Question 1

"Capital projects funds are established by a government to account for all plant or equipment acquired by construction." Do you agree? Why or why not?

Accepted Answer

The answer of "Capital projects funds are established by a...

Question 2

Maryville is considering the issuance of bonds to fund a capital project.For the following legally feasible bond issue alternatives,discuss the desirability of each alternative from the viewpoint of (1)the official in charge of administering capital projects funds,and (2)taxpayers responsible for repaying the bond issue.
a)$5,000,000 face value,10-year special assessment bonds can be sold at 98 with semiannual interest at the nominal annual rate of 6 percent.The discount would be borne by a debt service fund.
b)Same as item a above,except the discount would be borne by the capital projects fund.
c)The same bond issue can be sold at 103 with semiannual interest at the nominal rate of 9 percent; the premium would be transferred to the debt service fund.
d)Same as item c above,except the premium would be retained by the capital projects fund.

Accepted Answer

The answer of Maryville is considering the issuance of bonds...

Question 3

At the government-wide level,net assets related to capital assets should be reported as

Accepted Answer

Net assets related to capital assets should be reported as invested in capital assets, net of related debt. This reflects the resources that have been invested in tangible or intangible assets that provide a long-term benefit to the government. The net asset figure is adjusted to reflect any debt incurred to finance the acquisition or construction of the assets, which results in the presentation of net assets invested in capital assets.

Question 4

In late June,the Everready Construction Co.submitted a $600,000 progress billing on a construction contract.On July 2,the bill was approved for payment,subject to a five percent retention,as provided by the contract.Construction expenditures should be debited when

Accepted Answer

The answer of In late June,the Everready Construction Co.submitted a...

Question 5

The budgetary account recommended for use by a capital projects fund is

Accepted Answer

The answer of The budgetary account recommended for use by...

Question 6

"Infrastructure assets (e.g.,roads,bridges,curbs and gutters,streets,etc.)need not be capitalized since they are immovable and not likely to be stolen." Do you agree or disagree? Explain your answer.

Accepted Answer

The answer of "Infrastructure assets (e.g.,roads,bridges,curbs and gutters,streets,etc.)need not be...

Question 7

The following key terms from Chapter 5 relate to general capital assets and capital projects:
A)Bond anticipation notes
B)Infrastructure assets
C)Special assessments
D)General capital assets
E)Capital projects funds
F)Capital improvements funds
G)Capital leases
H)Operating leases
For each of the following definitions,indicate the key term from the list above that best matches the definition by placing the appropriate letter in the blank space next to the definition.

Accepted Answer

The answer of The following key terms from Chapter 5...

Question 8

Which of the following is one of the requirements that must be met to elect the "modified approach" to reporting certain eligible infrastructure assets?

Accepted Answer

The answer of Which of the following is one of...

Question 9

The city of Romeo 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 purchase of the car would be recorded?

Accepted Answer

The purchase of the squad car would be recorded in both the General Fund and Governmental Activities because it is financed by general revenues and is part of the city's governmental activities.

Question 10

In which of the following funds or activities general journals would it not be appropriate to record depreciation of capital assets?

Accepted Answer

The capital projects fund is used to account for the acquisition and construction of major capital assets. Depreciation is not recorded in this fund because it is not used for ongoing operations and the assets are expected to provide benefits over a long period of time.

Question 11

How should the capital assets of a capital lease be recorded in the capital projects fund?

Accepted Answer

The answer of How should the capital assets of a...

Question 12

In late June,the Everready Construction Co.submitted a $600,000 progress billing on a construction contract.On July 2,the bill was approved for payment,subject to a five percent retention,as provided by the contract.The amount that should be debited to Construction Expenditures is

Accepted Answer

The answer of In late June,the Everready Construction Co.submitted a...

Question 13

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

Accepted Answer

The answer of A capital projects fund might be used...

Question 14

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

Accepted Answer

The answer of At the start of a capital lease...

Question 15

One of the common objections to computing depreciation of general capital assets has been that the assets are used for activities that are not expected to generate revenues sufficient to replace the assets; therefore,depreciation expense is not relevant to decisions about the acquisition or use of general capital assets.Evaluate this argument.

Accepted Answer

The answer of One of the common objections to computing...

Question 16

Equipment acquired several years ago by a capital projects fund and recorded in the governmental activities general journal was sold.The cash received was considered to be unrestricted revenue.Entries are necessary in the

Accepted Answer

The sale of equipment does not affect an enterprise fund as it is only used for business-type activities. It only affects the capital projects fund and governmental activities. The General Fund is not affected unless there is an interfund transfer involved. Therefore, entries are necessary in the Capital Projects Fund and Governmental Activities only.

Question 17

For which of the following assets can the "modified approach" be elected in lieu of depreciation?

Accepted Answer

The modified approach can only be elected for eligible infrastructure assets, which are defined as "pavements, roadways, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems" (GASB Statement No. 34).

Question 18

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

Accepted Answer

A police vehicle would be considered a capital asset since it is a long-term asset that will provide future benefits to the government. It would not be recorded as an expenditure, expense, or appropriation, as those terms refer to different types of transactions.

Question 19

Which of the following accounts of a capital projects fund should be closed at the end of the fiscal year?

Accepted Answer

Encumbrances are budgetary accounts that are closed at the end of the fiscal year to prepare for the new fiscal period.

Question 20

The following are the city of Beaver Creek's capital assets:  What aggregate amount should Beaver Creek record in the governmental activities journal?

Accepted Answer

The answer of The following are the city of Beaver...

Quiz 5: Accounting for General Capital Assets and Capital Projects