Question

Katerah City maintains the following funds: a) General b) Special revenue c) Capital projects d) Debt service e) Enterprise f) Investment trust g) Permanent h) Agency For each of the following transactions, indicate which fund would most likely be used to report the transaction (each fund will be used once): 1. The city collects $1 million of taxes for an independent fire district located within the city. 2. The city spends $1.2 million on street maintenance using the proceeds of a city gas tax dedicated for road and highway maintenance and improvements. 3. The city receives a bequest of $1.5 million. The donor’s will, requires that the principal amount be invested in perpetuity and that the earnings on the investment be used to maintain a city park to be renamed for the donor. 4. The city collects water and sewer fees of $4.2 million. 5. The city pays $4 million to a contractor for work on a new bridge. 6. The city receives $1.3 million to invest on behalf of the county. 7. The city pays its police officers wages of $325,000. 8. The city pays $2.2 million in bond interest on its general obligation debt. I need help. Thank you

Answer 1

1. The city collects $1 million of taxes for an independent fire district located within the city.

Ans: g) Permanent

Permanent funds Accounts for endowments in which its earnings are restricted to support gov programs that are dedicated for a public purpose.

2. The city spends $1.2 million on street maintenance using the proceeds of a city gas tax dedicated for road and highway maintenance and improvements.

Ans: b) Special revenue

Special Revenue fund Accounts for specific revenue sources that are restricted or committed to expenditure for specific purposes other than debt service or capital projects.

3. The city receives a bequest of $1.5 million. The donor’s will, requires that the principal amount be invested in perpetuity and that the earnings on the investment be used to maintain a city park to be renamed for the donor.

Ans: e) Enterprise

Enterprise funds Accounts for business-type activities in which the public is the primary user (external users).

4. The city collects water and sewer fees of $4.2 million.

Ans: a) General

General funds Accounts for everything not required to be accounted for by a different type of fund

5. The city pays $4 million to a contractor for work on a new bridge.

Ans: c) Capital projects

6. The city receives $1.3 million to invest on behalf of the county.

Ans: f) Investment

Investment funds Accounts for assets held in trust for other participants, usually other governments.

7. The city pays its police officers wages of $325,000.

Ans: a) General

General funds Accounts for everything not required to be accounted for by a different type of fund8. The city pays $2.2 million in bond interest on its general obligation debt

Ans: d) Debt service

Debt service funds Accounts for resources that are restricted, committed, or assigned to debt service principal and interest expenditures.