Question

For each of the items below, identify which fund(s) would be used to account for the item and provide a justification for your answer. A city government issued general obligation bonds to finance the construction of a new jail. A tax of $1.00 per residential phone number is collected by a city government from the phone company. This amount is required by state law to be used for the operation of the 911 emergency phone system. A county government expended $1 million to expand the water treatment plant. A donor provided investments totaling $4 million to create an endowment, the earnings of which will be used to provide scholarships. A donor provided $50,000 to be used to purchase newspaper and magazine subscriptions for the public library. There is no requirement that the original principal may not be spent. A city government sold surplus street maintenance trucks for $10,000. A city government contributed $500,000 to a pension plan administered by the city for its teachers, public safet

Answer 1

a. A city government issued general obligation bonds to finance the construction of a new jail.

General fund and capital projects. General because it is from general obligation bond and capital because it is for the construction of a new building.

b. A tax of $1.00 per residential phone number is collected by a city government from the phone company. This amount is required by state law to be used for the operation of the 911 emergency phone system.

Enterprise funds. These are proprietary funds through tax on the phone service.

c. A county government expended $1 million to expand the water treatment plant.

Capital project funds. The government expended these funds for a specific project.

d. A donor provided investments totaling $4 million to create an endowment, the earnings of which will be used to provide scholarships.

Permanent funds, because the earnings only are allowed to be used.

e. A donor provided $50,000 to be used to purchase newspaper and magazine subscriptions for the public library. There is no requirement that the original principal may not be spent.

Debt service funds. These funds are restricted in their use, but both principal and earnings may be used.

f. A city government sold surplus street maintenance trucks for $10,000.

General fund, no other fund specifies for sale of the capital assets.

g. A city government contributed $500,000 to a pension plan administered by the city for its teachers, public safety.

Pension and employee benefit fund, because these are fiduciary funds where government is acting as the trustee.