Chapter 4

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: $ 0. $ 12,000. $1,080,000. $1,200,000.

$1,200,000.

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? $900,000. $925,000. $875,000. $0.

$900,000.

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 debit to Equipment. A debit to Capital Lease Expense. A credit to Obligations under Capital Leases. A credit to Other Financing Uses-Capital Leases.

A credit to Other Financing Uses-Capital Leases.

Which of the following would be considered a general capital asset? A vehicle purchased from General Fund revenues. A vehicle purchased and maintained by an enterprise fund. A computer purchased from revenues of an internal service fund and used by the supplies department. Real estate purchased with the assets of a pension trust fund.

A vehicle purchased from General Fund revenues.

How should a capital lease for a general capital asset be recorded in the governmental activities accounts at the inception of the lease? Debit to a capital asset account. Debit to a capital expense/expenditure account. Credit to Capital Lease Obligations Payable. Both A and C are correct.

Both A and C are correct.

A capital projects fund might be used to account for which of the following activities? Maintaining sidewalks. Building a parking garage. Providing water and sewer services. Servicing long-term debt.

Building a parking garage.

Which of the following is not a required disclosure about each major class of capital assets? Beginning-of-year and end-of-year balances showing accumulated depreciation separate from historical cost. Capital acquisitions and sales or other dispositions during the year showing the date and method of acquisition or disposition. Depreciation expense for the current period with disclosure of the amounts charged to each function in the statement of activities. Disclosures describing works of art or historical treasures that are not capitalized and explaining why they are not capitalized.

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

In which of the following would it not be appropriate to record depreciation of capital assets? Capital projects fund. Internal service fund. Business-type activities. Governmental activities.

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. Encumbrance accounting is generally used. Capital projects funds use the modified accrual basis of accounting. Capital projects funds have a project-life focus.

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 a new city jail. Construction of airport runways financed by revenue bonds and to be repaid from the revenues of the city airport, an enterprise fund. Lease of a building to be used as a city office building. Construction of a new city park to be maintained primarily from General Fund revenues.

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? Encumbrances. Appropriations. Contracts Payable-Retained Percentage. Construction Expenditures.

Contracts Payable-Retained Percentage.

How should a capital lease for a general capital asset be recorded in the General Fund accounts at the inception of the lease? Debit to a capital asset account. Debit to a capital expenditure account. Credit to Capital Lease Obligations Payable. Both A and C are correct.

Debit to a capital expenditure account.

Premiums received on tax-supported bonds are generally transferred to what fund? Internal service fund. Debt service. General. Special revenue.

Debt service.

Which of the following is true regarding capital projects funds? Encumbrances accounting is employed. Encumbrances accounting is not normally employed, but Appropriations are recorded. No budgetary accounts are ever used. All budgetary accounts are employed and budget to actual statements are prepared.

Encumbrances accounting is employed.

Which of the following statements regarding capital assets is not true? Proprietary funds routinely account for capital assets used in their operations within the fund financial statements. Fiduciary funds do not account for property, plant, and equipment within the fund financial statements. Because governmental funds account only for current financial resources, these funds do not record capital assets acquired by the funds. General capital assets purchased or constructed with governmental fund resources are recorded in the governmental activities general ledger at the government-wide level.

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

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 only. General Fund and the capital projects fund. General Fund and governmental activities. Governmental activities only.

General Fund and governmental activities.

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. 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. Interest expenditures must be capitalized as part of the cost of general capital assets reported in the capital projects fund. The capitalization of interest expenditures as part of the cost of general capital assets reported in the capital projects fund is optional.

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

Which of the following statements is correct regarding depreciation? Depreciation expense should be recorded in the appropriate governmental funds, and recorded in the governmental activities accounts. Depreciation expense must be recorded in the governmental fund, but no depreciation expense is recorded in the governmental activities accounts. No depreciation can be recorded in any governmental fund, but depreciation expense must be recorded in the governmental activities accounts. No depreciation can be recorded in any governmental fund, nor is it permissible to record depreciation expense in the governmental activities accounts.

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

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): Fund balance addition. Revenue. Other financing source. Current liability.

Other financing source.

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. The government documents that the eligible infrastructure assets are being preserved approximately at (or above) the condition level established and disclosed. 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. 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.

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

Capital assets used by governmental funds should be reported in: The appropriate governmental funds. The property, plant, and equipment fund. Departmental memorandum records. The governmental activities column of the government-wide statements.

The governmental activities column of the government-wide statements.

Governments can opt not to capitalize collections or individual works of art or historical treasures if the collection is: Held for public exhibition, education, or research in furtherance of public service rather than for financial gain. Protected, kept unencumbered, cared for, and preserved. Subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections. All of the above.

all of the above

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

capital asset

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?

the one with equipment