Chap005 - CHAPTER 5 ACCOUNTING FOR GENERAL CAPITAL ASSETS...

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CHAPTER 5: ACCOUNTING FOR GENERAL CAPITAL ASSETS AND CAPITAL PROJECTS OUTLINE Number Topic Type/Task Status (re: 12/e) Questions: 5-1 Financing sources of capital assets Describe 5-2 5-2 Infrastructure assets Explain 5-4 5-3 Use of capital projects fund Explain 5-6 5-4 Capital projects and capital outlays Describe 5-7 5-5 Capitalization of interest expenditures Explain 5-9 revised 5-6 Encumbrance accounting Explain 5-10 5-7 Encumbrances Explain 5-11 5-8 Capital leases Explain 5-12 5-9 Multiple capital projects Explain 5-13 5-10 Residual equity/deficits and interfund transfers Describe 5-15 revised Cases: 5-1 Financing capital road improvements Evaluate 5-1 revised 5-2 Modified approach for infrastructure assets Evaluate, write New 5-3 Capital assets and GASBS 34 Essay New Exercises/Problems: 5-1 Examine the CAFR Examine 5-1 revised 5-2 Various Multiple Choice 5-2, 5-3 5-3 General capital assets Journal Entries 5-4 revised 5-4 Capital asset disclosure statement Financial Statement 5-5 5-5 Statement of revenues and expenditures Compute; FS 5-7 5-6 Special assessment bonds JEs and Explain 5-9 revised 5-7 Construction fund JEs & FS 5-10 revised 5-8 Street improvement fund JEs & FS 5-11 revised 5-9 Capital asset disclosures Analyze, essay New 73
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CHAPTER 5: ACCOUNTING FOR GENERAL CAPITAL ASSETS AND CAPITAL PROJECTS Answers to Questions 5-1. The acquisition of general capital assets could be from General Fund or special revenue fund appropriations. More likely, though, major acquisitions are financed by long-term debt issues to be repaid from tax revenues, special assessments deemed to be particularly benefited by the long-lived asset, grants from other governmental units, and transfers from other funds. Occasionally, gifts are received from individuals or organizations for the construction or acquisition of capital facilities. Financing by long-term leases is also common. 5-2. The GASB argues that if the long-term debt incurred to acquire capital assets is recognized in the government-wide statement of net assets without recognizing the related benefits of the investment in capital assets, including infrastructure assets, the statements will mislead readers by showing a deficit in net assets. 5-3. In general, only those funds required by law or sound financial administration need be established. Capital projects funds often are used to provide a formal mechanism to enable administrators to ensure that revenues dedicated by law or agreement to the acquisition or construction of specified capital facilities are used for that purpose and none other. As few capital projects funds should be established as allowed by law and as is consistent with administrators' control needs. 5-4. Any capital facilities that can be acquired from revenues of one year (such as routine replacements of police cars, office equipment, etc.) may be considered capital outlays of the fund that finances their acquisition. If the amount of money involved is too large to be
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