Questions And Answers

WGU C252 Chapter 7: Practice

Questions And Answers

• Which of the following statements is true concerning accounting and

financial reporting practices related to capital asset acquisitions?

• Routine capital purchases such as vehicles and equipment often may be

financed and accounted for in a General Fund.

• Most capital lease transactions related to governmental funds are

accounted for in either the General Fund or a Debt Service Fund.

• Capital Project Funds may be used only for the acquisition or construction

of major capital facilities.

• Most capital projects last only for one fiscal year. Correct Ans -

Routine capital purchases such as vehicles and equipment often may be financed and accounted for in a General Fund.

• Which of the following is true?
• A government is required to record each major general government capital

project in a separate Capital Projects Fund.

• Acquisition or construction of general government capital assets must

always be accounted for through a Capital Projects Fund.

• A Capital Projects Fund is not required unless a project is financed by

issuing bonds.

• A Capital Projects Fund may be used to acquire vehicles and equipment.

Correct Ans - A Capital Projects Fund may be used to acquire vehicles and equipment.

• Which of the following capital asset-related transactions would most likely

be accounted for through a Capital Projects Fund?

• A major general government capital lease transaction.
• Purchase of multiple computers for general government departments.
• Construction of a general government office building.
• Maintenance of general government fixed assets. Correct Ans -

Construction of a general government office building.

• Which of the following statements is false?
• Capital leases are not commonly reported in a Capital Projects Fund. 1 / 2

• A governmental entity may report a Capital Project Fund in one year but not

the next.

• Budgetary entries are commonly made in a Capital Projects Fund.
• Debt service payments on capital-related debt are paid from a Capital

Projects Fund. Correct Ans - Debt service payments on capital-related debt are paid from a Capital Projects Fund.

• The General Fund is partially funding the construction of a new police

station. 80% of the project is being financed; the General Funds' share of the project is $1,000,000. The Capital Project Fund would report the General funds' share as a

• $1,000,000 other financing source.
• $1,000,000 revenue.
• $1,000,000 nonoperating revenue.
• $1,000,000 other financing use. Correct Ans - $1,000,000 other

financing source.

• Which of the following transactions would not be reported as an

expenditure in a Capital Projects Fund?

• Payment of construction costs.
• Bond issue costs.
• Bond discounts.
• Insurance on short-term debt issued to finance capital project. Correct

Ans - Bond discounts.

• Which of the following expenditures is not capitalized as part of the cost of a

capital asset acquired through a Capital Projects Fund?

• The retained percentage to insure proper completion of the construction by

the contractor.

• Direct materials and labor that are used or consumed in the construction

process.

• Interest expenditures on bond anticipation notes.
• Reimbursable overhead expenditures related to the construction project.

Correct Ans - Interest expenditures on bond anticipation notes.

• Which of the following is a distinguishing feature of a budget for a Capital

Projects Fund?

• The budget is usually for a single year.
• A budget is not used for projects for which contracts will be issued.
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