Chat with AIExam 5: Accounting for General Capital Assets and Capital Projects
In the recording of costs of general capital assets,a certain city finance officer instructed the staff:
a)To ignore items costing under $5,000.
b)To ignore all costs for street paving,curbs,gutters,and sidewalks.
c)To ignore all assets acquired under lease agreements.
For each of the three practices listed above,state whether you believe the practice is in conformity with generally accepted accounting principles.Defend your answers.
(78) 
Answered by Examlex AI CopilotThe practice of ignoring items costing under $5,000 may not be in conformity with generally accepted accounting principles (GAAP). GAAP requires that all costs related to the acquisition of capital assets, regardless of the amount, should be recorded and capitalized. By ignoring items costing under $5,000, the city may not be accurately reflecting the total cost of its capital assets, which could lead to misstated financial statements.
B: Ignoring all costs for street paving, curbs, gutters, and sidewalks may also not be in conformity with GAAP. These are essential infrastructure assets that should be capitalized and depreciated over their useful lives. By ignoring these costs, the city may not be accurately reflecting the value of its infrastructure assets, which could impact its financial statements and decision-making processes.
C: Ignoring all assets acquired under lease agreements may also not be in conformity with GAAP. Lease agreements often involve the acquisition of capital assets that should be recorded and capitalized on the city's financial statements. By ignoring these assets, the city may not be accurately reflecting its total capital assets and could be understating its liabilities related to lease agreements.
In conclusion, the practices instructed by the city finance officer may not be in conformity with GAAP. It is important for the city to accurately record and capitalize all costs related to its general capital assets in order to provide transparent and reliable financial information to its stakeholders.
Which of the following is true regarding capital projects funds?
(89) 
VerifiedA
If a capital projects fund starts construction of a building in one year and finishes it in a subsequent year an entry must be made in the governmental activities accounts until the building is completed,inspected,and accepted.
(68) VerifiedTrue
One of the required general capital asset disclosures is a report on the additions to,and deductions from,general capital assets during the course of a fiscal year.
(88) A capital projects fund might be used to record which of the following activities?
(85) General capital assets should be distinguished from capital assets that are specifically associated with activities financed by proprietary and fiduciary funds,since capital assets acquired by proprietary and fiduciary funds are accounted for by those funds.
(88) Equipment in general governmental service that had been acquired several years ago by a special revenue fund at a cost of $40,000 was sold for $15,000 cash.Accumulated depreciation of $30,000 existed at the time of the sale.The journal entry to be made in the special revenue fund will include
(91) Cash discounts available on the purchase of capital assets but not taken should be capitalized as part of the cost of the capital assets.
(88) The cost of the periodic recarpeting of the city mayor's office should be capitalized in the governmental activities accounts.
(83) 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 as a general capital asset?
(81) Which of the following is not a required disclosure about each major class of capital assets?
(96) The sale of tax-supported bonds at par for the eventual construction of a new city jail would require recognition in which of the following funds and/or activities?
(79) Which of the following activities or transactions would normally not be accounted for in a capital projects fund?
(84) Interest incurred on interim or long-term financing during construction of general capital assets cannot be capitalized as part of the cost of those assets.
(65) A capital projects fund might be used to account for which of the following activities?
(79) Capital projects funds should use the modified accrual basis of accounting for revenues and expenses.
(89) The acquisition of long-lived assets under an operating lease does not require any asset recognition in the accounts of any governmental fund.
(79) With regard to depreciation of general capital assets,which of the following statements is correct?
(78) If a capital projects fund receives the proceeds of a long-term debt issue that is backed primarily by collections of special assessments,but which is also backed by a primary government in the event that collections of special assessments are insufficient to pay debt service on time,what account should be credited for the debt proceeds,and how should that account be reported in the capital projects fund statement of revenues,expenditures,and changes in fund balance?
(73) 
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