Question

A government incurred expenses for its infrastructure as follows: $40 million for general repairs; $30 million to extend the life for existing infrastructure; and $30 million for additions and betterments. The infrastructure has a basis of $600 million and would be depreciated over a 40 year life, if depreciation were charged. The government chooses to use the modified approach to record infrastructure. The total amount that would be shown as expense in the Statement of Activities would be:

           
            A)    $50 million.       
            B)    $55 million.
            C)    $60 million.
            D)    $70 million.
           

A government reported, in its government-wide Statement of Net Position:assets of $82 million, including $60 million in capital assets (cost), with $18 million in accumulated depreciation, andliabilities of $50 million, including long-term debt of $20 million related to capital asset acquisition.In addition, $5 million of cash was restricted for payment of debt service. The government's Unrestricted Net Position would be reported as:

           
            A)    $27 million.       
            B)    $22 million.
            C)    $10 million.
           D)    $5 million.

A government reported expenditures for infrastructure as follows: $17 million for improvements and additions; $23 million to extend the life of existing infrastructure; $21 million for general repairs. The cost of its infrastructure, excluding land, is $800 million, and the infrastructure has an estimated life of 50 years, on average. Which of the following would be the reported expense (in millions) under each of the following options?

           
            A)    Depreciation Approach: $14; Modified Approach: $37.          
            B)    Depreciation Approach: $44; Modified Approach: $33.
            C)    Depreciation Approach: $14; Modified Approach: $39.
            D)    Depreciation Approach: $37; Modified Approach: $44.

Answers are bolded. Please explain how to get these answers!!!
           

Answer 1

Question - (1)

Answer -

Particulars	Amount	Explanation
The total amount that would be shown as expense in the Statement of Activities would be:	$70 million	$30 million to extend the life for existing infrastructure + $40 million for general repairs

Hence, Option - (D) is Correct.

.

Question - (2)

Answer -

Particulars	Amount	Explanation
The government's Unrestricted Net Position would be reported as:	$5 million	Net current assets : = (Total assets - Capital assets) - (Total liabilities - long term debt) = [$82 million - ($60 million - $18 million)] - ($50 million - $20 million) = $40 million - $30 million = $10 million. Unrestricted net position : = Net current assets - Cash restricted for payment of debt service. = $10 million - $5 million = $5 million.

Hence, Option - (D) is Correct.