Final answer:
The money received from a federal grant to purchase books for a library should be recorded in a Capital Projects Fund (C), as it is meant for acquiring major capital assets for public service.
Step-by-step explanation:
When a city received a federal grant for books to be purchased for a library, the money should have been recorded in C. a Capital Projects Fund. This is because capital projects funds are used by state and local governments to account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds and trust funds. In the case of purchasing books for a library, it would fall under this category as it represents an investment in capital assets for public services.
Expendable Trust Funds are not used in this scenario because they typically deal with resources that are held in a trustee capacity for individuals, private organizations, or other governments and are expendable for specified purposes. The Permanent Fund is incorrect as it involves resources that are not available for general appropriation by the government.
An Agency Fund is also not appropriate as these are used to account for resources held by the government as an agent for individuals, private organizations, or other governments, and which are not owned by the government itself. Lastly, a Special Revenue Fund is used to account for revenues from specific taxes or other earmarked sources that are designed to support particular functions or activities, which doesn't directly align with the stated purpose of buying library books.