A state government collected income taxes of $8,000,000 for the benefit of one of its cities that imposes an income tax on its residents.The state remitted these collections periodically to the city.The state should account for the $8,000,000 in the

Question

Quizplus · Accepted Answer

Since the state collected the income taxes on behalf of the city and is remitting the collections to the city periodically, the $8,000,000 should be accounted for in an agency fund. An agency fund is used to account for resources held by a government on behalf of others, where the government acts as an agent or custodian of those resources. Therefore, option B is the correct answer.

A State Government Collected Income Taxes of $8,000,000 for the Benefit