Question 1

The risk that there will a change in interest or market prices is

Accepted Answer

Market risk refers to the potential for an investment's value to decrease due to changes in market factors such as interest rates or market prices. Credit risk refers to the potential for a borrower to fail to repay a loan or bond, collaterized risk refers to the potential for a borrower to default on a loan and the lender's inability to recover the full amount through collateral, and legal risk refers to the potential for losses due to legal actions or regulations.

Question 2

Governments must disclose information about investment risks in which of the following categories?

Accepted Answer

Governments must disclose information about investment risks in all of the above categories, including credit risk, custodial credit risk, and foreign currency risk. This ensures transparency and accountability in government investments, allowing investors and the public to make informed decisions.

Question 3

For a government that elects NOT to capitalize its works of art and similar assets, the appropriate entry when receiving a contribution of a work of art in the government-wide financial statements is

Accepted Answer

The answer of For a government that elects NOT to...

Question 4

GASB standards require that depreciation be reported on all capital assets except

Accepted Answer

GASB standards require depreciation to be reported on all capital assets, except for infrastructure assets accounted for using the modified approach. This approach allows for certain infrastructure assets to be exempt from depreciation if they are being maintained at or above a condition level established by the government.

Question 5

Which of the following is NOT an infrastructure asset?

Accepted Answer

Buildings are not considered infrastructure assets as they are typically privately owned or used for private purposes.

Question 6

With regard to capitalization of infrastructure, which of the following is true?

Accepted Answer

According to GASB Statement 34, small governments may omit capitalizing infrastructure assets acquired or that received significant improvements before June 15, 2003. Therefore, option D is the correct choice. Option A and B are incorrect as they suggest that all infrastructure assets must be capitalized, regardless of government size. Option C is also incorrect as small- and medium-size governments can only elect to delay implementation of GASB Statement 34, not capitalization of infrastructure assets.

Question 7

Which of the following is true with regard to deferred maintenance?

Accepted Answer

The answer of Which of the following is true with...

Question 8

A broker-dealer or other financial institution transfers cash to a government in exchange for securities and the government agrees to repay the cash plus interest in exchange for return of the same securities.From the government's point of view, this transaction is a

Accepted Answer

This transaction is a reverse repurchase agreement, where the government is the seller of the securities and the financial institution is the buyer. The government is borrowing cash from the financial institution and agreeing to repurchase the securities at a later date with interest.

Question 9

For a government that elects to capitalize its works of art and similar assets, the appropriate entry when receiving a contribution of a work of art in the government-wide financial statements is

Accepted Answer

When a government elects to capitalize its works of art and similar assets, the appropriate entry when receiving a contribution of a work of art in government-wide financial statements is to recognize the asset by debiting Asset account and recognize the contribution revenue by crediting Revenues account. Therefore, the correct answer is Debit Asset; Credit Revenues.

Question 10

Which of the following is NOT an example of a derivative?

Accepted Answer

Repurchase agreements are short-term borrowing agreements and are not considered derivatives, whereas the other options involve financial instruments whose value is derived from underlying assets.

Question 11

If a government elects to capitalize certain works of art and similar assets, which of the following statement is true relative to depreciation on those assets?

Accepted Answer

Exhaustible works of art and similar assets, which are subject to wear and tear, must be depreciated if they are capitalized.

Question 12

If a government elects the modified approach with regard to capitalization of infrastructure

Accepted Answer

Under the modified approach, costs to preserve infrastructure assets are expensed as incurred, and the government must disclose the assessed condition of the infrastructure assets.

Question 13

To elect not to capitalize works of art and similar assets, a government must see that the assets meet all of the following criteria EXCEPT

Accepted Answer

The exception is that the proceeds from sales of collection items do not need to be used to acquire very similar items, but rather can be used to acquire other items for the collection.

Question 14

The city of Rapid Creek acquired a used front-end loader from a road contractor for use at the landfill which is accounted for in an Enterprise Fund.The loader had a fair value of $54,000 and a historical cost of $90,000.The city paid the contractor $50,000 for the loader.At what amount should be front-end loader be reported in the government-wide financial statements?

Accepted Answer

The answer of The city of Rapid Creek acquired a...

Question 15

Disclosures about investment risk apply

Accepted Answer

Disclosures about investment risk apply to deposits, investments, and derivatives to ensure transparency and inform stakeholders of potential risks associated with these financial instruments.

Question 16

Use the following information to answer questions 
Rapid City traded in a used pickup for a new pickup with a sticker price of $44,000.The old truck had a historical cost of $40,000, accumulated depreciation of $16,000, and a fair value of $27,000.The dealer took the old truck and $13,000 cash for the new truck.
-What is the amount of gain/loss that should be reported in the government-wide financial statements?

Accepted Answer

The answer of Use the following information to answer questions...

Question 17

If a government receives a donation of a work of art, the government must recognize revenue in its government-wide financial statements

Accepted Answer

Government-wide financial statements are prepared using the accrual basis of accounting. Under the accrual basis of accounting, revenue is recognized when earned and expenses are recognized when incurred, regardless of when cash is received or paid. Therefore, the government must recognize revenue in its government-wide financial statements when it receives a donation of a work of art, regardless of whether it elects to capitalize its collection.

Question 18

The risk that the other party to an investment will not fulfill its obligation is

Accepted Answer

Credit risk refers to the risk that the other party to an investment will not fulfill its obligation to repay principal or interest on a debt security or to meet other financial commitments. Market risk refers to the risk of an investment declining in value due to market fluctuations, collaterized risk refers to the risk of the value of the collateral used to secure a loan or investment declining in value, and legal risk refers to the risk of losses due to lawsuits or other legal actions.

Question 19

The risk that the transaction will be determined to be prohibited by law, regulation or contract is

Accepted Answer

Legal risk refers to the risk that a transaction will be contrary to the law, regulation, or contractual agreement.

Question 20

For governmental entities, a capital asset is considered impaired

Accepted Answer

A capital asset is considered impaired when its service capacity has declined significantly and unexpectedly. This means that the asset is no longer able to perform its intended function and needs to be repaired or replaced. Impairment is not determined based on whether the asset is reported in a governmental fund or whether it generates cash flows. However, it may be considered impaired if it no longer generates the expected cash flows.

Quiz 7: Capital Assets and Investments in Marketable Securities