Chapter 5

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:

$0.

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

$0.

The following items were included in Simple City's General Fund expenditures for the year ended June. Computers for the city treasurer's office $ 6,000 Furniture for the mayor's office $ 20,000 How much should be classified as capital assets in Simple City's General Fund balance sheet at June 30?

$0.

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:

$1,200,000.

In 2023, Sunset 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 2023 and $2,050,000 in 2024, 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 2024?

$2,050,000

The following items were included in Simple City's General Fund expenditures for the year ended June 30: Computer for the city treasurer's office $ 6,000 Furniture for the mayor's office $ 20,000 How much should be classified as capital assets in Simple City's government-wide statement of net position at June 30?

$26,000.

The following balances are included in the subsidiary records of Thistlewood: Town hall building - $500,000 Town swimming 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?

$527,500.

The following general capital assets were owned by the Town of Clementville: 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?

$6,250,000

During the year, a local merchant donated a building to the City of Stage Coach. The original cost of the building was $300,000. Accumulated depreciation at the date of the gift amounted to $250,000. The acquisition 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?

$600,000.

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:

$870,500.

The City of Brown Creek 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?

$900,000.

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:

A credit to Other Financing Sources for $5,000.

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

A credit to Other Financing Sources—Lease Agreement.

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:

A debit to Cash for $15,000.

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:

A service concession arrangement.

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

A vehicle purchased from General Fund revenues.

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

All of the options are correct.

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

Both Debit to a lease asset account and Credit to Lease Obligations Payable are correct.

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

Building a parking garage.

The City of Apple Creek 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?

Capital Projects Fund: Yes; Debt Service Fund: No

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

Capital acquisitions and sales or other dispositions during the year showing the date and method of acquisition or disposition.

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

Capital asset.

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

Capital projects fund.

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

Capital projects funds use a Construction Work in Progress account to record costs until the project is completed.

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

Construction of airport runways financed by revenue bonds and to be repaid from the revenues of the city airport, an enterprise fund.

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

Contracts Payable—Retained Percentage.

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

Debit to a capital expenditure account.

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

Debt service.

Which of the following is true regarding capital projects funds?

Encumbrances accounting is generally employed.

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

Fiduciary funds do not account for property, plant, and equipment within the fund financial statements.

Six 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?

General Fund : Debit Expenditures - $8000. Credit Vouchers Payable - $8000 Governmental Activities: Debit equipment - $8,000 Credit Vouches Payable - $8,000

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

General Fund and governmental activities.

The Town of Orleans purchased a truck for the parks department. If the operations of the parks department are financed by general revenues, which of the following is correct concerning where the capital asset would be recorded?

General Fund: No; Governmental Activities: Yes

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

Historical cost.

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

Interest cannot be capitalized as part of the cost of general capital assets reported in governmental activities.

Which of the following statements is correct regarding depreciation?

No depreciation can be recorded in any governmental fund, but depreciation expense must be recorded in the governmental activities accounts.

GASB standards require that general capital assets be recorded in the fund statements at: a) Historical cost. b) Fair value at the financial statement date. c) Estimated cost at the financial statement. d) None of the options are correct.

None of the options are correct.

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):

Other financing source.

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?

Restorative cost approach.

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:

The bill is approved for payment.

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:

The capital projects fund.

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

The government gets the permission of the Government Accounting Standards Board.

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?

The governmental activities accounts would record a debit to Expenses—Public Works.

Capital assets used by governmental funds should be reported in:

The governmental activities column of the government-wide statements.

Under a service concession arrangement:

The transferring government continues to report the transferred asset as a capital asset and any related contractual obligations as liabilities.