Question

A self-insurance activity that is accounted for in an Internal Service Fund pays $365,000 in claims during the year. Because the Internal Service Fund is a proprietary fund, the claims will be reported on the statement of revenues, expenses, and change in net assets as A. An operating expense. B. As a contra-revenue to premiums charged. C. A non-operating expense. D. Another financing use. E. None of these answers is correct.

Answer 1

Answer:

A. An operating expense.

Explanation:

Since in the question it is mentioned that the self insurance activity i.e. accounted for an internal service fund that paid the amount of $365,000. Also as we know that the internal service fund is a proprietary fund so the claim should be reported as an operating expenses in the revenues, expenses and change in net asset statement

Therefore the correct option is a.