Question

Tang City received land from a donor who stipulated that the land must remain intact, but any income generated from the property may be used for general government services. In which fund should Tang City record the donated land?
a. Private-purpose trust.
b. Special revenue.
c. Permanent.
d. Agency.

Answer 1

Answer:

The correct answer is C. Permanent.

Explanation:

The permanent fund is one of the five types of government funds established by the GAAP. It is classified as a restricted real endowment fund for governments and nonprofit organizations. Simply put, a permanent fund can be used to generate and disburse money to those who are entitled to receive payments by qualification or agreement, as in the case of Alaska citizens or residents who meet the standards for the payment of their state oil revenues . It was first introduced through the GASB Declaration 34. The name of the fund comes from the purpose of the fund: a sum of capital used to generate payments permanently to maintain some financial obligation. In addition, a fund can only be classified as a permanent fund if the money is used to report the status of a restricted financial resource. The resource is restricted in the sense that only the earnings of the resource are used and not the principal. For example, a fund can be classified as a permanent fund if it is used to pay accounting services for a permanent endowment of a government-run graveyard or financial endowments for a government-managed library.