Chapter 9 Multiple Choice

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1. Donated capital assets are valued by the recipient government at:

Explanation

When a government receives donated capital assets, it values them at their fair market value at the date of donation. This means that the assets are valued based on the price that they would fetch in the open market at the time of donation. This is the most accurate and objective way to determine the value of the assets. Valuing the assets based on the original cost per the donor's records or the net book value at the date of donation may not reflect their current market value. Similarly, valuing them based on the assessed valuation or the value of any tax deduction to be claimed by the donor may not be accurate or fair. Therefore, fair market value at the date of donation is the correct approach.

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Governmental Accounting Quizzes & Trivia

This quiz titled 'Chapter 9 Multiple Choice' assesses knowledge on accounting and financial reporting for capital assets, including scenarios of loss, transfer, and valuation of donated assets. It... see moreis tailored for learners in governmental accounting, focusing on GAAP compliance and practical applications. see less

2. Which of the following is never reported as a general long- term liability?

Explanation

Advances from other funds are not reported as a general long-term liability because they represent funds that have been transferred from one fund to another within the same entity. These transfers do not create a liability for the entity since the funds are still owned by the entity and can be used for future expenditures. Therefore, advances from other funds are not considered a long-term liability and are not reported as such.

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3. Which of the following statements concerning the accounting and financial reporting for capital assets is false?

Explanation

The statement that all capital assets are reported as assets of the purchasing fund is false. In governmental accounting, capital assets are typically reported in the government-wide financial statements, not in the fund financial statements. The fund financial statements focus on the financial activities of individual funds, while the government-wide financial statements provide an overview of the financial position and activities of the entire government.

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4. Assume that a building used by Carter County's police department is totally destroyed by a fire. It is then discovered that the building was not properly insured and that its current net book value was $ 170,000. The controller, Austin Miller, estimated that it will cost $ 350,000 to replace the building. The loss that would be reported in the General Fund for the reporting period in which the fire occurred would be:

Explanation

The correct answer is $ 0. The reason for this is that in governmental accounting, the loss due to the destruction of a capital asset is not recognized or reported in the General Fund. This is because the focus of governmental accounting is on the flow of financial resources rather than the determination of net income or loss. Therefore, even though the building was not properly insured and had a net book value and replacement cost, the loss would not be reported in the General Fund.

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5. Which of the following statements concerning the reporting of general long- term liabilities is true?

Explanation

This statement is true because general long-term liabilities are not reported in the governmental funds. They are only reported in the government-wide financial statements, which provide a comprehensive view of the government's financial position. This is because general long-term liabilities represent obligations that extend beyond the current fiscal year and are more relevant to the overall financial health of the government.

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6. When a capital asset of a department reported in a proprietary fund is transferred to a general government department, the effect of the transaction is reported as:

Explanation

When a capital asset of a department reported in a proprietary fund is transferred to a general government department, the effect of the transaction is reported as a non-operating expense in the proprietary fund. This means that the transfer is recorded as an expense in the proprietary fund, indicating a decrease in the value of the asset. However, nothing is reported in any governmental fund, as the transfer does not affect the financial statements of the government as a whole.

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7. In which of the following scenarios would a general long- term liability be reported as a governmental fund liability?

Explanation

A general long-term liability would be reported as a governmental fund liability if it is in default. This means that the entity has failed to make the required payments on the debt, and it is considered to be in default. In this scenario, the liability would be reported in the governmental fund financial statements to accurately reflect the financial position of the entity.

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8. GAAP require all of the following note disclosures for capital assets except:

Explanation

GAAP requires note disclosures for various aspects of capital assets, such as current year depreciation expense by function, a differentiation between depreciable and non-depreciable assets, increase in accumulated depreciation by class of asset, and retirements by class of asset. However, it does not require note disclosures specifically for capital assets that will be fully depreciated within one year.

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Donated capital assets are valued by the recipient government at:
Which of the following is never reported as a general long- term...
Which of the following statements concerning the accounting and...
Assume that a building used by Carter County's police department is...
Which of the following statements concerning the reporting of general...
When a capital asset of a department reported in a proprietary fund is...
In which of the following scenarios would a general long- term...
GAAP require all of the following note disclosures for capital assets...
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