Quiz Chapter 5 Governmental Accounting

What is a capital lease equivalent to?

• A service contract

• A purchase-borrow transaction

• A rental agreement

• A donation

According to FASB Statement No. 13, what distinguishes operating leases from capital leases?

• The payment structure

• The ownership of the asset

• The duration of the lease

• The interest rate

How are capital asset expenditures reported in governmental fund statements?

• As assets

• As revenues

• As liabilities

• As expenditures

What is the primary reason for not showing long-term debt on the governmental fund balance sheet?

• It is not relevant

• It is not a current liability

• It is not required by law

• It is too complex

What must be recognized in the year of payment for long-term debt?

• Only interest

• Only principal

• Neither principal nor interest

• Both principal and interest

What is the effect of not accruing interest on long-term debt in governmental funds?

• It reduces liabilities

• It increases transparency

• It distorts the true economic cost

• It simplifies accounting

What is the treatment of zero coupon bonds in governmental accounting?

• They are recorded at face value

• They are treated as regular bonds

• They are recorded at a discount

• They are not recorded

When should expenditures for nonexchange transactions be recognized?

• When cash is received

• When eligibility requirements are met

• When the budget is approved

• At the end of the fiscal year

What is the classification of prepaid items in governmental accounting?

• Deferred outflows

• Expenses

• Assets

• Liabilities

What is the main purpose of GASB standards?

• To simplify accounting

• To reduce taxes

• To increase government spending

• To ensure transparency in financial reporting