Which of the following statements about capital assets is false? a. Capital asse

Question

Which of the following statements about capital assets is false? a. Capital assets are initially recorded at historical cost, including capitalized interest and any other costs necessary to make the asset ready for its intended use b. Donated assets are initially reported at their historical cost to the donor c. Capital asse ts should generally be depreciated over their estimated useful lives unless they are indefinite lived assets (i.e., land). d. Governmental units are allowed to group similar assets and to depreciate them as a group using the same depreciation rate. 2. Which of the following statements is false regarding the depreciation of capital assets? used. b. Governments are not allowed to group similar assets and to depreciate them as a group c. Infrastructure assets (like a road or lighting system), are not required to be depreciated under d. Should the municipality incur liabilities that relate specifically to the acquisition, construction, using the same depreciation rate. certain circumstances. or improvement of capital assets, those assets should be reported net of the related debt Which of the following does not accurately describe the accounting for works of art? 3. a. Purchased works of art and historical treasures should be recorded at their purchase price b. If donated, they should be recorded at fair value whether held as individual items or in a c. Governments are not required to report works of art on their statements of net position. on the date of acquisition. collection d. All of the above accurately describe the accounting for works of art. Which of the following does not describe the presentation of restricted and unrestricted net position? 4. a. Net position should be reported as restricted when governments are not free to use the asset b. Restrictions on the use of net position may be imposed by loan covenants, donor restrictions c. Even though the net position may be labeled as restricted, it may be available to meet the d. Unrestricted net position is available to meet the needs of the general operations of the as they wish laws or regulations, constitutional provisions or enabling legislation. ongoing financial needs of the government government.

Explanation / Answer

Ans-1(b) Donated assets are initially reported at their historical cost to the donor.

Ans-2 (b) Governments are not allowed to group similar assets and to depreciate them as a group using the same depreciation rate.

Ans-3 (d) All of the above accurately describe the accouting for works of art.

Ans- 4 (c) Even though the net assets may be labeled as restricted they may be available to meet the ongoing financial needs of the government.

Ans -5 (c) The amount of the landfil liability is not adjusted following the initial estimate.

Ans-6 (a) The statement of activities uses the same format as corporate income statements.

Ans-7 (c) Program revenues include charges for services but do not include grants revenues.

Ans-8 (d) All of the statement can be used to complete the sentence.

Ans-9 (a) The journal entry to record capital assets recognizes a debit to capital assets and a credit to revenue.

Ans-10 (c) 1,2and 3

Ans-11 (d) Both a and c are true.

Ans- 12(b) An expenditure relates to the using up of an appropriation.

Ans- 13(a) An encumbrance is a contractual commitment relating to an existing appropriation.

Ans-14 (b) Outstanding encumbrance that have not yet been filled may be carried over to the following year if spending authority exists.

Ans-15 (c) PPE assets that are purchased by a government are not recorded as assets in fund based financial statements.

Ans-16 (a) The journal entry to record the sale of a PPE asset recognises cash or other assets received with a credit to other financing sources or revenue.

Ans-17 (c) The journal entry to record the proceeds of long term debit includes a credit to other financial sources.

Ans-18 (b) The journal entry to record the payment of principal and interest in long term debt generally includes a credit to cash and a debit to an expenditure account.

Ans-19 (d) Both a and b.

Ans-20 (d) None of the above.

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