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 …
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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?
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:
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:
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:
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?
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?
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?
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?
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?
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?
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?
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:
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:
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?
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?
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?
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:
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:
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?
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?
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?
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?
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:
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):
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?
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?
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?
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?
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?
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?
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?
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:
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?
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:
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:
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?
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?
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):
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:
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?
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?
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?
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:
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:
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. 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.)
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
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
