Lehi City Has Designated an Internal Service Fund as the Single

question 2

Multiple Choice

Lehi City has designated an internal service fund as the single fund to account for its self-insurance activities.Most of the insured activities such as the police department, fire department, and general government functions are accounted for in the General Fund.What is the maximum amount that can be charged to expenditure in the General Fund related to the self-insurance activities?

• A)The amount of 'premium' charged to the General Fund by the internal service fund.
• B)The amount of actual losses incurred by the insurance activity.
• C)The actuarially-determined amount necessary to cover claims, expenditures, and catastrophic losses.
• D)The amount transferred from the General Fund to the internal service fund for self-insurance purposes.
• Use the following information to answer questions #21 and #22.
• During the year the City's Self-Insurance Internal Service Fund billed the General Fund $300,000 for 'premiums,' of which $30,000 was for catastrophic losses and the balance was the premium computed on an actuarially-determined basis.During the year the City incurred $250,000 in claims losses.The total amount transferred to the Self-Insurance Fund by the General Fund was $310,000.