Question

The City of Mayville had total fund balance in its General Fund of $200,000 on December 31, 2019. The City of Maysville's General Fund balance sheet for its December 31, 2019 year end shows inventory of $28,000 and prepaid rent of $10,000. The City also had $60,000 of outstanding encumbrances in its General Fund at year-end. In December 2019, a grantor provided the City with $42,000 that must be used to buy musical instruments for the City's youth orchestra. No instruments had been purchased at year-end. How much should the City report as restricted fund balance in its General Fund on December 31, 2019?

A $42.000
B. $38,000
C. $98,000
D. 528,000
E. $60,000

Answer 1

The City of Mayville should report a restricted fund balance of $42,000 in its General Fund as of December 31, 2019, which corresponds to the grant funds allocated for purchasing musical instruments that have not been used.

Step-by-step explanation:

Understanding Restricted Fund Balance for Mayville

The restricted fund balance in the General Fund refers to the portion of the total fund balance that is subject to constraints imposed by external parties, constitutional provisions, or enabling legislation. For the City of Mayville, the grantor provided $42,000 specifically to be used to purchase musical instruments for the city's youth orchestra. Since the funds have not been used yet and are restricted for a specified purpose, this amount should be reported as the restricted fund balance.

Therefore, the correct answer to the amount that should be reported as restricted fund balance in the General Fund on December 31, 2019, is $42,000 (Option A). The outstanding encumbrances and prepaid items such as inventory and rent do not impact the restricted balance, as they relate to different parts of the fund balance (e.g., committed, assigned, or unassigned).

Answer 2

The City of Mayville

The City should report $42,000 as restricted fund balance in its General Fund on December 31, 2019.

Step-by-step explanation:

a) Data and Calculations:

Total fund balance in General Fund = $200,000

Inventory = $28,000

Prepaid Rent 10,000

Encumbrances 60,000

Restricted fund = $42,000

b) The City of Mayville's restricted fund balance is the cash balance that has been earmarked for specific or limited use by or for the City. Restricted funds ensure that donors detect and direct the usage of the funds.