Pocahontas School District, an Independent Public School District, Financed the Acquisition

question 19

Multiple Choice

Pocahontas School District, an independent public school district, financed the acquisition of a new school bus by signing a note for $105,000 plus interest on the unpaid balance at 6 percent. Annual principal payments of $35,000, plus interest, are due each July 1. Assuming that the district maintains its books and records in a manner that facilitates the preparation of the government-wide financial statements, the appropriate entry at the date of acquisition is

• A) Debit Expenditures $105,000; Credit Notes payable $105,000.
• B) Debit Capital assets $105,000; Credit Notes payable $105,000.
• C) Debit Expenditures $105,000; Credit Other financing sources $105,000.
• D) Debit Capital assets $105,000; Credit Other financing sources $105,000.

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Definitions:

Paper Money

Currency in the form of banknotes, which has no intrinsic value but is used as a medium of exchange, authorized and supported by a government.

King Cotton Diplomacy

An attempt during the Civil War by the South to encourage British intervention by banning cotton exports.

Great Britain

A sovereign nation located off the northwestern coast of mainland Europe, comprising England, Scotland, and Wales.

Union Blockade

The naval strategy by the Union during the American Civil War aimed at preventing the Confederacy from trading through its ports, significantly impacting the southern economy.