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The town of Mayberry receives a gift of $500,000 in bonds.The contributor instructs that the principal should remain intact,but the annual interest income of $50,000 can be used for the maintenance of the zoo animals.
-When the interest income of $50,000 is received,what account should be credited?

Question

Quizplus · Accepted Answer

The interest income of $50,000 should be recorded as Revenue in the town's accounting system since it is unrestricted and can be used for the maintenance of the zoo animals. Option A, Other Financing Sources, is not appropriate because it is typically used to record transfers from other government funds. Option B, Other Financing Uses, is used to record transfers out to other government funds. Option C, Deferred Revenue, is used to record receiving funds upfront before they are earned, which is not the case here because the interest income of $50,000 is earned annually.

Use the Following Information to Answer the Question(s)below