Question

A debt service fund of Clifton received $100,000 from its general fund during the fiscal year ended June 30, 20X9. The cash was used to pay matured interest on Clifton's general obligation bonds, which were issued to finance construction of a new municipal building. On the statement of revenues, expenditures, and changes in fund balance prepared for the debt service fund for the year ended June 30, 20X9, the amount received from the general fund should be reported as:_____________.

A. revenue.
B. a reduction of expenditures.
C.another financing source.
D. matured interest payments.

Answer 1

Answer: C. Another Financing source

Step-by-step explanation:

The fund was received for the purpose of debt service. Debt service means repayment of loans. The funds were utilized for debt servicing. Hence, the amount should be reported as another financing source.

The objective of the funds was to repay loans and the amount was received for repayment. This amount was used to finance their debt service. So it was a financing source for the company.