Question

Q1) If the government is merely a cash conduit, grants that are to be transferred to secondary recipients by a local government should be accounted for in which funds?

Group of answer choices

Investment trust funds.

Internal service funds.

Custodial funds.

Special revenue funds.

Q2) Egg County collects property taxes levied within its boundaries and receives a 1% fee for administering these collections on behalf of the municipalities located in the county. In the current year, Egg collected $1 million for its municipalities and remitted $990,000 to them after deducting fees of $10,000. In the initial recording of the 1% fee, Egg’s custodial fund should credit

Group of answer choices

Fund balance -- custodial fund, $10,000.

Due to Egg County general fund, $10,000.

Fees earned -- custodial fund, $10,000.

Revenues control, $10,000.

Answer 1

Ans 1. If the government is merely a cash conduit ,grants that are to be transferred to secondary recipients by a local government should be accounted for custodial funds as these funds are purely custodial. Custodian is a bank that holds financial assests for safekeeping to minimse the risk of theft or loss

Ans2. Eggs custodial fund should credit fees earned --custodial fund $10000

Explanation: As we know custodial account is a financial account set up for the benefit of beneficiary and administered by a responsible person and the amount 10000 is earned as a fees for providing administrative services.