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Unformatted text preview: ch07 Page 1 Chapter 7 Long-lived Assets and Investments in Marketable Securities TRUE/FALSE (CHAPTER 7) 1. General capital assets are distinguished from the capital assets of proprietary funds and fiduciary funds. 2. General capital assets are excluded from governmental funds, themselves, because of the funds’ measurement focus (current financial resources). 3. In governmental funds, the capital asset costs are reported as expenses when the assets are acquired. 4. At the government-wide level, governments must depreciate inexhaustible assets, such as land, works of art, or historical treasures. 5. Governments do not have to depreciate infrastructure assets if they can demonstrate they are preserving them at a specified condition level. 6. Unlike businesses, governments should not capitalize interest on general capital assets that they construct themselves. 7. Most infrastructure assets are the responsibility of the federal government, not state and local governments. 8. Prior to the issuance of GASB Statement No. 34, state and local governments provided virtually no information as to most of their infrastructure. 9. Governments invest in marketable securities for much the same reason that businesses do—to earn a return on cash that would otherwise be unproductive. 10. Governments are prohibited from entering into reverse repurchase agreements. ch07 Page 2 MULTIPLE CHOICE (CHAPTER 7) 1. The objectives of financial reporting for fixed assets should be to provide information a) About a governmental entity’s physical resources. b) That can be used to assess the service potential of a governmental entity’s physical resources. c) To help users assess a government’s long- and short-term capital needs. d) All of the above. 2. A governmental entity may record long-term assets in which of the following funds or account groups? a) General Fund b) Internal service funds. c) Capital Project Fund d) Debt Service Fund. 3. General fixed assets are excluded from governmental funds because a) The measurement focus of governmental funds is on financial resources. b) They are not used to used generate revenues. c) The basis of accounting is accrual. d) None of the above. 4. Jefferson County bought a new backhoe using General Fund cash. When the asset was acquired, what was the appropriate entry that was made in the General Fund, assuming that the entity maintains its books and records in a manner to facilitate the preparation of fund financial statements? a) Debit Equipment; Credit Cash. b) Debit Equipment; Credit Investment in Fixed Assets. c) Debit Expenditure; Credit Cash. d) Debit Expenditure; Credit Investment in Fixed Assets. 5. The City of Shiloh sold a used police car. The police car had a historical cost of $17,000, a fair value of $12,000, and was sold for $5,000. Assuming that the City maintains its books and records in a manner to facilitate the preparation of the fund financial statements, what is the appropriate entry in the General Fund to record this sale? the appropriate entry in the General Fund to record this sale?...
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This note was uploaded on 08/17/2011 for the course ACCT 410 taught by Professor Khalib during the Spring '11 term at Strayer.
- Spring '11