Question

Financing for the renovation of Fir City's municipal park, begun and completed during the fiscal year came from the following sources:

Grant from State Government $400,000
Proceeds from General Obligation Bond Issue 500,000
Transfer from Fir's General Fund 100,000
In its fiscal Statement of Revenue, Expenditures, and Changes in Fund Balances, how should Fir City report these amounts (choose one of the following options)?
Revenues Other Financing Sources
a. $1,000,000 $ 0
b. 900,000 100,000
c. 400,000 600,000
d. 0 1,000,000

Answer 1

Fir City should report the State Government grant as revenue and the bond issue proceeds and the transfer from the General Fund as other financing sources, option c: $400,000 revenue and $600,000 other financing sources.

Step-by-step explanation:

When reporting the financing for the renovation of Fir City's municipal park on the Statement of Revenue, Expenditures, and Changes in Fund Balances, the appropriate way to report these amounts is to distinguish between revenues and other financing sources. Grants from higher levels of government, such as the state, are typically considered revenues. Therefore, the grant from the State Government of $400,000 should be reported as revenue. On the other hand, the proceeds from the General Obligation Bond Issue and the transfer from Fir's General Fund, which are $500,000 and $100,000 respectively, are not considered revenues but are other financing sources since they do not represent income generated but rather funding methods which may result in future liabilities or be internal transfers. Thus, Fir City should report these as other financing sources. The correct option for Fir City to report these amounts in its fiscal Statement is option c: $400,000 revenue and $600,000 other financing sources.