G&p Chapter 7 - Mc 1-25

Front 1

The objectives of financial reporting for capital asset

s should be to provide information

a)

About a governmental entity’s physical resources.

b)

That can be used to assess the service potential of a g

overnmental entity’s physical

resources.

c)

To help users assess a government’s long- and short-term capi

tal needs.

d)

All of the above.

Back 1

D

Front 2

A government may record long-term assets in which of the f

ollowing funds?

a)

General fund

b)

Internal service funds.

c)

Capital projects funds

d)

Debt service funds.

Back 2

B

Front 3

General capital assets are not reported in governmental funds

because

a)

The measurement focus of governmental funds is on current fina

ncial resources.

b)

They are not used to used generate revenues.

c)

The basis of accounting is accrual.

d)

None of the above.

Back 3

A

Front 4

Joshua County bought a new backhoe using general fund cash. When

the asset was acquired,

what was the appropriate entry in the general fund, assuming

that the entity maintains its

books and records in a manner to facilitate the preparation

of fund financial statements?

a)

Debit Equipment; Credit Cash.

b)

Debit Equipment; Credit Investment in capital assets.

c)

Debit Expenditures; Credit Cash.

d)

Debit Expenditures; Credit Investment in capital assets.

Back 4

C

Front 5

Surfer City sold a used police car. The police car had

a historical cost of $25,000, a fair value

of $18,000, and was sold for $10,000. Assuming that the city mai

ntains its books and records

in a manner to facilitate the preparation of the fund finan

cial statements, what is the

appropriate entry in the general fund to record this sale?

a)

Debit Cash $10,000; Credit Revenue $10,000.

b)

Debit Cash $10,000 and Loss on sale $8,000; Credit Automotive equi

pment $18,000.

c)

Debit Cash $10,000; Credit Other financing sources—sale of ass

et $10,000.

d)

Debit Cash $10,000; Credit Automotive equipment $10,000.

Back 5

C

Front 6

Hilltop School District receives a donation of ten computers

from Computer Hut, a local

computer firm. The cost to Computer Hut of each computer is

$2,500. The retail value of

each computer is $3,000. Assuming that the district maintain

s its books and records in a

manner that facilitates the preparation of the fund financia

l statements, what is the

appropriate entry in the general fund to record this donation?

a)

Debit Computer equipment $25,000; Credit Donation revenue $25,000.

b)

Debit Computer equipment $30,000; Credit Other financing sources—

donation $30,000.

c)

Debit Computer equipment $30,000; Credit Donation revenue $30,000.

d)

No entry. The computers are not financial resources.

Back 6

D

Front 7

Which of the following costs will NOT be included in the cos

t of capital assets on the

government-wide financial statements?

a)

Purchase price (invoice amount).

b)

Cost of demolishing existing structures that cannot be used.

c)

Interest on self-constructed items.

d)

Engineering costs.

Back 7

C

Front 8

Donated assets are reported in the government-wide financial

statements at

a)

Historical cost to the donor.

b)

Book value in the hands of the donor.

c)

Fair value on date of donation.

d)

Zero value because they were not purchased.

Back 8

C

Front 9

Mariano County traded in a used pickup for a new pickup truck

with a sticker price of

$44,000. The old pickup had a fair value of $26,000, historical cos

t of $45,000, and

accumulated depreciation of $18,000. The dealer took the old tr

uck and $15,000 for the new

truck. The new truck should be reported on the

government-wide

financial statements at

a) $15,000.

b) $42,000.

c) $44,000.

d) $41,000.

Back 9

D

Front 10

Mariano County traded in a used pickup for a new pickup truck

with a sticker price of

$44,000. The old pickup had a fair value of $26,000, historical cos

t of $45,000, and

accumulated depreciation of $18,000. The dealer took the old tr

uck and $15,000 for the new

truck. The new truck should be reported on the

government-wide

financial statements at

The amount of gain or loss that should be recognized on t

his transaction in the

general fund

financial statements

is:

a) $0.

b) $1,000 loss.

c) $4,000 gain.

d) $15,000 loss.

Back 10

A

Front 11

Mariano County traded in a used pickup for a new pickup truck

with a sticker price of

$44,000. The old pickup had a fair value of $26,000, historical cos

t of $45,000, and

accumulated depreciation of $18,000. The dealer took the old tr

uck and $15,000 for the new

truck. The new truck should be reported on the

government-wide

financial statements at

The amount of gain or loss that should be recognized on t

his transaction in the

government-

wide

financial statements is

a) $0.

b) $1,000 loss.

c) $3,000 gain.

d) $12,000 loss.

Back 11

B

Front 12

Rory City traded in a used pickup for a new pickup with a

sticker price of $44,000. The old truck

had a historical cost of $40,000, accumulated depreciation of

$16,000, and a fair value of

$27,000. The dealer took the old truck and $10,000 cash for the new

truck.

At what value should the new truck be reported in the

government-wide

financial

statements?

a) $44,000.

b) $43,000.

c) $40,000.

d) $37,000.

Back 12

D

Front 13

Rory City traded in a used pickup for a new pickup with a

sticker price of $44,000. The old truck

had a historical cost of $40,000, accumulated depreciation of

$16,000, and a fair value of

$27,000. The dealer took the old truck and $10,000 cash for the new

truck.

What amount of gain/loss should be reported in the

general fund

financial statements?

a)

$0.

b)

$3,000 gain.

c)

$3,000 loss.

d)

$7,000 gain.

Back 13

A

Front 14

Rory City traded in a used pickup for a new pickup with a

sticker price of $44,000. The old truck

had a historical cost of $40,000, accumulated depreciation of

$16,000, and a fair value of

$27,000. The dealer took the old truck and $10,000 cash for the new

truck.

What amount of gain/loss should be reported in the

government-wide

financial statements?

a)

$0.

b)

$3,000 gain.

c)

$3,000 loss.

d)

$7,000 gain.

Back 14

A

Front 15

The city of Maine Creek acquired a used front-end loader

from a road contractor for use at

the city landfill (which is accounted for in an enter

prise fund). The loader had a fair value of

$54,000 and a historical cost of $90,000. The city paid the cont

ractor $50,000 for the loader.

At what amount should be front-end loader be reported

in the government-wide financial

statements?

a)

$50,000.

b)

$54,000.

c)

$90,000.

d)

It should not be reported in the government-wide financial s

tatements.

Back 15

A

Front 16

To elect not to capitalize works of art and simila

r assets, a government must see that the

assets meet all of the following criteria EXCEPT

a)

The assets must be held for public exhibition, education, or

research in furtherance of

public service, rather than for financial gain.

b)

The assets must be protected, kept unencumbered, cared for,

and preserved.

c)

The assets must be subject to an organizational policy tha

t requires the proceeds from

sales of the collection items be used to acquire very sim

ilar items for the collection.

d)

The assets must be subject to an organizational policy tha

t requires the proceeds from

sales of the collection items be used to acquire other it

ems for the collection.

Back 16

C

Front 17

If a government elects to capitalize certain works of art

and similar assets, which of the

following statements is true relative to depreciation on thos

e assets?

a)

Donated assets cannot be depreciated.

b)

All of the capitalized assets must be depreciated.

c)

All exhaustible works of art and similar assets must b

e depreciated.

d)

The government may elect to omit all depreciation.

Back 17

C

Front 18

Which of the following are NOT

infrastructure assets?

a)

Roads.

b)

Sidewalks.

c)

Buildings.

d)

Bridges.

Back 18

C

Front 19

If a government receives donations of works of art, the governme

nt must recognize revenue

in its government-wide financial statements

a)

Only if it elects to capitalize its collection.

b)

Only if it elects NOT to capitalize its collection.

c)

On all donations of works of art.

d)

It is not permitted to recognize revenue from donations.

Back 19

C

Front 20

For a government that elects NOT to capitalize its works

of art and similar assets, the

appropriate entry for reporting in the government-wide finan

cial statements when receiving a

contribution of a work of art is

a)

No entry is required for contributed assets.

b)

Debit Asset; Credit Revenues.

c)

Debit Asset; Credit Equity.

d)

Debit Expense, Credit Revenue.

Back 20

D

Front 21

For a government that elects to capitalize its works of a

rt and similar assets, the appropriate

entry for reporting in the government-wide financial statem

ents when receiving a contribution

of a work of art is

a)

No entry is required for contributed assets.

b)

Debit Asset; Credit Revenues.

c)

Debit Asset; Credit Equity.

d)

Debit Expenditures; Credit Revenues.

Back 21

B

Front 22

Which of the following is true with regard to deferred mai

ntenance?

a)

Deferred maintenance costs are delayed repair, or upkeep,

measured by the outlay

required to restore a plant or individual asset to full o

perating characteristics.

b)

Deferred maintenance costs should be measured as the

amount necessary to bring the

assets up to their expected operating condition.

c)

Deferred maintenance costs may be interpreted as a po

tential call upon government

resources—an obligation that is being passed on to taxpayers

of the future.

d)

Deferred maintenance costs are not useful information

to readers of financial statements

because they are not objective and verifiable and thus violat

e one of the basic qualitative

characteristics of accounting information.

Back 22

A

Front 23

GASB standards require that depreciation be reported on

all capital assets except

a)

Infrastructure accounted for using the standard approach.

b)

Infrastructure assets accounted for using the modified appro

ach.

c)

Donated assets.

d)

Capitalized works of art.

Back 23

B

Front 24

With regard to accounting for infrastructure, which of t

he following is true?

a)

Unlike other capitalized assets, infrastructure assets s

hould never be depreciated.

b)

The costs of general government infrastructure assets should

be recognized as

expenditures in governmental fund statements as the costs are

incurred.

c)

Governments that choose to apply the modified approach to accoun

ting for infrastructure

need not capitalize infrastructure assets.

d)

Under the modified approach, governments should capitalize both t

he initial costs of

infrastructure assets and subsequent outlays intended to pr

eserve and extend the assets’

useful lives.

Back 24

B

Front 25

If a government elects the modified approach with regard to

capitalization of infrastructure

a)

Costs to preserve infrastructure assets are expensed as

incurred with no additional

disclosure required.

b)

Costs to preserve infrastructure assets are expensed as

incurred and disclosure of assessed

condition is required.

c)

Costs to preserve infrastructure assets are capitalized

as incurred and depreciated over the

estimated useful with no additional disclosure required.

d)

Costs to preserve infrastructure assets are capitalized

as incurred and are not depreciated,

but disclosure of assessed condition is required.

Back 25

B