Select the best answer.1. A government repaves a section of highway every four years at a cost of $2 million to preserve it at a specific condition level. How much should it report in depreciation charges under the modified approach to accounting for infrastructure? The standard approach?Modified Approach Standard Approacha. $ 0 $ 0b. $500,000 $500,000c. $500,000 $ 0d. $ 0 $500,0002. States typically maintain investment pools for their towns and counties primarily toa. Provide the participants with the benefits of increased portfolio sizeb. Ensure that the participants adhere to all state investment laws and policiesc. Enable the participants to enhance internal and administrative controls over their investmentsd. Spread the risk of losses among the participants3. When a city enters into a repurchase agreement, it will typicallya. Give an investor the opportunity to repurchase equity securities that it will sell to the investorb. Borrow cash from a bank with the understanding that it will use the cash to repurchase bonds that the city previously issuedc. Sell securities to an investor guaranteeing that it will repurchase them at a higher priced. Buy securities from a third party with the promise that the third party will repurchase the securities at a higher price4. A government would typically enter into a reverse repurchase agreement in order toa. Borrow cash for a short period of timeb. Invest cash overnight or for some other short period of timec. Diversify its investment portfoliod. Hedge its investments against fluctuations in interest rates 5. Derivatives area. Variable interest rate bonds, the interest rate on which is derived from (based on) the prime rate of interestb. Shares of common stock, the value of which is derived from the market value of the underlying assets (typically investments in subsidiaries) of the issuing corporationc. Investments, the value of which is derived from some underlying asset or reference rated. Investment pools, the value of which is derived from the pools’ investments6. Which of the following statements is true with respect to derivatives?a. They are highly speculative instruments and therefore are suitable only for governments that are willing to accept a high degree of investment risk.b. Their market values are typically less volatile than those of the underlying assets.c. GASB standards require that governments explain in their annual reports the reasons why they invested in derivatives.d. They need not be reported on governments’ financial statements; they need only be disclosed in notes to the financial statements.7. The risk that a company will go bankrupt and thereby be unable to repay a bond that a government holds as an investment is known asa. Credit riskb. Market value riskc. Interest rate riskd. Counterparty risk8. Investments would generally be considered subject to the least credit risk if they area. Registered in the government’s name but in the possession of a broker-dealerb. Registered in the government’s name and in the physical possession of the government itselfc. Registered in the broker-dealer’s name and in the possession of the broker-dealerd. Registered in the broker-dealer’s name but in the possession of the government itself9. A city needs to determine whether it should sell its downtown administrative facility and move to an outlying location. The value of the facility that is most relevant to this decision isa. Historical costb. Current market valuec. Historical cost less accumulated depreciationd. Assessed value10. Which of the following costs should not be included in the cost of a highway that a county constructed itself?a. Insurance premiums paid while the project was under constructionb. Interest incurred on debt used to finance the project while it was under constructionc. Overhead costs of the construction departmentd. Fees paid to consultants to determine the high-way’s optimum routeView Solution:
Select the best answer 1 A government repaves a section