activities:
CONSTRUCTION WORK IN PROGRESS	2,600,000
CONTRACTS PAYABLE		2,600,000

 

5.

Capital Projects Fund and Governmental Activities:
CONTRACTS PAYABLE	2,600,000
CONTRACTS PAYABLE–RETAINED PERCENTAGE		130,000
CASH		2,470,000

 

 

 

6.

Capital Projects Fund:
CONSTRUCTION EXPENDITURES	2,600,000
CONTRACTS PAYABLE		2,600,000

 

ENCUMBRANCES OUTSTANDING	2,600,000
ENCUMBRANCES		2,600,000

 

CONTRACTS PAYABLE	2,600,000
CONTRACTS PAYABLE–RETAINED PERCENTAGE	130,000
CASH		2,730,000

 

Governmental Activities:
CONSTRUCTION WORK IN PROGRESS	2,600,000
CONTRACTS PAYABLE		2,600,000
CONTRACTS PAYABLE	2,600,000
CONTRACTS PAYABLE–RETAINED PERCENTAGE	130,000
CASH		2,730,000
PARK BUILDING	5,000,000
EQUIPMENT	200,000
CONSTRUCTION WORK IN PROGRESS		5,200,000

 

 

 

7.

Capital Projects Fund:
To close nominal accounts:
OTHER FINANCING SOURCES– PROCEEDS OF BONDS	5,000,000
OTHER FINANCING SOURCES– INTERFUND TRANSFERS IN	250,000
CONSTRUCTION EXPENDITURES		5,200,000
FUND BALANCE–RESTRICTED OR ASSIGNED		50,000

 

To close the fund:
OTHER FINANCING USES– INTERFUND TRANSFERS OUT	50,000
CASH		50,000

 

FUND BALANCE–RESTRICTED OR ASSIGNED	50,000
OTHER FINANCING USES– INTERFUND TRANSFERS OUT		50,000
Debt Service Fund:
CASH	50,000
OTHER FINANCING SOURCES– INTERFUND TRANSFERS IN		50,000

 

Difficulty: 3 Hard

Topic:  Capital Projects Funds

Learning Objective:  05-04 Prepare journal entries for a typical capital project, both at the fund level and within the governmental activities category at the government-wide level.

Bloom’s:  Understand

AACSB:  Knowledge Application

AICPA:  FN Reporting