Introduction: Some economists and policy experts have argued that there is a private sector investment bias and that investment from the U.S. Federal Government is unnecessarily handicapped due to its accounting procedures.

1. Describe 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.