Several years ago, a donor gave $5 million to the City and specified that the principal was to be kept intact but the earnings were to be used to support operations of the city parks.During the current year, the City earned $300,000 on the gift.To what type of fund, should the City transfer the $300,000 earnings?

Question

Quizplus · Accepted Answer

The $300,000 earnings from the gift should be transferred to a special revenue fund as it is designated for a specific purpose (supporting operations of city parks). The permanent fund should only contain the principal amount of the gift. The general fund and enterprise fund are not appropriate as they are not designated for a specific purpose such as park operations.

Several Years Ago, a Donor Gave $5 Million to the City