Governmental Acct Smartbooks Ch 5
In order to use the modified approach for eligible infrastructure assets, governments must provide documentation that complete condition assessments are made at least every ______ years.
3
The City of Portage is building a new police station and has set up a capital products fund to account for the construction. All of the requirements and obligations related to the building have been fulfilled and the revenues and bond proceeds exceeded the expenditures. The entry to record this would include which of the following?
A credit to Fund Balance—Restricted in the Police Station Capital Projects Fund A credit to Construction Expenditures in the Police Station Capital Projects Fund
Which of the following would be included in the entry to record the inception of a capital lease for the acquisition of general capital assets? A debit to Equipment in the Special Revenue Fund for the present value of the lease payments A credit to Lease Obligations Payable in the Governmental Activities for the present value of the lease payments A credit to Lease Obligations Payable in the Governmental Activities for the acquisition cost of the capital assets A debit to Expenditures in the Governmental activities for the present value of the lease payments
A credit to Lease Obligations Payable in the Governmental Activities for the present value of the lease payments
The entry to record the inception of a capital lease for the acquisition of general capital assets would include which of the following? Multiple choice question. A debit to Equipment in the Special Revenue Fund A credit to Other Financing Sources—Lease Agreements in the Government-wide activities A credit to Other Financing Sources—Lease Agreements in the Special Revenue Fund A debit to Expenditures in the Government-wide activities
A credit to Other Financing Sources—Lease Agreements in the Special Revenue Fund
Which of the following would be included in the entry to record the inception of a capital lease for the acquisition of general capital assets?
A credit to Other Financing Sources—Lease Agreements in the Special Revenue Fund for the present value of the lease payments
When bond anticipation notes are retired using a portion of the bond proceeds, the entries include which of the following?
A debit to Bond Anticipation Notes Payable in governmental activities
Donated general capital assets are recorded at which of the following?
Acquisition value
Identify which of the following should be capitalized as part of the asset. Costs of operating the city pool City pool maintenance Additions of a room to a building Change in equipment that increases its output
Additions of a room to a building Change in equipment that increases its output
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. The entry to record a $1,000,000 bond issue at par value includes a credit to which of the following?
Bonds Payable in the Governmental Activities general ledger
Required GASB disclosures about capital assets must be made for both for the general capital assets reported in the Governmental Activities column and those assets reported in which column of the government-wide financial statements.
Business-type activities
Which of the following are part of the GASB's definition of intangible assets? Capital assets that lack physical substance Capital assets that have a useful life of more than one period Capital assets that are financial in nature
Capital assets that lack physical substance Capital assets that have a useful life of more than one period
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. Miscellaneous costs that have not been encumbered were paid in the amount of $25,000. The entry includes a credit to which of the following?
Cash in the Police Station Capital Projects Fund
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. The entry to record payment in full from another government that had agreed to pay part of the cost includes a debit to which of the following?
Cash in the Police Station Capital Projects Fund
The City of Portage is building a new police station and has set up a capital products fund to account for the construction. A loan was taken out to cover preliminary expenses. The entry to record the repayment of the $30,000 loan plus interest of $900 includes a credit to which of the following? Multiple choice question.
Cash in the Police Station Capital Projects Fund for $30,900
The City of Portage is building a new police station and has set up a capital products fund to account for the construction. $350,000 had previously been encumbered for supplies, materials, and minor equipment. Actual invoices amounted to $347,000. The entry to record the payment of these invoices includes a credit to which of the following?
Cash in the Police Station Capital Projects Fund for $347,000 Encumbrances in the Police Station Capital Projects Fund for $350,000
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. Miscellaneous costs that have not been encumbered were paid in the amount of $25,000. The entry includes a debit to which of the following?
Construction Expenditures in the Police Station Capital Projects Fund
The City of Portage is building a new police station and has set up a capital products fund to account for the construction. $350,000 had previously been encumbered for supplies, materials, and minor equipment. Actual invoices amounted to $347,000. The entry to record the payment of these invoices includes a debit to which of the following?
Construction Expenditures in the Police Station Capital Projects Fund for $347,000 Encumbrances Outstanding in the Police Station Capital Projects Fund for $350,000
Which account is used to capitalize the accumulated cost of partially completed general capital assets?
Construction Work-in-process
Capital assets constructed by outside contractors are capitalized at ____
Contract price
A contractor has submitted a bill for $500,000 for the completion of a building included in a capital projects fund. The contract provided for a retention of 5% until the final inspection is completed. The entry to record payment includes a debit to which of the following?
Contracts Payable for $500,000
A contractor has submitted a bill for $500,000 for the completion of a building included in a capital projects fund. The contract provided for a retention of 5% until the final inspection is completed. The entry to record payment includes a credit to which of the following?
Contracts Payable—Retained Percentage for $25,000
Which statement regarding capital projects funds is correct?
Each capital projects fund that meets the definition of a major fund must be reported in a separate column of the balance sheet.
The City of Portage is building a new police station and has set up a capital products fund to account for the construction. The entry to record the contractor's bill for work completed includes a debit to which of the following?
Encumbrances Outstanding in the Police Station Capital Projects Fund
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. Purchase orders have been issued for supplies, equipment, and materials in the amount of $50,000. The entry to record this includes a credit to which of the following?
Encumbrances Outstanding in the Police Station Capital Projects Fund
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. Purchase orders have been issued for supplies, equipment, and materials in the amount of $50,000. The entry to record this includes a debit to which of the following?
Encumbrances in the Police Station Capital Projects Fund
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. The entry to record the contractor's bill for work completed includes a credit to which of the following?
Encumbrances in the Police Station Capital Projects Fund
Which of the following are criteria for outlays that may be capitalized as part of a capital asset? Multiple select question. Enhances the value of an integral part of the asset Clearly adds to the utility or function of the asset Exceeds 20% of the value of the asset Provides revenue as a result of use of the asset
Enhances the value of an integral part of the asset Clearly adds to the utility or function of the asset
True or false: General capital assets may be specifically associated with activities financed by proprietary and fiduciary funds.
False Reason: General capital assets should be distinguished from capital assets specifically associated with activities financed by proprietary and fiduciary funds.
True or false: Acquisitions of general capital assets requiring substantial amounts of money are ordinarily financed through a special revenue fund appropriation in a single budgetary period.
False Reason: They are usually financed with some type of long-term debt.
True or false: If the requirements to use the modified approach to accounting for eligible infrastructure assets are met, all expenditures incurred to preserve the assets should be depreciated.
False Reason: This is false. They should be expensed in the period incurred
If after the completion of a capital projects fund, there is a large deficit, the government could do which of the following?
Finance the deficit by issuing debt in whatever form is legally possible and feasible Seek additional grants from other governments to cover the deficit if it is relatively large
If funds are left over when a capital project is complete, which of the following is correct?
Fund Balance—Restricted is debited and Other Financing Uses—Interfund Transfers Out is credited
Leases involving equipment are commonly accounted for in which of the following?
General fund
Select the correct statement regarding capital projects funds. Governments are required to provide as supplementary information combining financial statements for all major funds. Governments are required to provide as supplementary information combining financial statements for all nonmajor funds. Governments are encouraged to provide as supplementary information combining financial statements for all nonmajor funds. Each capital projects fund that meets the definition of a nonmajor fund must be reported in a separate column of the balance sheet.
Governments are encouraged to provide as supplementary information combining financial statements for all nonmajor funds.
Identify the accurate statement regarding costs incurred after acquisition of capital assets.
In the case of a betterment, the asset account can be credited for the original cost of the part replaced and then debited for the new cost.
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. A loan was taken out to cover preliminary expenses. The entry to record the repayment of the $30,000 loan plus interest of $900 includes a debit to which of the following?
Interest Expenditures in the Police Station Capital Projects Fund for $900
Which of the following statements is true of depreciation expense?
It is reported as part of the direct expenses of functions and programs in the government-wide statement of activities.
Which of the following is true of Construction Work in Progress? It is reported on the statement of net position with other assets that are being depreciated. It is reported on the statement of net position with other assets that are not being depreciated. It is not reported on the statement of net position.
It is reported on the statement of net position with other assets that are NOT being depreciated.
Which of the following is true of depreciation expense? 1. It is usually an allowable cost on capital assets used in the operations of a government grant-financed program. 2. It should only be reported on capital assets used for the production of services that are sold. 3. It should not be reported on general capital assets acquired for the production of general governmental services.
It is usually an allowable cost on capital assets used in the operations of a government grant-financed program.
Which of the following is true of depreciation expense on infrastructure assets in the government-wide statement of activities?
It must be reported unless a government adopts the modified approach.
Which of the following are true of disclosure for capital assets?
It should be distinguished between general capital assets and those reported in business-type activities. It should be divided into major classes of capital assets of the primary government.
The City of Plainwell issued $400,000 of 7% bond anticipation notes that will be retired within six months using the proceeds of a previously approved $4,000,000 bond issue. The entry to record the issue of the bond anticipation notes includes a credit to which of the following?
Other Financing Sources—Proceeds of Bond Anticipation Notes in the capital projects fund
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. The entry to record a $1,000,000 bond issue at par value includes a credit to which of the following?
Other Financing Sources—Proceeds of Bonds in the Police Station Capital Projects Fund
Proceeds of debt issues may be recorded as which of the following?
Proceeds of Bonds or Long-term Notes
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. The entry to record payment in full from another government that had agreed to pay part of the cost includes a credit to which of the following?
Program Revenues—Public Safety—Capital Grants and Contributions in the Governmental Activities general ledger
Identify the major differences in how activities are recorded in the capital projects fund and the governmental activities general ledger.
Resource outflows are recorded as expenditures in the capital projects fund and as construction work in progress in governmental activities. Resource inflows are recorded as other financing sources in the capital projects fund and as liabilities in governmental activities
True or false: An asset impairment can occur due to a change in the manner or duration of an asset's use.
TRUE
When bonds are issued at a premium in states that require initial issue premiums to be used for debt service, which of the following is correct?
The par value is recorded in the capital projects fund and the premium is recorded in the debt service fund.
When bonds are issued at a premium in states that require initial issue premiums to be used for debt service, which of the following is correct? Multiple choice question.
The par value is recorded in the capital projects fund and the premium is recorded in the debt service fund.
The cost of capital assets may be reduced by which of the following?
The transfer of an asset from the governmental activities ledger to an enterprise fund Demolition of an identifiable portion of the asset
Events that reduce the recorded cost of capital assets include which of the following?
Theft or loss Sales Retirements
Which of the following is true of works of art or historical treasures?
They do not have to be capitalized if they are held for public exhibition, education, or research.
If after the completion of a capital projects fund, there is a residual fund balance, how may the residual be accounted for?
Transferred to the General Fund to pay operating expenses Transferred to the fund that is to service the debt if long-term debt has been incurred for the purpose of the capital projects fund Returned to the source of the restricted funding
True or false: Judgments levied from damage suits in connection with land acquisition are considered capital costs of the property acquired.
True
Deflated depreciated replacement cost approach
Used for impairment due to change in the manner or duration of use The estimated current cost of another asset with similar depreciation.
Service units approach
Used for impairment due to environmental factors or obsolescence The portion of estimated service utility life of the asset that has been estimated lost due to impairment
Restoration cost approach
Used for impairments from physical damage The estimated cost to recover the utility of the asset
A service concession arrangement is reported as ______.
a deferred inflow recognized as revenue over the term of the arrangement
Machinery and equipment are usually _____
acquired by purchase
Service concession arrangements ______ may only be entered into between two legally separate government entities are used to generate revenues and cash flows from capital assets may have a negative impact on the efficiency of public services
are used to generate revenues and cash flows from capital assets
The GASB defines an ______ as a significant, unexpected decline in the service utility of a capital asset.
asset impairment
Bond issue premiums should _____
be amortized over the life of the bond using the effective-interest method
If an asset impairment is significant in amount and results from an event that is considered unusual in nature, the loss due to impairment should ______.
be reported as either a special item or extraordinary item as appropriate
A government may postpone a bond sale until a large portion of the proceeds is needed or in the case where all of the details connected with a bond issuance are not known. These temporary financing arrangements are called ___
bond anticipation notes
General capital assets should be distinguished from capital assets specifically associated with activities financed by which type of funds? Multiple choice question.
both proprietary and fiduciary
A special assessment or local improvement district is sometimes formed by a group of property owners to facilitate a(n) ______
capital improvement project
Use of a ______ fund is recommended to account for money restricted, committed, or assigned to the purchase or construction of specified general capital assets.
capital projects
In a service concession arrangement, the transferring government generally ___
continues reporting the transferred asset as a capital asset reports any related contractual obligations as liabilities
Intangible assets include which of the following? Multiple select question. copyrights patents land improvements easements
copyrights patents easements
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. All of the requirements and obligations related to the building have been fulfilled. The entry to record this in Governmental Activities includes which of the following?
credit to Construction Work in Progress
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. All of the requirements and obligations related to the building have been fulfilled. The entry to record this in Governmental Activities includes which of the following? Multiple choice question.
credit to Construction Work in Progress
Accounting for a governmental fund focuses on the inflows and outflows of ___
current financial resources on the modified accrual basis
The City of Portage is building a new police station and has set up a capital projects fund to account for the construction. All of the requirements and obligations related to the building have been fulfilled. The entry to record this in Governmental Activities includes ___
debit to Buildings
When bond anticipation notes are retired using a portion of the bond proceeds, the entries include a ___
debit to Other Financing Uses—Retirement of Bond Anticipation Notes in the capital projects fund
A capital projects fund is ______.
different from the General Fund and special revenue funds in that capital projects funds have a project-life focus`
Accounting for governmental activities focuses on the inflows and outflows of ______
economic resources on the accrual basis
GASB standards required that general capital assets be recorded at which of the following?
historical cost
Capital assets such as highways, streets, sidewalks, storm drainage systems, and lighting systems are called ____
infrastructure assets
The cost of machinery and equipment purchased should include which of the following? Multiple select question.
installation costs purchase price transportation costs
State laws often require that assets no longer needed in a capital projects fund be transferred to the fund that will service the debit incurred for the project, a debt service fund. This type of transfer is a(n) ______.
interfund transfer
Historically, interest rates payable on general long-term debt were often ______ than interest rates that the government could earn on temporary investments of high quality.
lower
If the two criteria have been met regarding bond anticipation notes, the issue should be recorded as ______
other financing sources in the capital projects fund
If the two criteria have been met regarding bond anticipation notes, the issue should be recorded as ______.
other financing sources in the capital projects fund
Capital assets are generally acquired by which of the following?
outright purchase lease financing construction
Capital projects funds differ from both general and special revenue funds because they have a ______. Multiple choice question.
project-life focus
The loss due to an asset impairment that is not significant in amount, unusual in nature, or infrequently occurring is _____
recorded as a program expense in the government-wide statement of activities
Building improvements include which of the following?
renovations that increase a building's value alterations that extend the useful life of a building
Disclosure for each major class of capital assets should include which of the following?
sales or dispositions during the year capital acquisitions during the year depreciation expense for the current period
When financing a capital projects fund, governments typically ______.
sell bonds as soon as possible
A government transfers the rights and obligations of an asset to another legally separate governmental or private sector entity in a(n) ____
service concession arrangement
Proceeds of debt issues for a capital projects fund should be recognized at the time the issue is ______.
sold
A(n) ______ is a compulsory levy made against certain property to defray part or all of the cost of a specific improvement or service that is of particular benefit to the assessed property.
special assessment
The cost of land acquired by a government through purchase should include which of the following?
taxes and other liens assumed the contract price title search costs
State laws often require that assets no longer needed in a capital projects fund be transferred to ______.
the fund that will service the project debt
The liability for bond anticipation notes should be treated as a long-term liability if ______.
the intent is supported by an ability to consummate financing the short-term notes on a long-term basis