When a Cash and Investment Pool of a Certain City

question 53

Multiple Choice

When a cash and investment pool of a certain city was established,the debt service fund transferred investments to the pool having a cost of $3,000,000 but a current fair market value of $2,900,000.To record this transaction,the journal entry made by the debt service fund will include:

• A) A debit to Equity in Pooled Cash and Investments in the amount of $3,000,000.
• B) A debit to Revenues-Change in Fair Value of Investments in the amount of $100,000.
• C) A debit to Investments in the amount of $2,900,000.
• D) A credit to Investments in the amount of $100,000.

---

Definitions:

Deferred Income Tax

Deferred Income Tax is a liability on a company's balance sheet that results from income already earned and recognized for accounting purposes but not yet subject to taxation.

Fair Value

The estimated market price of an asset or liability, reflecting what a willing buyer would pay to a willing seller in an arm's length transaction.

Tax Rate

The proportion of income that is taken as tax from a person or business.

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its net assets, representing future economic benefits.