Question

The city of medford purchased a fire truck for the fire department. if the operations of the fire department are financed by general revenues, an asset would be recorded in which journal(s)?

General Fund / Governmental Activities
a. Yes / No
b. No / No
c. No / Yes
d. Yes / Yes

Answer 1

The fire truck purchased by the city of Medford for the fire department, financed by general revenues, would be recorded as 'No' in the General Fund and 'Yes' in the Governmental Activities, making the correct answer option c. No / Yes.

Step-by-step explanation:

The city of Medford's acquisition of a fire truck for its fire department raises the question of how such an asset should be recorded in financial statements under governmental accounting standards. When operations such as the fire department are financed by general revenues, they are typically considered part of the General Fund for governmental accounting purposes. In terms of recording the asset in the General Fund and Governmental Activities journals, the correct approach would be:

• General Fund: No - Because the fire truck is a capital asset, it is not recorded in the General Fund which accounts for day-to-day operational expenses.
• Governmental Activities: Yes - The Governmental Activities journal reflects capital assets used in governmental operations, and the fire truck would be recorded here because it serves the entire community and is financed by the general tax base.

Therefore, the correct answer is option c. No / Yes. The fire truck is not recorded in the General Fund but is included in the Governmental Activities.