NFP Exam 2 UPDATED ACTUAL Exam
Questions and CORRECT Answers
Which of the following statements is correct regarding depreciation?
Depreciation expense should be recorded in the appropriate governmental funds, and recorded in
the governmental activities accounts.
Depreciation expense must be recorded in the governmental fund, but no depreciation expense is
recorded in the governmental activities accounts.
No depreciation can be recorded in any governmental fund, but depreciation expense must be
recorded in the governmental activities accounts.
No depreciation can be recorded in any governmental fund, nor is it permissible to record
depreciation expense in the governmental activities accounts. - CORRECT ANSWER - No
depreciation can be recorded in any governmental fund, but depreciation expense must be
recorded in the governmental activities accounts.
Four 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?
General JournalDebitCredit General Fund: Expenditures8,000 Vouchers Payable 8,000
General JournalDebitCredit Governmental Activities: Expenses8,000 Vouchers Payable 8,000
General JournalDebitCredit General Fund: Expenditures8,000 Vouchers Payable 8,000
Governmental Activities: Expenses 8,000 Vouchers Payable 8,000
General JournalDebitCredit General Fund: Expenditures8,000 Vouchers Payable 8,000
Governmental Activities: Equipment 8,000 Vouchers Payable 8,000 - CORRECT
,ANSWER - General JournalDebitCredit General Fund: Expenditures8,000 Vouchers
Payable 8,000 Governmental Activities: Equipment 8,000 Vouchers Payable 8,000
How should a capital lease for a general capital asset be recorded in the governmental activities
accounts at the inception of the lease?
Debit to a capital asset account.
Debit to a capital expense/expenditure account.
Credit to Capital Lease Obligations Payable.
Both A and C are correct. - CORRECT ANSWER - Both A and C are correct.
When part of a progress payment for construction is withheld until final settlement of the
contract, what account is credited?
Encumbrances.
Appropriations.
Contracts Payable-Retained Percentage.
Construction Expenditures. - CORRECT ANSWER - Contracts Payable-Retained
Percentage.
At the inception of a capital lease for equipment the journal entry required in the capital projects
fund will include which of the following?
A debit to Equipment.
A debit to Capital Lease Expense.
A credit to Obligations under Capital Leases.
A credit to Other Financing Uses-Capital Leases. - CORRECT ANSWER - A credit to
Other Financing Uses-Capital Leases.
,A general capital asset constructed several years ago by a capital projects fund was sold by the
General Fund. Entries are necessary in the:
General Fund only.
General Fund and the capital projects fund.
General Fund and governmental activities.
Governmental activities only. - CORRECT ANSWER - General Fund and governmental
activities.
Which of the following activities or transactions would normally not be accounted for in a
capital projects fund?
Construction of a new city jail.
Construction of airport runways financed by revenue bonds and to be repaid from the revenues
of the city airport, an enterprise fund.
Lease of a building to be used as a city office building.
Construction of a new city park to be maintained primarily from General Fund revenues. -
CORRECT ANSWER - Construction of airport runways financed by revenue bonds and to
be repaid from the revenues of the city airport, an enterprise fund.
When a snowplow purchased by a government is received, it should be recorded in the
governmental activities general journal as a(an):
Expenditure.
Capital asset.
Appropriation.
Expense. - CORRECT ANSWER - Capital asset.
, Which of the following statements is correct concerning interest expenditures incurred during the
period of construction of capital projects?
Interest expenditures may not be capitalized as part of the cost of general capital assets reported
in governmental activities.
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.
Interest expenditures must be capitalized as part of the cost of general capital assets reported in
the capital projects fund.
The capitalization of interest expenditures as part of the cost of general capital assets reported in
the capital projects fund is optional. - CORRECT ANSWER - Interest expenditures may
not be capitalized as part of the cost of general capital assets reported in governmental activities.
How should a capital lease for a general capital asset be recorded in the General Fund accounts
at the inception of the lease?
Debit to a capital asset account.
Debit to a capital expenditure account.
Credit to Capital Lease Obligations Payable.
Both A and C are correct. - CORRECT ANSWER - Debit to a capital expenditure account.
Which of the following statements regarding capital assets is not true?
Proprietary funds routinely account for capital assets used in their operations within the fund
financial statements.
Questions and CORRECT Answers
Which of the following statements is correct regarding depreciation?
Depreciation expense should be recorded in the appropriate governmental funds, and recorded in
the governmental activities accounts.
Depreciation expense must be recorded in the governmental fund, but no depreciation expense is
recorded in the governmental activities accounts.
No depreciation can be recorded in any governmental fund, but depreciation expense must be
recorded in the governmental activities accounts.
No depreciation can be recorded in any governmental fund, nor is it permissible to record
depreciation expense in the governmental activities accounts. - CORRECT ANSWER - No
depreciation can be recorded in any governmental fund, but depreciation expense must be
recorded in the governmental activities accounts.
Four 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?
General JournalDebitCredit General Fund: Expenditures8,000 Vouchers Payable 8,000
General JournalDebitCredit Governmental Activities: Expenses8,000 Vouchers Payable 8,000
General JournalDebitCredit General Fund: Expenditures8,000 Vouchers Payable 8,000
Governmental Activities: Expenses 8,000 Vouchers Payable 8,000
General JournalDebitCredit General Fund: Expenditures8,000 Vouchers Payable 8,000
Governmental Activities: Equipment 8,000 Vouchers Payable 8,000 - CORRECT
,ANSWER - General JournalDebitCredit General Fund: Expenditures8,000 Vouchers
Payable 8,000 Governmental Activities: Equipment 8,000 Vouchers Payable 8,000
How should a capital lease for a general capital asset be recorded in the governmental activities
accounts at the inception of the lease?
Debit to a capital asset account.
Debit to a capital expense/expenditure account.
Credit to Capital Lease Obligations Payable.
Both A and C are correct. - CORRECT ANSWER - Both A and C are correct.
When part of a progress payment for construction is withheld until final settlement of the
contract, what account is credited?
Encumbrances.
Appropriations.
Contracts Payable-Retained Percentage.
Construction Expenditures. - CORRECT ANSWER - Contracts Payable-Retained
Percentage.
At the inception of a capital lease for equipment the journal entry required in the capital projects
fund will include which of the following?
A debit to Equipment.
A debit to Capital Lease Expense.
A credit to Obligations under Capital Leases.
A credit to Other Financing Uses-Capital Leases. - CORRECT ANSWER - A credit to
Other Financing Uses-Capital Leases.
,A general capital asset constructed several years ago by a capital projects fund was sold by the
General Fund. Entries are necessary in the:
General Fund only.
General Fund and the capital projects fund.
General Fund and governmental activities.
Governmental activities only. - CORRECT ANSWER - General Fund and governmental
activities.
Which of the following activities or transactions would normally not be accounted for in a
capital projects fund?
Construction of a new city jail.
Construction of airport runways financed by revenue bonds and to be repaid from the revenues
of the city airport, an enterprise fund.
Lease of a building to be used as a city office building.
Construction of a new city park to be maintained primarily from General Fund revenues. -
CORRECT ANSWER - Construction of airport runways financed by revenue bonds and to
be repaid from the revenues of the city airport, an enterprise fund.
When a snowplow purchased by a government is received, it should be recorded in the
governmental activities general journal as a(an):
Expenditure.
Capital asset.
Appropriation.
Expense. - CORRECT ANSWER - Capital asset.
, Which of the following statements is correct concerning interest expenditures incurred during the
period of construction of capital projects?
Interest expenditures may not be capitalized as part of the cost of general capital assets reported
in governmental activities.
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.
Interest expenditures must be capitalized as part of the cost of general capital assets reported in
the capital projects fund.
The capitalization of interest expenditures as part of the cost of general capital assets reported in
the capital projects fund is optional. - CORRECT ANSWER - Interest expenditures may
not be capitalized as part of the cost of general capital assets reported in governmental activities.
How should a capital lease for a general capital asset be recorded in the General Fund accounts
at the inception of the lease?
Debit to a capital asset account.
Debit to a capital expenditure account.
Credit to Capital Lease Obligations Payable.
Both A and C are correct. - CORRECT ANSWER - Debit to a capital expenditure account.
Which of the following statements regarding capital assets is not true?
Proprietary funds routinely account for capital assets used in their operations within the fund
financial statements.
