NFP Exam 2 Questions with Complete
Solutions
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.
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. 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. 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. 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.
Fiduciary funds do not account for property, plant, and equipment within the fund financial
statements.
, Because governmental funds account only for current financial resources, these funds do not
record capital assets acquired by the funds.
General capital assets purchased or constructed with governmental fund resources are recorded
in the governmental activities general ledger at the government-wide level. Fiduciary
funds do not account for property, plant, and equipment within the fund financial statements.
Transfers from the General Fund to the capital projects fund to provide partial financing of a
capital project would be reported by the capital projects fund as a(an):
Fund balance addition.
Revenue.
Other financing source.
Current liability. Other financing source.
Solutions
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.
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. 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. 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. 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.
Fiduciary funds do not account for property, plant, and equipment within the fund financial
statements.
, Because governmental funds account only for current financial resources, these funds do not
record capital assets acquired by the funds.
General capital assets purchased or constructed with governmental fund resources are recorded
in the governmental activities general ledger at the government-wide level. Fiduciary
funds do not account for property, plant, and equipment within the fund financial statements.
Transfers from the General Fund to the capital projects fund to provide partial financing of a
capital project would be reported by the capital projects fund as a(an):
Fund balance addition.
Revenue.
Other financing source.
Current liability. Other financing source.
