Question

15) 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.

            16) 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.

            17) 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.

            18) 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.

            19) Which of the following statements regarding debt service funds is true?

A.   Debt service funds are always accounted for on the accrual basis of accounting.

B.   GASB standards require a separate debt service fund to be established for each issuance of tax-supported or special assessment debt.

C.   A debt service fund is used only for debt service activities related to general long-term liabilities.

D.   GASB requires that annual budgets must be prepared for all debt service funds.

            20) When the City of Delray makes its annual lease payment on an unpaid capital lease obligation, the journal entry for the debt service fund accounts will include:

A. A debit to Capital Lease Obligation Payable.

B. A credit to Capital Lease Obligation Payable.

C. A debit to Capital Lease Expense.

D. A debit to Expenditures—Principal of Capital Lease Obligation.

Answer 1

15) 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.	Correct	Depreciation expense is reported at the government-wide level on the statement of activities .
D. No depreciation can be recorded in any governmental fund, nor is it permissible to
record depreciation expense in the governmental activities accounts.
16) 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.	Correct	interest costs incurred during construction are not capitalized.Interest costs are reported as interest expenses at the government-wide level and as interest expenditures at the fund level
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.
17) 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.	Correct	Construction Work in Progress debited Contracts Payable credited
D. Construction Expenditures.
18) 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.	Correct
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.
19) Which of the following statements regarding debt service funds is true?
A.   Debt service funds are always accounted for on the accrual basis of accounting.
B.   GASB standards require a separate debt service fund to be established for each issuance of tax-supported or special assessment debt.
C.   A debt service fund is used only for debt service activities related to general long-term liabilities.	Correct
D.   GASB requires that annual budgets must be prepared for all debt service funds.
20) When the City of Delray makes its annual lease payment on an unpaid capital lease obligation, the journal entry for the debt service fund accounts will include:
A. A debit to Capital Lease Obligation Payable.	Correct
B. A credit to Capital Lease Obligation Payable.
C. A debit to Capital Lease Expense.
D. A debit to Expenditures—Principal of Capital Lease Obligation.