Deck 7: Governmental Activities - Capital Assets and Investments in Marketable Securities

Question 1

The objectives of financial reporting for fixed assets should be to provide information

A)About a governmental entity's physical resources.
B)That can be used to assess the service potential of a governmental entity's physical resources.
C)To help users assess a government's long- and short-term capital needs.
D)All of the above.

Answer 1

D

Question 2

Which of the following is NOT an infrastructure asset?

A)Roads.
B)Sidewalks.
C)Buildings.
D)Bridges.

Answer 2

C

Question 3

The City of Shiloh sold a used police car.The police car, which had a historical cost of $17,000 and a fair value of $12,000, was sold for $5,000.Assuming that the City maintains its books and records in a manner to facilitate the preparation of the fund financial statements, what is the appropriate entry in the General Fund to record this sale?

A)Debit Cash $5,000; Credit Revenue $5,000.
B)Debit Cash $5,000 and Loss on Sale $7,000; Credit Automotive Equipment $12,000.
C)Debit Cash $5,000; Credit Other Financing Sources-Sale of Asset $5,000.
D)Debit Cash $5,000; Credit Automotive Equipment $5,000.

Answer 3

C

Question 4

Most infrastructure assets are the responsibility of the federal government, not state and local governments.

Question 5

General capital assets are excluded from governmental funds, themselves, because of the funds measurement focus (current financial resources).

Question 6

Prior to the issuance of GASB Statement No.34, state and local governments provided virtually no information as to most of their infrastructure.

Question 7

General fixed assets are excluded from governmental funds because

A)The measurement focus of governmental funds is on current financial resources.
B)They are not used to generate revenues.
C)The basis of accounting is accrual.
D)None of the above.

Question 8

To elect not to capitalize works of art and similar assets, a government must see that the assets meet all of the following criteria except:

A)The assets must be held for public exhibition, education, or research in furtherance of public service, rather than for financial gain.
B)The assets must be protected, kept unencumbered, cared for and preserved.
C)The assets must be subject to an organizational policy that requires the proceeds form sales of the collection items be used to acquire very similar items for the collection.
D)The assets must be subject to an organizational policy that requires the proceeds from sales of the collection items be used to acquire other items for the collection.

Question 9

Donated assets are reported at

A)Historical cost to the donor.
B)Book value in the hands of the donor.
C)Fair value on date of donation.
D)Zero value because they were not purchased.

Question 10

If a government capitalizes works of art and similar assets, which of the following statements is true relative to depreciation on the works of art and similar assets?

A)Donated assets cannot be depreciated.
B)All works of art must be depreciation, not just exhaustible.
C)All exhaustible assets must be depreciated.
D)The government may elect to omit all depreciation.

Question 11

A governmental entity may record long-term assets in which of the following funds or account groups?

A)General Fund
B)Internal Service Fund.
C)Capital Project Fund
D)Debt Service Fund.

Question 12

Which of the following costs will be included in the cost of land on the government-wide financial statements?

A)Purchase price (invoice amount).
B)Cost of demolishing existing structures that cannot be used.
C)Closing costs.
D)All of the above.

Question 13

Governments are prohibited from entering into reverse repurchase agreements.

Question 14

If a government receives a donation of a work of art, the government must recognize revenue

A)Only if it elects to capitalize its collection.
B)Only if it elects NOT to capitalize its collection.
C)On all donations of works of art.
D)It cannot recognize revenue from donations.

Question 15

At the government-wide level, governments must depreciate inexhaustible assets, such as land, works of art, or historical treasures.

Question 16

Unlike businesses, governments should not capitalize interest on general capital assets that they construct themselves.

Question 17

Governments do not have to depreciate infrastructure assets if they can demonstrate they are preserving them in a specified condition.

Question 18

In governmental funds, the capital asset costs are reported as expenses when the assets are acquired.

Question 19

Governments invest in marketable securities for much the same reason that businesses do-to earn a return on cash that would otherwise be unproductive.

Question 20

General capital assets are distinguished from the capital assets of proprietary funds and fiduciary funds.

Question 21

GASB standards require that depreciation be reported on all capital assets except

A)Infrastructure accounted for on the standard approach.
B)Infrastructure assets accounted for on the modified approach.
C)Donated assets.
D)Capitalized works of art.

Question 22

If a government elects the modified approach with regard to capitalization of infrastructure

A)Costs to preserve infrastructure assets are expensed as incurred with no additional disclosure required.
B)Costs to preserve infrastructure assets are expensed as incurred and disclosure of assessed condition is required.
C)Costs to preserve infrastructure assets are capitalized as incurred and depreciated over the estimated useful life with no additional disclosure required.
D)Costs to preserve infrastructure assets are capitalized as incurred and NOT depreciated over the estimated useful life with additional disclosure required.

Question 23

A broker-dealer or other financial institution transfers cash to a government in exchange for securities and the government agrees to repay the cash plus interest and return the securities.From the government's point of view, this transaction is a

A)Repurchase agreement.
B)Reverse repurchase agreement.
C)Derivative.
D)Option.

Question 24

Which of the following is NOT an example of a derivative?

A)Stock options.
B)Interest-only strips.
C)Debt instruments backed by pools of mortgages.
D)Repurchase agreements.

Question 25

Governments must classify bank balance in one of three categories.Which of the following is NOT one of those categories?

A)Insured or collateralized with the security held by the entity or its agents in the entity's name.
B)Collateralized with security held by the pledging financial institution's trust department.
C)Insured, registered in the name of the government or held by the government or its agent in the government's name.
D)Uncollateralized.

Question 26

The risk that the other party to an investment will not fulfill its obligation is

A)Market risk.
B)Credit risk.
C)Collaterized risk.
D)Legal risk.

Question 27

With regard to capitalization of infrastructure, which of the following is true?

A)All infrastructure must be capitalized on the financial statement before GASB Statement No.34 can be implemented.
B)Only large governments must capitalize all infrastructure on the date they implement GASB Statement No.34.
C)Small and medium size governments may elect to delay capitalization of infrastructure.
D)Small governments may omit capitalizing all infrastructure acquired before the date on which they implement GASB Statement No.34.

Question 28

For a government that elects NOT to capitalize its works of art and similar assets, the appropriate entry when receiving a contribution of a work of art at the government-wide level is

A)No entry is required for contributed assets.
B)Debit Asset; Credit Revenues.
C)Debit Asset; Credit Equity.
D)Debit Expense, Credit Revenue.

Question 29

For a government that elects to capitalize its works of art and similar assets, the appropriate entry when receiving a contribution of a work of art at the government-wide level is

A)No entry is required for contributed assets.
B)Debit Asset; Credit Revenues.
C)Debit Asset; Credit Equity.
D)Debit Expense/Expenditure, Credit Revenues.