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? a) Debit Cash $5 000; Credit Revenue $5 000. b) Debit Cash $5 000 and Loss on Sale $7 000; Credit Automotive Equipment $12 000. c) Debit Cash $5 000; Credit Other Financing Sources—Sale of Asset $5 000. d) Debit Cash $5 000; Credit Automotive Equipment $5 000. 6. Lakeview School District a governmental entity received 10 computers from Computer Hut a local computer firm. The computers were a donation to the District by Computer Hut. The cost to Computer Hut for each computer is $2 500. The retail value of each computer is $3 000. Assuming that the District maintains its books and records in a manner that facilitates the preparation of the fund financial statements what is the appropriate entry in the General Fund to record this donation? a) Debit Computer Equipment $25 000; Credit Donation Revenue $25 000. b) Debit Computer Equipment $30 000; Credit Other Financing Sources—Donation $30 000. c) Debit Computer Equipment $30 000; Credit Donation Revenue $30 000. d) No entry is required. The computers are not financial resources. 7. Which of the following costs will NOT be included in the cost of fixed assets on the government-wide financial statements? a) Purchase price (invoice amount). b) Cost of demolishing existing structures that cannot be used. c) Interest on self-constructed items. d) Engineering costs. 8. Donated assets are reported in the government-wide financial statements at a) Historical cost to the donor. b) Book value in the hands of the donor. c) Fair value on date of donation. d) Zero value because they were not purchased. [NOTE: Guidance on the calculation of gain or loss in the next two series of questions is not covered in this chapter but is from APB Opinion 29. Students should be familiar with this pronouncement from their intermediate accounting classes.] Use the following information to answer questions #9 – #11 9. Monroe County traded in a used pickup for a new pickup truck with a sticker price of $29 000. The old pickup had a fair value of $17 000 historical cost of $30 000 and accumulated depreciation of $12 000. The dealer took the old truck and $10 000 for the new truck. The new truck should be reported on the government-wide financial statements at a) $10 000. b) $28 000. c) $29 000. d) $27 000. 10. The amount of gain or loss that should be recognized on this transaction in the General Fund financial statements is: a) $0. b) $1 000. c) $3 000. d) $10 000. 11. The amount of gain or loss that should be recognized on this transaction in the government-wide financial statements is a) $0. b) $1 000. c) $2 000. d) $8 000. Use the following information to answer questions #12 – #14 Rapid City traded in a used pickup for a new pickup with a sticker price of $33 000. The old truck had a historical cost of $30 000 accumulated depreciation of $12 000 and a fair value of $20 000. The dealer took the old truck and $10 000 cash for the new truck. 12. At what value should the new truck be reported in the government-wide financial statements? a) $33 000. b) $32 000. c) $30 000. d) $28 000.
