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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 The assets must be held for public exhibition, education, or research in furtherance of public service, rather than for financial gain. The assets must be protected, kept unencumbered, cared for, and preserved. The assets must be subject to an organizational policy that requires the proceeds from sales of the collection items be used to acquire very similar items for the collection. The assets must be subject to an organizational policy that requires the proceeds from sales of the collection items be used to acquire other items for the collection. Salvador County issued $25 million of 5 percent demand bonds for construction of a county maintenance building. The county has no take-out agreement related to the debt. It estimates that 20 percent of the bonds would be demanded (called) by the buyers if interest rates increased by at least one percentage point. At year-end, rates on comparable debt were 7 percent. How should these demand bonds be reported in the governmental fund financial statements at year-end? $25 million in the capital projects fund. $5 million in the capital projects fund AND $20 million would be reported in the schedule of changes in longterm obligations. $20 million in the capital projects fund AND $5 million would be reported in the schedule of changes in longterm obligations. $25 million in the schedule of changes in long-term obligations. Voters of Valdez School District, a public school district, approved construction of a new high school at a cost not to exceed $20 million. The district will finance the construction by issuing $20 million of 6 percent term bonds payable in 20 years. Because the site had already been prepared, the school district began construction immediately but the bonds would not be issued for nearly a year. Shortly before the fiscal year-end, the school district borrowed $5 million from a local bank due in one year with interest at 6.2 percent. The note will be repaid from bond proceeds. The school district secured a financing agreement with the bank to convert the debt to a 10-year debt if the school district is unable to sell the bonds by the due date. At year-end, how should the $5 million note be displayed in the governmental fund financial statements? Capital projects fund-Notes payable $5 million; Nothing in the schedule of changes in long-term obligations. Capital projects fund-Notes payable $5 million; $15 million in the schedule of changes in long-term obligations. Capital projects fund-Encumbrances of $5 million; $15 million in the schedule of changes in long-term obligations. Nothing in the capital projects fund AND $5 million notes payable in the schedule of Changes in long-term obligations. Dumas County has a December 31 fiscal year-end. In November, the county borrowed $8 million from a local bank, due in six months at 6 percent interest, to finance general government operations. The county pledges property tax revenues to secure the loan. At year-end, how should the county display the bank note in the governmental fund financial statements? Nothing in the General Fund; Nothing in the schedule of changes in long-term obligations. General fund-$8 million in other financing sources; Nothing in the schedule of changes in long-term obligations. General fund~$8 million in other financing sources; $8 million in the schedule of changes in long-term obligations. General fund--$8 million in notes payable; Nothing in the schedule of changes in long-term obligations. Governments enter into capital leases rather than conventional buy and borrow arrangements for which of the following reasons? Capital leases May be an effective means of circumventing debt limitations. Are less expensive overall than buy and borrow arrangements. Reduce the cash outflows related to the asset acquisition. Have less effect on governmental fund balances than buy and borrow arrangements
