Accounting for Governmental and Nonprofit Entities, 18e (Reck)
1) 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.
2) GASB standards require that all governmental expenditures for long-lived assets be accounted
for by a capital projects fund.
3) General capital assets purchased or constructed with governmental fund resources are recorded
in the governmental activities general ledger at the government-wide level.
4) The disposal of a general capital asset, resulting in no revenue or expenditure to the government,
is recorded only in the governmental activities accounts.
5) Historical cost includes acquisition cost less any ancillary costs necessary to put the asset into
use.
6) Depreciation of general capital assets for the period should be reported in the statement of
activities at the government-wide level.
7) GASB allows governments with a population below 100,000 to choose the modified approach,
whereby they are not required to record depreciation on general capital assets.
8) Acquisition of a general capital asset represents an expenditure in a governmental fund, but
requires capitalization of an asset at the government-wide level.
9) While the GASB encourages capitalization of all collections or individual works of art or
historical treasures, governments can opt not to capitalize if certain conditions exist.
10) General capital assets acquired under lease agreements should not be recorded in the
governmental activities accounts.
11) One of the required general capital asset disclosures is a schedule of the additions to, and
deductions from, general capital assets during the course of a fiscal year.
12) General capital assets acquired with capital projects fund resources would be recorded in
essentially the same manner as if they had been acquired by the General Fund.
13) Capital projects funds should use the accrual basis of accounting.
14) Capital projects funds generally do not use the Encumbrances control account.
15) In the capital projects fund general journal, Construction Work in Progress is the account used
to capitalize the accumulated cost of partially-completed general capital assets.
16) Intangible assets are defined by the GASB as capital assets that lack physical substance, have a
useful life of more than one reporting period, and are nonfinancial in nature.
17) 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.
18) It is common practice for a portion of contractor payments to be withheld in the capital projects
fund until final inspection and acceptance of the asset under construction has occurred.
19) The recorded premium on tax-supported bonds issued by a capital projects fund should be
amortized at both the government-wide and fund levels.
20) Interest incurred during construction of general capital assets cannot be capitalized as part of
the cost of those assets.
21) State laws often require that assets no longer needed in a capital projects fund be transferred to
the fund that will service the debt incurred for the project, a debt service fund.
22) Streets, curbs, and sidewalks constructed or acquired through use of capital projects fund
resources should never be reported in the financial statements of a government because they are for
the use of the public, not for use by the government.
23) When a government experiences delays associated with a bond issuance, it is common practice
to obtain temporary financing by use of bond anticipation notes.
24) The acquisition of long-lived assets under a lease agreement does not require any asset
recognition in the accounts of any governmental fund.
25) Water rights purchased by a city would be considered an intangible asset.
26) Capital projects funds differ from the General Fund and special revenue funds in that the latter
categories have a year-to–year life, whereas capital projects funds have a project-life focus.
27) If general capital assets are donated, revenue related to the donation is recognized in the
governmental fund statement of revenue, expenditures and changes in fund balance.
28) General capital assets financed wholly or partially through collections of special assessments
are recorded in the same manner as any other general capital assets in the governmental activities
category at the government-wide level.
29) 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.
30) Under a service concession arrangement, a government transfers the rights and obligations of
an asset to another legally separate government or private sector entity.
31) Which of the following would be considered a general capital asset?
A) A vehicle purchased from General Fund revenues.
B) A vehicle purchased and maintained by an enterprise fund.
C) A computer purchased from revenues of an internal service fund and used by the supplies
department.
D) Real estate purchased with the assets of a pension trust fund.
32) Capital assets used by governmental funds should be reported in:
A) The appropriate governmental funds.
B) The property, plant, and equipment fund.
C) Departmental memorandum records.
D) The governmental activities column of the government-wide statements.
33) GASB standards require that general capital assets be recorded in the fund statements at:
A) Historical cost.
B) Fair value at the financial statement date.
C) Estimated cost at the financial statement date.
D) None of the options are correct.
34) GASB standards require that general capital assets be recorded in the government-wide
statements at:
A) Historical cost.
B) Fair value at the financial statement date.
C) Estimated cost at the financial statement date.
D) None of the options are correct.
35) The following items were included in Castle City’s General Fund expenditures for the year
ended June.
Personal computer for the city treasurer
$
6,000
Furniture for the mayor’s office
$
20,000
How much should be classified as capital assets in Castle City’s General Fund balance sheet at
June 30?
A) $0.
B) $6,000.
C) $20,000.
D) $26,000.
36) The following items were included in Castle City’s General Fund expenditures for the year
ended June
Personal computer for the city treasurer
$
6,000
Furniture for the mayor’s office
$
20,000
How much should be classified as capital assets in Castle City’s government-wide statement of net
position at June 30?
A) $0.
B) $6,000.
C) $20,000.
D) $26,000.