Which of the Following Circumstances Would Indicate That a Potential

question 24

Multiple Choice

Which of the following circumstances would indicate that a potential component unit (PCU) should be included as part of the governmental financial reporting entity?

• A)The primary government does not approve the operating budget of the potential component unit.
• B)Officials of the primary government appoint a majority of the members of the governing board of the PCU.
• C)The PCU has sufficient operational and financial dependence that the primary government can impose its will on the PCU.
• D)Officials of the primary government appoint a majority of the members of the PCU's governing board and the primary government is able to impose its will on the PCU.

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Definitions:

Salvage Values

Salvage Values represent the estimated residual value of an asset after its useful life has ended and it has been fully depreciated.

Useful Lives

The estimated periods of time over which fixed assets, such as machinery or buildings, are expected to be used by a business.

Straight-line Method

A method of calculating depreciation or amortization by evenly distributing the cost of an asset over its expected useful life.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, representing its decrease in value over time.