When a Government Acquires General Fixed Assets Under a Capital

question 18

Multiple Choice

When a government acquires general fixed assets under a capital lease agreement,the asset should be recorded in the government-wide financial statements:

• A) at the inception of the lease agreement at the lesser of the present value of the minimum lease payments or the fair market value of the property.
• B) as an expenditure when payments are made.
• C) at the inception of the lease agreement for the total lease payments.
• D) as an expense when payments are made.

---

Definitions:

Direct Labor

The wages and related benefits of employees who are directly involved in the production of goods or services.

Materials Requisition

The process of requesting and withdrawing materials from inventory for use in the production process or for other operational needs.

Source Document

An original record, such as an invoice or receipt, that evidences a business transaction.

Indirect Materials

Indirect materials are those materials used in the production process but are not directly traceable to specific products, such as lubricants for machinery.