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 $3,100,000. 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 credit to Revenues-Change in Fair Value of Investments in the amount of $100,000. c. A debit to Investments in the amount of $3,000,000. d. A credit to Investments in the amount of $3,100,000.

Question

Wright

Business

8 January, 10:10

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 $3,100,000. 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 credit to Revenues-Change in Fair Value of Investments in the amount of $100,000. c. A debit to Investments in the amount of $3,000,000. d. A credit to Investments in the amount of $3,100,000.

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Answers (1)

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Aiyana Alvarez · Answer 1

B) A credit to Revenues-Change in Fair Value of Investments in the amount of $100,000.

Explanation:

Government entities have to record transactions using the fair market value of assets. In this case, the fair market value was $100,000 higher than the cost of the transferred investments. So that difference has to be adjusted using the Revenues-Change in Fair Market Value of Investments account.