Question

9. 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. d. A city government issued general obligation bonds to finance the con- struction of a new jail. b. A tax of $1.00 per residential phone number is collected by a city govern- ment from the phone company. This amount is required by state law to be used for the operation of the 911 emergency phone system. C. A county government expended $1 million to expand the water treatment plant. d. A donor signed a trust agreement and provided investments totaling $4 million to create an endowment, the earnings of which will be used to provide scholarships. e. A donor provided $50,000 to be used to purchase newspaper and maga- zine subscriptions for the public library. There is no requirement that the original principal may not be spent. J. A city government sold surplus street maintenance trucks for $10,000. g. A city government contributed $500,000 to a pension trust administered by the city for its teachers, public safety employees, and employees of the water department.

Answer 1

Answer-

	Types of Fund	Reason
a) A city government issued general obligation bonds to finance the construction of a new jail	Capital Project Funds	These financial resources are to be used to finance construction of a capital asset.Since the jail is unlikely to charge for its services, it would not be part of a proprietary fund.
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.	Special Revenue Funds	Because the tax revenue is restricted by state law for a purpose other than capital project or debt service, these amount would be reported in a special revenue fund.
c) A county government expended $1 million to expand the water treatment plant	Enterprise Fund	Water departments expenditures are typically reported as enterprise funds.
d) A donor provided investments totaling $4 million to create an endowment, the earnings of which will be used to provide scholarships.	Private-Purpose Trust Fund	Here income benefits individuals, therefore it is a trust fund . If the fund was to benefit the government or public , then it would be appropriate to report these resources in a permanent fund.
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	Special Revenue Fund	Library benefits the citizenry in general but precludes the resources being reported in a permanent fund due to the absence of a requirement that principal be maintained. They would be reported in a special revenue fund bcoz the resources are restricted by the donor.
f) A city government sold surplus street maintenance trucks for $10,000	General Fund	it is neither fiduciary nor proprietary. The resources are neither restricted nor committed to a particular purpose, so General Fund would be the appropriate fund for reporting in this case
g)A city government contributed $500,000 to a pension plan administered by the city for its teachers, public safety employees, and employees of the water department	Pension and Employee Benefit Fund	These are fiduciary funds where government is acting as the trustee

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