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Student name:__________
1) For each of the following definitions, select the key term from the list that relates to
general capital assets and capital projects.
A.Bond anticipation notes
B.Infrastructure assets
C.Service Concession Arrangements
D.General capital assets
E.Capital projects funds
F.Asset impairment
G.Intangible assets
H.Depreciation
_____ 1. Assets that lack physical substance and are nonfinancial in nature.
_____ 2. Short-term interest-bearing instruments issued by a government with a plan to replace
with longer-term debt.
_____ 3. Roads, bridges, curbs and gutters, streets, sidewalks, and drainage systems installed for
the common good.
_____ 4. Capital assets of a government that are not recorded in a proprietary or fiduciary fund.
_____ 5. Significant, unexpected decline in the service utility of a capital asset.
2) The City of McNeely sold bonds in the amount of $25,000,000 to finance the
construction of a public health center. The bonds are serial bonds and were sold at par on January
1, the first day of a fiscal year. Shortly thereafter a construction contract in the amount of
$22,000,000 was signed and the contractor commenced work. By year-end the contractor had
been paid in full for all billings to date amounting to $12,000,000.
Prepare, in general journal form, all journal entries that should have been made during the fiscal
year ended December 31 to record the preceding information in the capital projects fund.
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3) Prepare journal entries for the following related transactions in the fund and activity
journals affected: (If no entry is required for a transaction/event, select “No Journal Entry
Required” in the first account field.)
1.A capital projects fund issued $5,000,000, 4 percent bonds for $5,050,000 to finance
improvements of a park. Premiums received are to be used to service the debt issue.
2.The Parks and Recreation Special Revenue Fund transferred $250,000 for use in
construction.
3.A construction contract was awarded in the amount of $5,200,000.
4.A bill was received from the contractor for $2,600,000.
5.The contractor’s bill is paid, and 5% retainage is withheld.
6.The park renovations were completed and the final bill of $2,600,000 was received. The
contractor’s bill and retainages are approved for payment in full. Total construction expenditures
were allocated as follows: $5,000,000 to building, and the remainder to equipment.
7.The capital projects fund temporary accounts were closed, and the capital projects fund was
closed by transferring remaining funds to the debt service fund for use in debt repayment.
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4) This year Riverside began work on an outdoor amphitheater and concession stand at the
city’s park. It is to be financed by a $3,500,000 bond issue and supplemented by a $500,000
General Fund transfer. The following transactions occurred during the current year:
1.The General Fund transferred $500,000 to the Park Building Capital Projects Fund.
2.A contract was signed with Restin Construction Company for the major part of the project
on a bid of $2,700,000.
3.Preliminary planning and engineering costs of $69,000 were vouchered for the Great Pacific
Engineering Company. (This cost had not been encumbered.)
4.A payable was recorded for an $18,500 billing from the Water and Sewer enterprise fund for
the cost of extending water pipes to the new concession stand.
5.An invoice in the amount of $1,000,000 was received from Restin for progress to date on the
project.
6.The $3,500,000 bonds were issued at par.
7.The amount billed by the contractor (see Transaction 5) less 5 percent retainage was paid.
8.Temporary investments were purchased at a cost of $1,800,000.
9.Closing entries were prepared as of year-end. Assume that $2,500,000 of the encumbrances
outstanding will be paid from the bond proceeds and are therefore considered restricted
resources. The remaining fund balance is assigned.
Prepare journal entries to record the preceding information in the general ledger accounts for
the Park Building Capital Projects Fund. (If no entry is required for a transaction/event,
select “No Journal Entry Required” in the first account field.)
5) 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.
6) 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.
7) 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.
8) 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.
9) The following items were included in Simple City’s General Fund expenditures for the
year ended June.
Computers for the city treasurer’s office
$ 6,000
Furniture for the mayor’s office
$ 20,000
How much should be classified as capital assets in Simple City’s General Fund balance sheet at
June 30?
A) $0.
B) $6,000.
C) $20,000.
D) $26,000.
10) The following items were included in Simple City’s General Fund expenditures for the
year ended June 30:
Computer for the city treasurer’s office
$ 6,000
Furniture for the mayor’s office
$ 20,000
How much should be classified as capital assets in Simple City’s government-wide statement of
net position at June 30?
A) $0.
B) $6,000.
C) $20,000.
D) $26,000.
11) During the year, a local merchant donated a building to the City of Stage Coach. The
original cost of the building was $300,000. Accumulated depreciation at the date of the gift
amounted to $250,000. The acquisition value of the donation at the date of the gift was $600,000.
At what amount should this contribution be recorded in the governmental activities accounts at
the government-wide level?
A) $50,000.
B) $300,000.
C) $600,000.
D) $0.
12) During the year, a local merchant donated a building to the city of Stage Coach. The
original cost of the building was $300,000. Accumulated depreciation at the date of the gift
amounted to $250,000. The acquisition value of the donation at the date of the gift was $600,000.
At what amount should Stage Coach record this donated property in the General Fund?
A) $50,000.
B) $300,000.
C) $600,000.
D) $0.
13) Which of the following is not a required disclosure about each major class of capital
assets?
A) Beginning-of-year and end-of-year balances showing accumulated depreciation
separate from historical cost.
B) Capital acquisitions and sales or other dispositions during the year showing the date
and method of acquisition or disposition.
C) Depreciation expense for the current period with disclosure of the amounts charged
to each function in the statement of activities.
D) Disclosures describing works of art or historical treasures that are not capitalized and
explaining why they are not capitalized.
14) The City of Brown Creek 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 in
the government-wide statements?
A) $900,000.
B) $925,000.
C) $875,000.
D) $0.
15) The following general capital assets were owned by the Town of Clementville:
Town buildings
$ 3,250,000
Intangible assets
1,000,000
Streets, sidewalks, and water lines
2,000,000
What amount should be recorded as capital assets in the town’s governmental activities accounts?
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A) $0.
B) $3,250,000.
C) $5,250,000
D) $6,250,000
16) Equipment that had been acquired several years ago by a special revenue 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:
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.
17) Equipment that had been acquired several years ago by a special revenue 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 special revenue fund will include:
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.
18) How should a lease for a general capital asset be recorded in the governmental activities
accounts at the inception of the lease?
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A) Debit to a lease asset account.
B) Debit to a capital expense/expenditure account.
C) Credit to Lease Obligations Payable.
D) Both Debit to a lease asset account and Credit to Lease Obligations Payable are
correct.
19) How should a lease for a general capital asset be recorded in the General Fund accounts
at the inception of the lease?
A) Debit to a lease asset account.
B) Debit to a capital expenditure account.
C) Credit to Lease Obligations Payable.
D) Both Debit to a lease asset account and Credit to Lease Obligations Payable are
correct.
20) The City of Apple Creek issued bonds at par for the construction of a new city office
building. Receipt of the bond proceeds would result in journal entries in which funds?
A) Capital Projects Fund: Yes; Debt Service Fund: No
B) Capital Projects Fund: No; Debt Service Fund: Yes
C) Capital Projects Fund: Yes; Debt Service Fund: Yes
D) Capital Projects Fund: No; Debt Service Fund: No
21) A government enters into a lease agreement for the purchase of a new snow plow. The
present value of the future lease payments is $845,500 and there is a down payment at the
inception of the lease of $25,000. The snow plow should be recorded in the General Fund at:
A) $25,000.
B) $870,500.
C) $845,500.
D) $0.
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22) A government enters into a lease agreement for the purchase of a new snow plow. The
present value of the future lease payments is $845,500 and there is a down payment at the
inception of the lease of $25,000. The snow plow should be recorded in the government-wide
statement of net position at:
A) $25,000.
B) $870,500.
C) $845,500.
D) $0.
23) Which of the following statements is correct regarding depreciation?
A) Depreciation expense should be recorded in the appropriate governmental funds, and
recorded in the governmental activities accounts.
B) Depreciation expense must be recorded in the governmental fund, but no
depreciation expense is recorded in the governmental activities accounts.
C) No depreciation can be recorded in any governmental fund, but depreciation expense
must be recorded in the governmental activities accounts.
D) No depreciation can be recorded in any governmental fund, nor is it permissible to
record depreciation expense in the governmental activities accounts.
24) Six new computers, for which the cost exceeded the city’s capitalization threshold, were
purchased for use in the city clerk’s office using General Fund resources. Which of the following
entries would be required to completely record this transaction?
A)
General Journal
Debit
Credit
General Fund:
Expenditures
8,000
Vouchers Payable
8,000
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B)
General Journal
Debit
Credit
Governmental Activities:
Expenses
8,000
Vouchers Payable
8,000
C)
General Journal
Debit
Credit
General Fund:
Expenditures
8,000
Vouchers Payable
8,000
Governmental Activities:
Expenses
8,000
Vouchers Payable
8,000
D)
General Journal
Debit
Credit
General Fund:
Expenditures
8,000
Vouchers Payable
8,000
Governmental Activities:
Equipment
8,000
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Vouchers Payable
8,000
25) A capital projects fund might be used to account for which of the following activities?
A) Maintaining sidewalks.
B) Building a parking garage.
C) Providing water and sewer services.
D) Servicing long-term debt.
26) Which of the following is true regarding capital projects funds?
A) Encumbrances accounting is generally employed.
B) Encumbrances accounting is not normally employed, but Appropriations are
recorded.
C) No budgetary accounts are used.
D) All budgetary accounts are employed and budget to actual statements are prepared.
27) In 2023, Sunset City signed a contract in the amount of $8,000,000 for the construction of
a new city hall. Expenditures were $4,000,000 in 2023 and $2,050,000 in 2024, which included a
change to the original construction design in the amount of $50,000. What amount should be
added to capital assets in the governmental activities accounts in 2024?
A) $0
B) $50,000
C) $2,050,000
D) $2,000,000
28) To offset engineering and design costs incurred prior to the issuance of a long-term bond
issue, a capital projects fund borrowed the sum of $75,000 on a short-term basis from First
National Bank. This transaction should be recorded in:
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A) The capital projects fund.
B) The debt service fund.
C) The special revenue fund.
D) None of the options are correct. Debt is not recorded in governmental funds.
29) Transfers from the General Fund to the capital projects fund to provide partial financing
of a capital project would be reported by the capital projects fund as a(an):
A) Fund balance addition.
B) Revenue.
C) Other financing source.
D) Current liability.
30) Which of the following statements is correct concerning interest incurred during the
period of construction of capital projects?
A) Interest cannot be capitalized as part of the cost of general capital assets reported in
governmental activities.
B) Interest should be capitalized as part of the cost of general capital assets reported in
the governmental activities accounts at the government-wide level.
C) Interest must be capitalized as part of the cost of general capital assets reported in the
capital projects fund.
D) The capitalization of interest as part of the cost of general capital assets reported in
the capital projects fund is optional.
31) When part of a progress payment for construction is withheld until final settlement of the
contract, what account is credited?
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A) Encumbrances.
B) Appropriations.
C) Contracts Payable—Retained Percentage.
D) Construction Expenditures.
32) The following balances are included in the subsidiary records of Thistlewood:
Town hall building
$ 500,000
Town swimming 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.
33) 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.
34) 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?
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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.
35) 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.
36) Premiums received on tax-supported bonds are generally transferred to what fund?
A) Internal service fund.
B) Debt service.
C) General.
D) Special revenue.
37) Governments can opt not to capitalize collections or individual works of art or historical
treasures if the collection is:
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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.
38) 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.
39) 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.
40) 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: