Question

Gem City's Internal Service Fund received a residual equity transfer of $50,000 cash from the General Fund.

Answer 1

Answer:

Gem City's Internal Service Fund received a residual equity transfer of $50,000 cash from the General Fund.

This $50,000 transfer should be reported in Gem's Internal Service Fund as a credit to;

D. Transfers.

Explanation:

An internal Service fund can be defined as a fund used in most governments to keep records of goods and services that are moved between departments on the basis of cost reimbursement. An example of an Internal Service fund is when one department offers goods and services to another department. In our case, the Gem City's Internal Service Fund received a residual equity transfer of $50,000 from the General Fund in form of cash. An equity transfer is the transfer of the ownership of shares from one entity to another. In this case from the General Fund to the Gem City's Internal Service Fund.

To record the transaction above, the residual equity transfer of $50,000 to the Internal Service Fund should be recorded as a debit to Cash and a credit to Transfers.  The reporting of Transfers is usually on a separate line in the Statement of Revenues and Expenses for the fund. It comes immediately after the line item: Operating Income/Loss before Transfers and Additions.