1. The GASB Statement No. 34 reporting model requires state and local governments to report general government capital outlay expenditures, costs of using capital assets, and gain or loss upon disposition of capital assets. Explain why this is so. [Hint: consider measurement focus and basis of accounting in your response]

2. Distinguish between interfund transactions and interfund relationships. 3. a. Under what circumstances are Debt Service Funds used? b. How are the activities of Debt Service Funds controlled? c. Are budgets typically recorded in Debt Service Funds? d. When is interest recorded as an expenditure in Debt Service Funds? e. When is general long-term debt principal recorded in Debt Service Funds? f. Under what circumstances are Permanent Funds used? g. Are budgets typically recorded in Permanent Funds?