In previous years, Boze City had received a $400,000 gift of cash and investments. The donor had specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be re-invested. During the current year, the earnings from this gift were $24,000. The earnings from this gift should generally be considered revenue to which of the following funds?

Question

Quizplus · Accepted Answer

The earnings from the gift should be considered revenue to a Permanent fund because the principal amount is to be preserved (re-invested) while the earnings are used for a public purpose, in this case, to beautify city-owned parks. Permanent funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs—that is, for the benefit of the public.

In Previous Years, Boze City Had Received a $400,000 Gift