Exam 5: Accounting for General Capital Assets and Capital Projects

The city of McNeely sold bonds in the amount of $10,000,000 to finance the construction of a public health center.The bonds are serial bonds and were sold at par on July 1,2011 the first day of a fiscal year.Shortly thereafter a construction contract in the amount of $9,000,000 was signed and the contractor commenced work.By year-end the contractor had been paid in full for all billings to date amounting to $4,000,000.Prepare,in general journal form,all journal entries that should have been made during the fiscal year ended June 30,2012 to record the preceding information in the capital projects fund (including closing entry).

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,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?

With regard to depreciation of general capital assets,which of the following statements is correct?

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.

The cost of the periodic redecoration of the city mayor's office should be capitalized in the governmental activities accounts.

One of the common objections to computing depreciation of general capital assets has been that the assets are used for activities that are not expected to generate revenues sufficient to replace the assets; therefore,depreciation expense is not relevant to decisions about the acquisition or use of general capital assets.Evaluate this argument.

Which of the following funds of a government uses the modified accrual basis of accounting?