Maple City Has a Permanent Fund That Reported Current-Year Investment

question 42

Multiple Choice

Maple City has a permanent fund that reported current-year investment earnings (realized and unrealized) of $80,000. The endowment principal is $800,000 and the city council has adopted a policy of considering only the inflation-adjusted rate of return to be available for transfer to the recipient fund. During the current year the council declared the inflation-adjusted rate of return to be 8 percent. How much revenue would be recognized in the permanent fund?

• A) $ 0.
• B) $ 64,000.
• C) $ 80,000.
• D) Insufficient information to determine.

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Definitions:

Accounting

The systematic recording, reporting, and analysis of financial transactions of a business.

Invoiced Price

The cost specified on an invoice for goods or services, representing the amount demanded by the seller from the buyer.

Assignment

The act of transferring to another all or part of one’s rights arising under a contract.

Privity

A relationship between parties that is sufficiently close to validate contracts or grant rights or obligations.