56) Which of the following statements is correct concerning interest expenditures incurred during
the period of construction of capital projects?
A) Interest expenditures may not be capitalized as part of the cost of general capital assets reported
in governmental activities.
B) Interest expenditures may be capitalized as part of the cost of general capital assets reported in
the governmental activities accounts at the government-wide level.
C) Interest expenditures must be capitalized as part of the cost of general capital assets reported in
the capital projects fund.
D) The capitalization of interest expenditures as part of the cost of general capital assets reported
in the capital projects fund is optional.
57) When part of a progress payment for construction is withheld until final settlement of the
contract, what account is credited?
A) Encumbrances.
B) Appropriations.
C) Contracts Payable—Retained Percentage.
D) Construction Expenditures.
58) The following balances are included in the subsidiary records of Carrollwood:
Town hall building
$
500,000
Town pool (supported by user fees)
100,000
Police cars
20,000
Equipment
7,500
Office supplies
1,000
What is the total amount of general capital assets held by the town?
A) $527,500.
B) $528,500.
C) $627,500.
D) $628,500.
59) Which of the following activities or transactions would normally not be accounted for in a
capital projects fund?
A) Construction of a new city jail.
B) Construction of airport runways financed by revenue bonds and to be repaid from the revenues
of the city airport, an enterprise fund.
C) Lease of a building to be used as a city office building.
D) Construction of a new city park to be maintained primarily from General Fund revenues.
60) 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?
A) The General Fund would record a debit to Expenditures.
B) The General Fund would record a debit to Other Financing Uses—Loss due to Impairment.
C) The governmental activities accounts would record a debit to Loss due to Impairment.
D) The governmental activities accounts would record a debit to Expenses—Public Works.
61) A government experienced significant loss of certain roadways and bridges as a result of major
flooding. Which of the following estimation approaches would be most useful in estimating the
amount of asset impairment that has occurred?
A) Deflated depreciated replacement cost approach.
B) Service units approach.
C) Restorative cost approach.
D) Each of these three approaches would be equally useful.
62) Premiums received on tax-supported bonds are generally transferred to what fund?
A) Internal service fund.
B) Debt service.
C) General.
D) Special revenue.
63) Governments can opt not to capitalize collections or individual works of art or historical
treasures if the collection is:
A) Held for public exhibition, education, or research in furtherance of public service rather than for
financial gain.
B) Protected, kept unencumbered, cared for, and preserved.
C) Subject to an organizational policy that requires the proceeds from sales of collection items to
be used to acquire other items for collections.
D) All of the options are correct.
64) Which of the following is not true for capital projects funds?
A) Capital projects funds use a Construction Work in Progress account to record costs until the
project is completed.
B) Encumbrance accounting is generally used.
C) Capital projects funds use the modified accrual basis of accounting.
D) Capital projects funds have a project-life focus.
65) In late April, the Acme Construction Co. submitted a $1,200,000 progress billing on a
construction contract. On May 2, the bill was approved for payment, subject to a ten percent
retention, as provided by the contract. Construction expenditures should be debited when:
A) The bill is approved for payment.
B) The contract is signed.
C) The bill is paid (except for the ten percent retention).
D) The final ten percent of the bill is paid.
66) In late April, the Acme Construction Co. submitted a $1,200,000 progress billing on a
construction contract. On May 2, the bill was approved for payment, subject to a ten percent
retention, as provided by the contract. The amount that should be debited to Construction
Expenditures is:
A) $0.
B) $12,000.
C) $1,080,000.
D) $1,200,000.
67) At the inception of a lease for equipment the journal entry required in the capital projects fund
will include which of the following?
A) A debit to Equipment.
B) A debit to Lease Expense.
C) A credit to Obligations under Leases.
D) A credit to Other Financing Sources—Lease Agreement.
68) Which of the following is not a requirement that must be met to elect the “modified approach”
to reporting certain eligible infrastructure assets?
A) The government gets the permission of the Government Accounting Standards Board.
B) The government documents that the eligible infrastructure assets are being preserved
approximately at (or above) the condition level established and disclosed.
C) The government manages the assets using an asset management system that includes condition
assessments of the assets and summary of results using a measurement scale.
D) The government manages the assets using an asset management system that includes estimates
each year of the annual amount needed to maintain and preserve the eligible assets at the condition
level established and disclosed by the government.
69) When a snowplow is purchased by a government, it should be recorded in the governmental
activities general journal as a(an):
A) Expenditure.
B) Capital asset.
C) Appropriation.
D) Expense.
70) A general capital asset constructed several years ago by a capital projects fund was sold by the
General Fund. Entries are necessary in the:
A) General Fund only.
B) General Fund and the capital projects fund.
C) General Fund and governmental activities.
D) Governmental activities only.
71) In which of the following would it not be appropriate to record depreciation of capital assets?
A) Capital projects fund.
B) Internal service fund.
C) Business-type activities.
D) Governmental activities.
72) The Town of Golden 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 capital asset would be recorded?
A) General Fund: No; Governmental Activities: Yes
B) General Fund: No; Governmental Activities: No
C) General Fund: Yes; Governmental Activities: No
D) General Fund: Yes; Governmental Activities: Yes
73) Which of the following statements regarding capital assets is not true?
A) Proprietary funds routinely account for capital assets used in their operations within the fund
financial statements.
B) Fiduciary funds do not account for property, plant, and equipment within the fund financial
statements.
C) Because governmental funds account only for current financial resources, these funds do not
record capital assets acquired by the funds.
D) General capital assets purchased or constructed with governmental fund resources are recorded
in the governmental activities general ledger at the government-wide level.
74) When a government transfers the rights and obligations of an asset to another legally separate
governmental or private sector entity, the transaction is referred to as:
A) A special assessment arrangement.
B) An infrastructure agreement.
C) A service concession arrangement.
D) A sale-leaseback agreement.
75) Under a service concession arrangement:
A) The transferring government continues to report the transferred asset as a capital asset and any
related contractual obligations as liabilities.
B) The operating government will record the transferring government’s payment or receivable, a
liability for the present value of significant contractual obligations and a corresponding deferred
inflow of resources for the difference between the two.
C) Any deferred inflow of resources is recognized as revenue at the time the arrangement takes
place.
D) All of the given statements are true.