The citizens of a specific area of the City of Arlington approved the construction of sidewalks in their residential neighborhood and approved a $1 million bond issue to finance construction of those sidewalks. The citizens agreed to a special assessment on their property for 20 years in an amount sufficient to pay principal and interest on the bonds. The city will oversee the construction of the sidewalks and act as agent for servicing the debt. If the special assessment is not sufficient to make the principal and interest payments, the city will assume the obligations.
-When the city collects the special assessment, it should be accounted for in which fund of the City of Arlington?
A) Agency fund.
B) Special assessment fund.
C) Capital projects fund.
D) Debt service fund.

Question

The citizens of a specific area of the City of Arlington approved the construction of sidewalks in their residential neighborhood and approved a $1 million bond issue to finance construction of those sidewalks.  The citizens agreed to a special assessment on their property for 20 years in an amount sufficient to pay principal and interest on the bonds.  The city will oversee the construction of the sidewalks and act as agent for servicing the debt.  If the special assessment is not sufficient to make the principal and interest payments, the city will assume the obligations.  
-When the city collects the special assessment, it should be accounted for in which fund of the City of Arlington?
A) Agency fund.
B) Special assessment fund.
C) Capital projects fund.
D) Debt service fund.

Quizplus · Accepted Answer

The city is acting as an agent for the collection and payment of the special assessment related to the construction of sidewalks. Therefore, the collections should be accounted for in an Agency fund, which is used to account for resources held by the government in a purely custodial capacity.

The Citizens of a Specific Area of the City of Arlington