Question

Pocahontas School District, an independent public school district, financed the acquisition of a new school bus by signing a note for $90,000 plus interest on the unpaid balance at 6%. Annual principal payments of $30,000, plus interest, are due each July 1. Assuming that the District maintains its books and records in a manner that facilitates the preparation of the fund financial statements, the appropriate entry in the General Fund at the date of acquisition is:_________.
A) Debit Expenditures $90,000; Credit Notes Payable $90,000.
B) Debit Fixed Assets $90,000; Credit Notes Payable $90,000.
C) Debit Expenditures $90,000; Credit Other Financing Sources $90,000.
D) Debit Fixed Assets $90,000; Credit Other Financing Sources $90,000.

Answer 1

Answer:

C) Debit Expenditures $90,000; Credit Other Financing Sources $90,000

Explanation:

A General fund can be defined as the primary fund which are often used by a government entity and they are used to help record all inflows and outflows of resources that are not associated with funds which are for special purpose.

Therefore ,the entry in the General Fund at the date of acquisition will be :

Debit Expenditures $90,000

Credit Other Financing Sources $90,000

Reason been that the acquisition of the new school bus was been financed by signing a note for $90,000 in which the $90,000 is an expenditure which was debited while Other Financing Sources of $90,000 was been credited.