The following information pertains to a city government.
A. The city (1) purchased a 3-year, 7 percent U.S. Treasury note (2) used the note to enter into a 90-day short-term loan transaction that incorporated an interest rate of 6 percent and (3) used the proceeds from the short-term loan transaction to purchase another 3-year 7 percent U.S. Treasury note. What are the benefits and risks of the city's investment practices?
B. In 2015 the city constructed a new highway at a cost of $120 million. In the years following 2015, the city did not record a depreciation charge on the highway - not even in its government-wide statements. Can the omission of the depreciation charge be justified under GASB standards? Explain.

Question

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The Answer of The following information pertains to a city government.
A. The city (1) purchased a 3-year, 7 percent U.S. Treasury note (2) used the note to enter into a 90-day short-term loan transaction that incorporated an interest rate of 6 percent and (3) used the proceeds from the short-term loan transaction to purchase another 3-year 7 percent U.S. Treasury note. What are the benefits and risks of the city's investment practices?
B. In 2015 the city constructed a new highway at a cost of $120 million. In the years following 2015, the city did not record a depreciation charge on the highway - not even in its government-wide statements. Can the omission of the depreciation charge be justified under GASB standards? Explain.

The Following Information Pertains to a City Government