Question

A local golfer contributed $100,000 to the city stipulating that the money be invested and that the earnings thereon be used for maintenance of the city golf course. The $100,000 would most appropriately be recorded in a(an)

a. Private-purpose trust fund
b. Investment trust fund
c. Agency fund
d. Permanent fund

Answer 1

The $100,000 donated by a local golfer to the city for golf course maintenance, where only earnings from the investment can be used, should be recorded in a permanent fund.

Step-by-step explanation:

A local golfer contributed $100,000 to the city with the stipulation that the money be invested and the earnings used for the maintenance of the city golf course. This type of financial contribution is most appropriately recorded in a permanent fund. Permanent funds are used by government entities to account for resources that are restricted to the extent that only earnings, and not principal, may be used for the purposes specified by the benefactor. In this case, the city is required to invest the $100,000 and can only use the investment earnings to maintain the golf course, which aligns with the characteristics of a permanent fund.