When a Government Acquires General Fixed Assets Under a Capital

question 58

Multiple Choice

When a government acquires general fixed assets under a capital lease agreement, the asset should be recorded in the General Fund's fund basis financial statements:

• A) As a capital asset and lease obligation 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 debt service expenditures when payments are made
• C) As a capital asset and lease obligation at the inception of the lease agreement for the total lease payments
• D) as an expense when payments are made

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Definitions:

Indirect Labor

Wages paid to employees who are not directly involved in production but support the process, such as maintenance and supervisory staff.

Precision Drills

High-accuracy tools used for making holes in various materials with exact measurements.

Variable Overhead

Costs that fluctuate with production volume, such as utilities or materials used in the manufacturing process.

Overhead Efficiency

The effectiveness with which an organization manages its overhead costs in relation to its operational activities.