Question 1

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.

Accepted Answer

General capital assets financed through special assessments are recorded in the same manner as any other general capital assets in the governmental activities category at the government-wide level.

Question 2

The following items were included in Castle City's General Fund expenditures for the year ended June 
How much should be classified as capital assets in Castle City's government-wide statement of net position at June 30?

Accepted Answer

The capital assets include land, buildings, equipment, and infrastructure. Out of the given expenditures, the following items should be classified as capital assets:
- Land purchase: $20,000
- Construction of new parks and recreation facilities: $6,000
So, a total of $26,000 should be classified as capital assets in Castle City's government-wide statement of net position at June 30.

Question 3

Capital assets used by governmental funds should be reported in:

Accepted Answer

Capital assets used by governmental funds should be reported in the governmental activities column of the government-wide statements. This provides a more comprehensive view of the assets owned by the government and their usage, which is important for decision-making purposes. Reporting them in the appropriate governmental fund or in departmental memorandum records would only provide a partial view of the assets and could lead to incomplete or inaccurate analysis of the government's financial position. The property, plant, and equipment fund is not a commonly used fund in governmental accounting.

Question 4

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

Accepted Answer

General capital assets are assets that are used in operations and are financed through tax revenues or general obligations. They are not tied to any specific fund that operates in a business-like manner (such as enterprise or internal service funds) or fiduciary activities (like pension trust funds). Therefore, a vehicle purchased from General Fund revenues fits the definition of a general capital asset, as the General Fund is the primary operating fund of a government, reflecting its general revenues and the expenditures necessary to carry out basic governmental functions.

Question 5

State laws often require that assets no longer needed in a capital projects fund be transferred to the fund that will service the debt incurred for the project, a debt service fund.

Accepted Answer

This is correct, as it is a common practice for state laws to require the transfer of assets from a capital projects fund to a debt service fund to ensure that the debt incurred for the project is properly serviced.

Question 6

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

Accepted Answer

Governmental funds use the modified accrual basis of accounting, which does not recognize long-term assets or liabilities.

Question 7

The following items were included in Castle City's General Fund expenditures for the year ended June. 
How much should be classified as capital assets in Castle City's General Fund balance sheet at June 30?

Accepted Answer

The answer of The following items were included in Castle...

Question 8

Under a service concession arrangement, a government transfers the rights and obligations of an asset to another legally separate government or private sector entity.

Accepted Answer

This is the definition of a service concession arrangement.

Question 9

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.

Accepted Answer

General capital asset donations are not recognized as revenues in the governmental funds statement of revenue, expenditures, and changes in fund balances because these funds use the modified accrual basis of accounting, which focuses on current financial resources and expenditures, not on capital transactions.

Question 10

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

Accepted Answer

Bond anticipation notes are a short-term borrowing tool used by governments to obtain temporary financing when experiencing delays in issuing long-term bonds.

Question 11

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. At what amount should Rosewood record this donated property in the General Fund?

Accepted Answer

The answer of During the year, a wealthy local merchant...

Question 12

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

Accepted Answer

Water rights are a type of intangible asset, as they are not physical assets but rather legal rights to use a specific quantity of water from a particular source. When a city purchases water rights, they are essentially acquiring the right to use and manage a particular water supply, and this right is recognized as an intangible asset on their balance sheet.

Question 13

Streets, curbs, and sidewalks constructed or acquired through use of capital projects fund resources should never be reported in the financial statements of a government because they are for the use of the public, not for use by the government.

Accepted Answer

Streets, curbs, and sidewalks constructed or acquired through use of capital projects fund resources should be reported in the financial statements of a government as infrastructure assets. They represent a significant investment of public resources and are utilized by the government to provide necessary services to the public.

Question 14

If all asset, liability, and fund equity accounts of a capital projects fund were closed during a certain fiscal year, it is unnecessary to prepare any financial statements for that fund for that year.

Accepted Answer

Even if all accounts of a capital projects fund were closed during a certain fiscal year, it is still necessary to prepare financial statements for that fund for that year as required by Generally Accepted Accounting Principles (GAAP). These financial statements would include a statement of revenues, expenditures, and changes in fund balance for the capital projects fund.

Question 15

Which of the following is not a required disclosure about each major class of capital assets?

Accepted Answer

The requirement for disclosing capital acquisitions and sales or other dispositions during the year showing the date and method of acquisition or disposition is not specifically mentioned as a required disclosure for each major class of capital assets in standard accounting practices. The other options (A, C, D) are typical disclosures related to capital assets, including details on depreciation, beginning and end-of-year balances, and explanations for non-capitalized items like works of art or historical treasures.

Question 16

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?

Accepted Answer

The answer of The City of Oak Park constructed a...

Question 17

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. At what amount should this contribution be recorded in the governmental activities accounts at the government-wide level?

Accepted Answer

The contribution should be recorded at its fair market value of $600,000, which is the appraised value at the date of the gift. The accumulated depreciation is not relevant for the government-wide level accounting.

Question 18

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

Accepted Answer

GASB standards require that general capital assets be recorded at historical cost in the government-wide statements. This means that the assets are recorded at their original cost of acquisition, construction or development, rather than at their fair market value on the financial statement date. This approach ensures consistency and comparability of financial statements across different time periods.

Question 19

Capital projects funds differ from the General Fund and special revenue funds in that the latter categories have a year-to-year life, whereas capital projects funds have a project-life focus.

Accepted Answer

Capital projects funds are used to account for financial resources that are restricted, committed, or assigned for capital projects, while the General Fund and special revenue funds are used for regular, ongoing operations and programs with a year-to-year focus. Capital projects funds have a project-life focus, meaning they are used for specific large-scale expenditures and have a longer-term horizon than the other types of funds.

Question 20

GASB standards require that general capital assets be recorded in the fund statements at:

Accepted Answer

The answer of GASB standards require that general capital assets...

Quiz 5: Accounting for General Capital Assets and Capital Projects