A Government Is Considering Undertaking One or More Construction Projects

question 14

Multiple Choice

A government is considering undertaking one or more construction projects. The estimated marginal costs and benefits of each project are given in the table. Refer to the above table and information. What is the net benefit of project 2?

• A) $2 million
• B) $3 million
• C) $4 million
• D) $5 million

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Definitions:

Modified Accrual Accounting

This accounting method recognizes revenues when they become available and measurable and expenses when incurred, blending elements of both cash and accrual accounting.

Accrual Accounting

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash is received or paid.

Proprietary Fund Types

Types of funds used by governmental entities to account for activities similar to those found in the private sector, where the intent is to recover costs through user charges.

Internal Service Funds

Funds used by a government entity to account for the services provided by one department to other departments on a cost-reimbursement basis.