Describe in a brief paragraph the differences between the accounting procedures used in the private sector’s income statement and the U.S. Federal Government’s income statement.

1. Describe in a brief paragraph the differences between the
accounting procedures used in the private sector’s income statement and
the U.S. Federal Government’s income statement.

2. Suppose a private company invests $100
million into a factory to increase their productive capacity and improve
its competitiveness. The useful life of the factory is 20 years.
Suppose that the company’s revenues were $600 million and its
non-investment expenses were $250 million in the year the investment was
made . Calculate the company’s surplus/deficit for the year using the
“cash-basis” accounting method. (You must provide the calculations for
full credit)

3. Now calculate the company’s
surplus/deficit for the year given the information in part (B), but now
use the “accrual” accounting method instead. (You must provide the
calculations for full credit)

4. Now given the differences in the
surplus/deficit calculated in parts (B) and (C), why have some policy
experts argued that there is a private sector investment bias and
investment by the government is handicapped? (Provide at least 2
paragraphs for full credit)

5. Discuss the reasons for and against
using capital budgeting (accrual accounting) for the U.S. Federal
Government’s budget. (Provide at least 2 paragraphs for full credit)

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