Exam 5: Accounting for General Capital Assets and Capital Projects

When a project has been completed,inspected,and accepted,retained percentages of contract billings may be paid.

The capital assets used by government departments accounted for in the governmental funds should be reported in

GASB standards require that all governmental expenditures for long-lived assets be accounted for by a capital projects fund.

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

Proceeds of debt issued for the construction or acquisition of capital assets are recognized by the capital projects fund as "other financing sources" and as a liability in the governmental activities journal.

The following key terms from Chapter 5 relate to general capital assets and capital projects: A.Bond anticipation notes B.Infrastructure assets C.Service Concession Arrangements D.General capital assets E.Capital projects funds F.Asset impairment G.Capital leases H.Operating leases I.Depreciation 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. _____ 1.A rental-type lease in which the risks and benefits of ownership are primarily those of the lessor _____ 2.Short-term interest-bearing instruments issued by a government with a plan to replace with longer-term debt _____ 3.Roads,bridges,curbs and gutters,streets,sidewalks,and drainage systems installed for the common good _____ 4.Capital assets of a government that are not recorded in a proprietary or fiduciary fund _____ 5.Significant,unexpected decline in the service utility of a capital asset

General capital assets acquired under capital leases should not be recorded in the governmental activities accounts.

The disposal of a general capital asset,resulting in no revenue or expenditure to the government,is recorded only in the governmental activities accounts.

A government enters into a capital lease for the purchase of a new fire truck.The present value of the future lease payments is $745,500 and there is a down payment at the inception of the lease of $25,000.The fire truck should be recorded in the governmental activities accounts at

Which of the following is not true for capital projects funds?

The recorded premium on tax-supported bonds issued should be amortized at the government-wide level in the same manner as a bond premium would be amortized by a business that issued bonds.

A government expended $200,000 to buy land to be used by the city electric utility as a site for an office building.This land should be capitalized in the utility fund,not in the governmental activities accounts.

If a capital project is financed partially by use of special assessments,should the capital projects fund recognize revenue from the assessments at the time of the levy or at the time that the assessments are collected? Explain your answer.

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

During the year,a wealthy local merchant donated a building to the city of Pasedena.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,of which $40,000 was the value of the land on which the building was situated.At what amount should Rosewood record this donated property in the governmental activities accounts at the government-wide level?

Which of the following statements is correct concerning interest expenditures incurred during the period of construction of capital projects?

Construction contracts for governmental projects often provide that a certain percentage of each billing by the contractor will be retained by the government until the project is inspected and accepted upon completion.

Carsonville 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.

In late June,the Buildit 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

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