Assume the General Fund borrows $50,000 from the Enterprise Fund. The interfund loan is scheduled to be paid back in five years. Which of the following statements properly characterize the reporting effects of this transaction?

Question

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When the General Fund borrows $50,000 from the Enterprise Fund, the General Fund Assets will increase by $50,000 due to the cash received, but at the same time, the General Fund will have a liability to the Enterprise Fund for the same amount, thus increasing the General Fund Liabilities. This will result in an increase in both General Fund Assets and Liabilities. The loan will not affect the General Capital Assets or Fund Balance. General Long-Term Liabilities account does not come into play here as this is a short-term loan to be paid back in five years.

Assume the General Fund Borrows $50,000 from the Enterprise Fund