Question 1

Which of the following accounts of a capital projects fund should be closed at the end of the fiscal year?

Accepted Answer

A)  Encumbrances.
B)  Bond Anticipation Notes Payable.
C)  Contracts Payable-Retained Percentage.
D)  Temporary Investments. A

Question 2

Equipment in general governmental service that had been acquired several years ago by a capital projects 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 governmental activities journal will include all of the following except

Accepted Answer

A)  A debit to Cash for $15,000.
B)  A debit to Accumulated Depreciation for $30,000.
C)  A credit to Equipment for $40,000.
D)  A credit to Other Financing Sources for $5,000. D

Question 3

If bonds sold to finance a project for the construction of general capital assets are sold at a premium,what legal question arises concerning the premium? Discuss the accounting treatment appropriate to two of the common answers to the legal question.

Accepted Answer

If bonds sold to finance the construction of general capital assets are sold at a premium,the legal question is: "Can the premium be used by the capital projects fund,or must it be transferred to the fund that will service the debt?" If the premium can be used by the capital projects fund,the premium can be credited to the Proceeds of Bonds account of the capital projects fund.If the premium must be used to service debt,and the premium is not received directly by the debt service fund,the capital projects fund should credit Due to Other Funds (or Cash if the transfer is immediate)for the amount of the premium.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 capital asset?

Accepted Answer

A)  $900,000.
B)  $925,000.
C)  $875,000.
D)  $0.

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

After all liabilities are paid and the operating statement accounts closed,it is common to transfer any remaining assets of a capital projects fund to the General Fund.

Accepted Answer

A) True 
 B)False

Question 9

A patent purchased by a city would be considered a capital asset.

Accepted Answer

A) True 
 B)False

Question 10

If all asset,liability,and fund equity accounts of a capital projects fund were closed during a certain fiscal year,it is unnecessary to prepare any financial statements for that fund for that year.

Accepted Answer

A) True 
 B)False

Question 11

Cash discounts available on purchase of capital assets but not taken should be capitalized as part of the cost of the capital assets.

Accepted Answer

A) True 
 B)False

Question 12

General capital assets must be depreciated and the amount of depreciation for the period should be reported in the operating statement for governmental activities at the government-wide level.

Accepted Answer

A) True 
 B)False

Question 13

Capital projects funds should use the modified accrual basis of accounting for revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 14

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?

Accepted Answer

The answer of If a capital projects fund receives the...

Question 15

If a bond sale occurs between interest dates,accrued interest sold should be credited to Proceeds of Bonds.

Accepted Answer

A) True 
 B)False

Question 16

The General Fund 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.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is true regarding capital projects funds?

Accepted Answer

A)  Encumbrances accounting is employed.
B)  Encumbrances accounting is not normally employed,but Estimated Revenues and Appropriations accounts are used.
C)  No budgetary accounts are ever used.
D)  All budgetary accounts are employed in the same manner as for the General Fund and special revenue funds.

Question 18

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

Accepted Answer

The answer of How should the capital assets of a...

Question 19

"Capital projects funds are established by a government to account for all plant or equipment acquired by construction." Do you agree? Why or why not?

Accepted Answer

The answer of "Capital projects funds are established by a...

Question 20

When materials that were ordered for a capital projects fund for use on a construction project are received but the invoice has not yet paid,what account is debited?

Accepted Answer

A)  Encumbrances.
B)  Appropriations.
C)  Vouchers payable.
D)  Construction Expenditures.

Exam 5: Accounting for General Capital Assets and Capital Projects

Which of the following accounts of a capital projects fund should be closed at the end of the fiscal year?

If bonds sold to finance a project for the construction of general capital assets are sold at a premium,what legal question arises concerning the premium? Discuss the accounting treatment appropriate to two of the common answers to the legal question.

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

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 capital asset?

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.

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

After all liabilities are paid and the operating statement accounts closed,it is common to transfer any remaining assets of a capital projects fund to the General Fund.

A patent purchased by a city would be considered a capital asset.

If all asset,liability,and fund equity accounts of a capital projects fund were closed during a certain fiscal year,it is unnecessary to prepare any financial statements for that fund for that year.

Cash discounts available on purchase of capital assets but not taken should be capitalized as part of the cost of the capital assets.

General capital assets must be depreciated and the amount of depreciation for the period should be reported in the operating statement for governmental activities at the government-wide level.

Capital projects funds should use the modified accrual basis of accounting for revenues and expenses.

If a bond sale occurs between interest dates,accrued interest sold should be credited to Proceeds of Bonds.

The General Fund 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.

Which of the following is true regarding capital projects funds?

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

"Capital projects funds are established by a government to account for all plant or equipment acquired by construction." Do you agree? Why or why not?

When materials that were ordered for a capital projects fund for use on a construction project are received but the invoice has not yet paid,what account is debited?