A Deficit Unassigned Fund Balance Was Reported in a City

question 6

Multiple Choice

A deficit unassigned fund balance was reported in a city Capital Projects Fund balance sheet. Which of the following explanations for the deficit is not plausible?

• A) The project is being financed in large part by a federal grant, which provides that costs incurred will not be reimbursed until the project is completed.
• B) The city financed current year expenditures by issuing bond anticipation notes that are not general long-term liabilities.
• C) The city entered into a two-year construction contract. Transfers from the General Fund will be made each year to cover actual expenditures.
• D) The city had a large assigned fund balance.

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Definitions:

Unrestricted Contribution

Donations or funds given to an organization without any conditions or limitations on their use.

Unrestricted Resources

Funds or resources received by an organization that are not subject to stipulations on their use by donors, allowing for flexibility in allocation.

Restricted Resources

Funds or resources that are designated for specific purposes by donors, grantors, or regulatory authorities, limiting their use.

Capital Assets

Long-term assets acquired for use in a business, intended for the purpose of earning income and not for resale.