Question

The City of Comstock had a total General Fund balance of $1,400,000 at the end of its fiscal year. The year end balance sheet reports inventory of material and supplies of $60,000. City Council passed an ordinance that all revenue received from hotel occupancy taxes must be used for beautification projects in the City. The City received $280,000 in hotel occupancy taxes and spent $225,000 on beautification projects this year. The City received a Federal grant of $120,000 for specifically the purchase of new breathing apparatus for the fire department. Due to a backlog by the manufacturer of the equipment, the equipment has not been purchased by year end.

Which of the following statements are correct regarding the classifiction of fund balance at year end?

	A.	The City will report Nonspendable Fund Balance of $60,000
	B.	The City will report Committed Fund Balance of $55,000.
	C.	The City will not report any amounts for Assigned Fund Balance.
	D.	The City will report Restricted Fund Balance of $180,000.
	E.	The City will report Restricted Fund Balance of $125,000.
	F.	The City will report Assigned Fund Balance of $280,000.

Answer 1

• Nonspendable fund balance—amounts that are not in a spendable form (such as inventory) or are required to be maintained intact (such as the corpus of an endowment fund)

• Restricted fund balance—amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation

• Committed fund balance—amounts constrained to specific purposes by a government itself, using its highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest-level action to remove or change the constraint

• Assigned fund balance—amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority

Answer

Statement A is correct because constraints on how amounts can be spent are not really an issue for resources that are inherently nonspendable. Examples include inventories and prepaids;the longterm portion of loans receivable and non- financial assets held for resale.

Statement B is correct because (280000 - 225000 ) $55000 is committed by the City for a particular purpose of beautification

Assigned balance to be reported is $120000, therefor statement C and F are incorrect.