Question

The Town of Carlisle's public school system is administered by a separately elected board of education, which is not organized as a separate legal entity and does not have the ability to either issue bonds or assess taxes. The Town must approve the school system's budget. The Town should report the school system as follows:

A. As a separate legal entity.
B. As a component unit.
C. As a fiduciary fund.
D. As a primary government.

Answer 1

The Town of Carlisle's public school system should be reported as a component unit.

Step-by-step explanation:

The Town of Carlisle's public school system should be reported as a component unit.

A component unit is a separate entity that is financially dependent on another government entity and whose activities should be presented as a part of the financial statements of that government entity. In this case, the school system is administered by a separately elected board of education, but it does not have the ability to issue bonds or assess taxes, and its budget must be approved by the Town. Therefore, it is considered a component unit of the Town of Carlisle.