Exam 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 item costing under $5,000. b)To ignore all special assessment 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.

A capital lease was used to acquire equipment used by the Police Department,part of the general government.How should the lease be recorded in the governmental activities accounts at the inception of the lease?

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

When a bond issue is legally authorized it is usual practice to make either no entry or a memorandum entry in the capital projects fund general journal.

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

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

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

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

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

Property,plant,and equipment constructed or acquired by use of special assessment financing is recorded in the governmental activities accounts because the assets belong to the government.

Capital projects funds generally do not use the Estimated Revenues and Appropriations control accounts; it is also recommended that the Encumbrances control account not be used.

The capital projects fund of Petit City paid salaries to city employees who worked on construction of a capital project.The debit for the entry in the capital projects fund to record this event should be to

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

Because year-end closings are artificial in a capital projects fund it is desirable to debit encumbrances on the first day of the new fiscal year in the amount that was closed at the end of the prior fiscal year.

A city recorded an asset impairment to a Public Works facility.Which of the following is correct concerning the recording of the amount of the asset impairment?

Debt backed by both assessments and the full faith and credit of a government should be reported in the governmental activities column of the statement of net assets at the government-wide level.

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

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?

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.

Five trucks were leased by Pleasantville under terms qualifying as a capital lease.These trucks are to be used by the fire department.Where would the capital lease transaction be recorded?