Exam 2 Accounting 260

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 fair market value of the donation at the date of the gift was $600,000, of which $40,000 was the value of the land on which the building was situated. At what amount should this contribution be recorded in the governmental activities accounts at the government-wide level?

$600000

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?

$900000

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

A vehicle purchased from General Fund revenues.

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

Capital projects fund.

The contractor's bill is paid. 5% retainage is withheld.

Contracts Payable dr. 2600000 contracts payable retained % 130000 cr Cash cr 2470000

Which of the following is true regarding capital projects funds

Encumbrances accounting is employed.

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.

False

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.

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

General Fund and governmental activities.

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?

General Fund: No; Governmental Activities: Yes

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.

True

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.

True

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

True

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.

True

The acquisition of long-lived assets under an operating lease does not require any asset recognition in the accounts of any governmental fund.

True

. A construction contract was awarded in the amount of $5,200,000.

encumbrances 5200000 encumbrances outstanding 5200000

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

historical cost

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.

true

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

true

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 fair market value of the donation at the date of the gift was $600,000, of which $40,000 was the value of the land on which the building was situated. At what amount should Rosewood record this donated property in the General Fund?

$0

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?

$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:

$1200000

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?

$6250000

Grant funds totaling $1,500,000 are received from the state historical society, since eligible expenditures have been made.

Capital Projects Fund cash dr 1500000 revenues cr. 1500000 governmental activities cash dr 1500000 program revenues general gov cr 1500000

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?

Capital Projects Fund: Yes; Debt Service Fund: No

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

Capital asset

i. Central Paving and Construction submitted a progress billing to the town for $2,500,000. The city's public works inspector agrees that all milestones have been met for this portion of the work.

Capital projects fund encumbrances outstanding dr 2500000 construction expenditures dr 2500000 encumbrances cr 2500000 contracts payable cr2500000 governmental activities construction WIP 2500000 Dr Contracts payable 250000 Cr

p. Public works employees installed a new sidewalk and landscaping at a total cost of $130,000.

Capital projects fund construction expenditures 130000 cash 130000 governmental activities construction WIP 130000 Cash 130000

f. The capital projects fund paid the city's Utility Fund $50,000 for wiring associated with the renovation. No encumbrance had been recorded for this service.

Capital projects fund construction expenditures 50000 cash 50000 governmental activities construction WIP 50000 cash 50000

The roof leak was repaired satisfactorily, and the city paid the final billing and all retainages.

Capital projects fund contracts payable dr 2000000 contracts payable r% dr 125000 cash 2125000 cr Governmental Activities contracts payable dr 2000000 contracts payable r% dr 125000 cash cr 2125000

was discovered in the roof.

Capital projects fund encumbrances outstanding dr 2000000 construction expenditures dr 2000000 encumbrances cr 2000000 contracts payable cr 2000000 Governmental activities Construction WIP 2000000 Contracts Payable 2000000

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.

s. The renovation is considered complete and appropriate amounts are reclassified as buildings and improvements other than buildings (i.e., landscaping)

Debt Service fund Cash dr 120000 OFS Transfer in Cr. 120000 2) est OFS transfer in dr 120000 budgetary fund balance cr 120000 Capital projects fund Fund Balance restricted dr 1250000 Fund balance assgined dr 880000 Construction expenditure cr. 2130000 2) OFS Transfer out 120000 Cash 120000 3) fund balance assigned 120000 OFS transfer out 120000 Governmental activities Buildings dr 4750000 Improvements other than buildings dr 130000 Construction WIP 4880000

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

Interest expenditures may not be capitalized as part of the cost of general capital assets reported in governmental activities

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

A credit to Other Financing Uses-Capital Leases.

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

All of the above - Held for public exhibition, education, or research in furtherance of public service rather than for financial gain. - Subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections. - Protected, kept unencumbered, cared for, and preserved.

g. On October 1, 2017, the city mailed checks to bondholders for semiannual interest on the bonds.

Debt Service fund Expenditures interest 62500 Cash 62500 Governmental activities premium on bonds payable dr. 1250 expenses- interest on long term debt dr. 61250 cash cr. 62500

r. The April 1 debt service payments are made.

Debt Service fund Expenditures interest dr 62500 expenditures principal dr 250000 cash cr 312500 governmental activities premium on bonds payable dr 1250 interest exp dr 61250 bonds payable dr 250000 cash cr 312500

h. Sales taxes earmarked for debt service of $350,000 were collected.

Debt service fund cash 350000 revenues 350000 Governmental activities cash 350000 general revenues- taxes 350000

m. Record the 2018 budget for the Serial Debt Service Fund; $300,000 of earmarked sales taxes are expected to be collected in 2018; appropriations include a $250,000 principal payment on April 1 and two serial bond interest payments.

Debt service fund Estimated revenues dr 300000 budgetary fund balance dr 68750 appropriations cr 368750

n. Sales tax collections for debt service amounted to $250,000.

Debt service fund cash 250000 Revenues 250000 Governmental activities cash 250000 general revenues taxes 250000

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

Debt service.

Capital projects funds should use the modified accrual basis of accounting for revenues and expenses.

False

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

False

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.

If bonds are sold at a premium to finance a capital project the important question that you want to know is what is par value of the bond. I think it would also be good to know what state statutues are in place in regard to the sale of a bond for a premium. If a bond is sold at a premium the sale would be recorded first in the capital projects fund you would record the face value of the bond and an entry in the debt service fund for the premium. its important to record the proceeds at the capital projects level and the transfer of the premium to the debt service fund. Capital Projects fund Cash (D) Other Financing sources- proceeds (C) Due to other funds (C)

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

The modified approach to accounting the government is not required to record depreciation expense or adjusting entries for accumulated depreciation. following the modified approach infrastructure assets are expensed when incurred and improvements or additions capitalized when incurred. In the event that these assets are not being maintained at or above the established level then the government must revert back to reporting depreciation for the assets and stop using the modified approach.

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

True

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

True

Which of the following statements is correct regarding depreciation?

Which of the following statements is correct regarding depreciation?

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.

a) Cash dr 5000000 Other financing sources proceeds of bonds cr. 5000000 b) cash dr. 5050000 bonds payable dr. 5000000 premiums on bonds payable 50000 c) Cash dr. 50000 Other financing sources bond payable 50000

The Parks and Recreation Special Revenue Fund transferred $250,000 for use in construction.

a) cash dr 250000 Other financing sources interfund transfer in cr. 250000 b) other financing sources interfund transfer in 250000 cash 250000

A bill was received from the contractor for $2,600,000.

a) construction expenditure 2600000 (D) contracts payable 2600000 (C) b) encumbrances outstanding (D)2600000 (C) encumbrances 2600000 c) construction work in progress 2600000 (D) contracts payable (C) 2600000

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.

a) construction expenditures 2600000 (D) contracts payable 2600000 (D) b) encumbrances outstanding 2600000 encumbrances 2600000 c) contracts payable 2600000 (D) contracts payable r%: 130000 (D) Cash (C) 2730000 d) construction work in progress 2600000 contracts payable 2600000 e) contracts payable 2600000 (D) contracts payable r%130000 (D) cash 2730000 (C) f) park building (D) 5000000 equipment (D) 200000 construction wip (C) 5200000

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.

a) other financing sources proceeds from bonds (D)5000000 Other financing sources interfund transfer in (D) 250000 Construction Expend. (C) 5200000 Fund Balance restricted or assigned (C) 50000 b) Other financing sources interfund transfers out (D) 50000 cash (C) 50000 c) Fund balance restricted (D) 50000 other financing sources transfer out (C) 50000 d) Cash (D) 50000 Other financing sources interfund transfers in (C) 50000

b. The town transfers $1,000,000 from the General Fund to a newly established capital projects fund.

capital projects fund cash 1000000 other financning sources interfund transfers in 1000000

c. Planning and architect's fees for the town hall renovation are paid in the amount of $200,000.

capital projects fund construction expend 200000 cash 200000 governmental act. construction wip 200000 cash 200000

j. The town paid Central Paving and Construction the amount it had billed, except for 5 percent that was withheld as a retained percentage per terms of the contract.

capital projects fund contracts payable dr 2500000 contracts payable r% cr 125000 Cash cr 2375000 Governmental activities contracts payable dr 2500000 contracts payable r% cr 125000 Cash cr 2375000

d The town hall renovation construction contract is awarded to a local contractor, Central Paving and Construction, for $4,500,000.

capital projects fund: encumbrances 4500000 encumbrances oustanding 4500000

l. At year-end, closing entries are made; $1,000,000 of fund balance is assigned, and the remainder is restricted. (Ignore closing entries for governmental activities.)

debt service fund 1) appropriations dr 62500 budgetary fund balance dr337500 estimated revenues cr 350000 estimated OFS prem on bond cr 50000 2) revenues dr 350000 OFS Premium on bond dr 50000 Expenditures interest cr. 62500 Fund Balance Restricted cr 337500 Capital projects fund revenues 1500000 OFS interfund transfers in dr 1000000 OFS proceeds of Bonds dr 2500000 Construction Expenditures dr 2750000 Fund Balance restricted cr 1250000 Fund Balance Assigned 1000000

e. On April 1, 2017, the town issues serial bonds with a face value totaling $2,500,000 and having maturities ranging from one to 20 years at 102. The bonds bear interest of 5 percent per annum, payable semiannually on April 1 and October 1.

debt service fund 1) cash dr 50000 other financing sources premium on bond cr. 50000 2) est. other financing sources premium on bond dr 50000 budgetary fund balance cr 50000 capital projects fund cash dr. 2500000 other fin. sources proceeds bond cr 2500000 Governmental Activities Cash dr. 2550000 Premium on bonds cr. 50000 bonds payable cr. 2500000

a. Record the 2017 budget for the Serial Debt Service Fund. $350,000 of sales taxes are expected to be collected in 2017; the only appropriation is expected to be six months of interest on the serial bond.

debt service fund: estimated revenue 350000 appropriations 62500 budgetary fund balances 287500

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.

true

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.

true

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.

true