Governmental Accounting Chapters 5
and 6 questions with actual answers.
Which of the following would be reported as a general capital asset?
A) A garbage truck purchased and used by the city's Solid Waste Disposal Fund, an enterprise fund.
B) An off-set printer purchased and used by the city's Central Duplicating Fund, an internal service fund.
C) A computer purchased and used by the Finance Department, a function of the General Fund.
D) All of the above are general capital assets. ANS - A computer purchased and used by the Finance
Department, a function of the General Fund.
As indicated in Chapter 5, a capital asset acquired and used by an activity accounted for in a
governmental fund type is a general capital asset. These assets are accounted for in the governmental
activities general ledger at the government-wide level and not in any governmental fund. A capital asset
owned by a proprietary or fiduciary fund is accounted for in that fund and is reported as an asset of that
fund. Internal service fund capital assets are also reported in the Governmental Activities column of the
government-wide statement of net position if the internal service fund predominately serves
governmental funds. Enterprise fund capital assets are reported in the Business-type Activities column
of the government-wide statement of net position. Fiduciary fund financial information, including that
related to capital assets, is reported only in the fund financial statements and not in the government-
wide financial statements
The Village of Jonesburg had the following General Fund capital outlay expenditures during its current
fiscal year:
Assuming these were the only capital outlays for the fiscal year, the amount to be reported as capital
assets on the Village's General Fund balance sheet at the end of the current fiscal year is:
A) $50,000.
B) $47,000.
C) $3,000.
D) $0. ANS - $0.
,This may seem to be a trick question, but it really is not. Just recall that capital assets are not reported
on the balance sheet of any governmental fund. Instead, all general capital assets are reported in the
Governmental Activities column of the government-wide statement of net position.
Which of the following would not be reported as a general capital asset?
A) Water rights acquired by the state's Department of Conservation, a function of the General Fund.
B) The inventory of asphalt held by the city's Street Maintenance Department, a function of the General
Fund.
C) A new bridge constructed by the county and maintained by the Public Works Department, a function
of the General Fund.
D) The sculptures of an internationally known local artist purchased by the mayor's office, a function of
the General Fund, for display in city hall. ANS - The inventory of asphalt held by the city's Street
Maintenance Department, a function of the General Fund.
Of the items listed, only inventory would be considered a current asset rather than a capital asset.
Water rights are intangible assets, which are classified as capital assets under GASB standards. The
bridge is an infrastructure asset. Since it is maintained by a function of the General Fund it would be
considered a general capital asset. Sculptures would be classified as works of art. It is possible that the
city would opt not to record works of art as a general capital asset, but it must report (note disclosure)
the assets even if it opts not to record them (see page 172 of the text).
Regarding calculation and reporting of depreciation on capital assets, for which of the following capital
assets would accumulated depreciation be reported on the government-wide statement of net position?
General Capital Assets
Enterprise Fund Capital Assets
Fiduciary Fund Capital Assets ANS - General Capital Assets (YES)
Enterprise Fund Capital Assets (YES)
Fiduciary Fund Capital Assets (NO)
Depreciation is reported for all depreciable capital assets reported on the government-wide statement
of net position, both those reported in the Governmental Activities column (i.e., general capital assets
and most internal service fund capital assets) and those reported in the Business-type Activities column
, (i.e., enterprise fund capital assets). Fiduciary fund financial information is reported only in the fund
financial statements, not in the government-wide financial statements.
Which of the following is a required disclosure regarding capital assets?
A) Capital assets that are not being depreciated should be reported separately from those that are
being depreciated.
B) Depreciation expense for the year with disclosure of the amounts charged to each function on the
statement of activities.
C) An explanation concerning major changes in a capital asset category during the year.
D) Both A and B are required disclosures. ANS - Both A and B are required disclosures.
Feedback: Choices A and B are required disclosures about capital assets as discussed on pp. 171-172 of
the text. While changes to capital asset categories are disclosed, no explanations concerning capital
asset changes are required.
State and local governments can avoid reporting depreciation on infrastructure assets if they use the
modified approach and meet which of the following two requirements?
A) (1) Manage the eligible infrastructure assets using an asset management system that includes (a) an
up-to-date inventory, (b) condition assessment and results using a measurement scale, and (c) estimates
of the amount needed to maintain and preserve assets at the condition level established. (2) Document
that the eligible assets are being preserved at or above the condition level established.
B) (1) File a "Declaration of Intent to Follow the Modified Approach" with the GASB. (2) Agree in writing
to maintain infrastructure assets at a high condition level.
C) (1) Agree in writing to maintain infrastructure assets at a high condition level. (2) Document that the
assets are, in fact, being maintained at the high condition level established.
D) ANS - 1) Manage the eligible infrastructure assets using an asset management system that includes
(a) an up-to-date inventory, (b) condition assessment and results using a measurement scale, and (c)
estimates of the amount needed to maintain and preserve assets at the condition level established. (2)
Document that the eligible assets are being preserved at or above the condition level established.
and 6 questions with actual answers.
Which of the following would be reported as a general capital asset?
A) A garbage truck purchased and used by the city's Solid Waste Disposal Fund, an enterprise fund.
B) An off-set printer purchased and used by the city's Central Duplicating Fund, an internal service fund.
C) A computer purchased and used by the Finance Department, a function of the General Fund.
D) All of the above are general capital assets. ANS - A computer purchased and used by the Finance
Department, a function of the General Fund.
As indicated in Chapter 5, a capital asset acquired and used by an activity accounted for in a
governmental fund type is a general capital asset. These assets are accounted for in the governmental
activities general ledger at the government-wide level and not in any governmental fund. A capital asset
owned by a proprietary or fiduciary fund is accounted for in that fund and is reported as an asset of that
fund. Internal service fund capital assets are also reported in the Governmental Activities column of the
government-wide statement of net position if the internal service fund predominately serves
governmental funds. Enterprise fund capital assets are reported in the Business-type Activities column
of the government-wide statement of net position. Fiduciary fund financial information, including that
related to capital assets, is reported only in the fund financial statements and not in the government-
wide financial statements
The Village of Jonesburg had the following General Fund capital outlay expenditures during its current
fiscal year:
Assuming these were the only capital outlays for the fiscal year, the amount to be reported as capital
assets on the Village's General Fund balance sheet at the end of the current fiscal year is:
A) $50,000.
B) $47,000.
C) $3,000.
D) $0. ANS - $0.
,This may seem to be a trick question, but it really is not. Just recall that capital assets are not reported
on the balance sheet of any governmental fund. Instead, all general capital assets are reported in the
Governmental Activities column of the government-wide statement of net position.
Which of the following would not be reported as a general capital asset?
A) Water rights acquired by the state's Department of Conservation, a function of the General Fund.
B) The inventory of asphalt held by the city's Street Maintenance Department, a function of the General
Fund.
C) A new bridge constructed by the county and maintained by the Public Works Department, a function
of the General Fund.
D) The sculptures of an internationally known local artist purchased by the mayor's office, a function of
the General Fund, for display in city hall. ANS - The inventory of asphalt held by the city's Street
Maintenance Department, a function of the General Fund.
Of the items listed, only inventory would be considered a current asset rather than a capital asset.
Water rights are intangible assets, which are classified as capital assets under GASB standards. The
bridge is an infrastructure asset. Since it is maintained by a function of the General Fund it would be
considered a general capital asset. Sculptures would be classified as works of art. It is possible that the
city would opt not to record works of art as a general capital asset, but it must report (note disclosure)
the assets even if it opts not to record them (see page 172 of the text).
Regarding calculation and reporting of depreciation on capital assets, for which of the following capital
assets would accumulated depreciation be reported on the government-wide statement of net position?
General Capital Assets
Enterprise Fund Capital Assets
Fiduciary Fund Capital Assets ANS - General Capital Assets (YES)
Enterprise Fund Capital Assets (YES)
Fiduciary Fund Capital Assets (NO)
Depreciation is reported for all depreciable capital assets reported on the government-wide statement
of net position, both those reported in the Governmental Activities column (i.e., general capital assets
and most internal service fund capital assets) and those reported in the Business-type Activities column
, (i.e., enterprise fund capital assets). Fiduciary fund financial information is reported only in the fund
financial statements, not in the government-wide financial statements.
Which of the following is a required disclosure regarding capital assets?
A) Capital assets that are not being depreciated should be reported separately from those that are
being depreciated.
B) Depreciation expense for the year with disclosure of the amounts charged to each function on the
statement of activities.
C) An explanation concerning major changes in a capital asset category during the year.
D) Both A and B are required disclosures. ANS - Both A and B are required disclosures.
Feedback: Choices A and B are required disclosures about capital assets as discussed on pp. 171-172 of
the text. While changes to capital asset categories are disclosed, no explanations concerning capital
asset changes are required.
State and local governments can avoid reporting depreciation on infrastructure assets if they use the
modified approach and meet which of the following two requirements?
A) (1) Manage the eligible infrastructure assets using an asset management system that includes (a) an
up-to-date inventory, (b) condition assessment and results using a measurement scale, and (c) estimates
of the amount needed to maintain and preserve assets at the condition level established. (2) Document
that the eligible assets are being preserved at or above the condition level established.
B) (1) File a "Declaration of Intent to Follow the Modified Approach" with the GASB. (2) Agree in writing
to maintain infrastructure assets at a high condition level.
C) (1) Agree in writing to maintain infrastructure assets at a high condition level. (2) Document that the
assets are, in fact, being maintained at the high condition level established.
D) ANS - 1) Manage the eligible infrastructure assets using an asset management system that includes
(a) an up-to-date inventory, (b) condition assessment and results using a measurement scale, and (c)
estimates of the amount needed to maintain and preserve assets at the condition level established. (2)
Document that the eligible assets are being preserved at or above the condition level established.
