Exam 7: Capital Assets and Investments in Marketable Securities

Government investment policies have been sharply criticized because of significant losses incurred by certain governments. What is the nature of the problem that is being criticized? What should be the role of accounting in determining and reporting investment strategies?

Which of the following costs will NOT be included in the cost of capital assets on the government-wide financial statements?

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

The City of Baconsville engaged in the following transactions. Assume that the city maintains its books and records in a manner that facilitates the preparation of fund financial statements. Required: Prepare the appropriate journal entries in the general fund. If appropriate, write "No entry required." a) The city purchased for cash three dump trucks for $80,000 each. b) The city sold for $4,000 a police car that had been purchased four years ago at a cost of $30,000. At the time of acquisition, the city estimated that the police car had a useful life of five years and a salvage value of $5,000. c) During the year, the city spent $12 million to build a third lane on both sides of the major north-south highway through town. d) The city traded in a pickup truck used in general government operations for a new pickup truck, paying a difference of $18,000. The old pickup truck was purchased four years ago at a cost of $21,000. At the time it had an estimated useful life of five years and an estimated salvage value of $6,000. At the time of the trade the old truck had a fair value of $10,000. The new truck has a sticker price of $29,000. e) During the year the city began construction of a new city hall. By year-end, the city had made progress payments to the contractor of $3 million. f) The city received a gift of land from a citizen. The land is to be used to build a city park. The land had been in the donor's family since it was homesteaded. It had a fair value when contributed of $2 million.

Mariano County traded in a used pickup for a new pickup truck with a sticker price of $44,000. The old pickup had a fair value of $26,000, historical cost of $45,000, and accumulated depreciation of $18,000. The dealer took the old truck and $15,000 for the new truck. - The new truck should be reported on the government-wide financial statements at

Concentration of credit risk is

Donated assets are reported in the government-wide financial statements at

If a government receives donations of works of art, the government must recognize revenue in its government-wide financial statements

General capital assets are not reported in governmental funds because

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

What is infrastructure? Give some examples. Why should governments capitalize infrastructure assets? What are some of the objections raised by critics of the GASB's standards for general government infrastructure? What is the GASB's position on those criticisms?

Disclosures about investment risks apply

Government accounting does not permit depreciation to be charged on the operating statements of governmental funds. Present arguments FOR reporting depreciation and arguments AGAINST reporting depreciation.

How should changes in the fair value of derivatives be reported in a government's financial statements?

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

The risk that changes in currency exchange rates will adversely affect the fair value of an investment is

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

What are the differences among the various elements of risk: market risk, credit risk, concentrations of credit risk, and interest rate risk? Describe how each of these risks could affect a government's investment in a 20-year Treasury note.

Which of the following can be referred to as a derivative?

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