Author Question: A municipal government decides to construct and operate a public swimming pool. It will charge user ... (Read 71 times)

segrsyd · **on:** Jul 5, 2018

A municipal government decides to construct and operate a public swimming pool. It will charge user fees to recover its costs, but will allow senior citizens and children under the age of three to enter at half-price.

What type of fund should it use for this purpose?
a. Special Revenue Fund
b. Enterprise Fund
c. Agency Fund
d. Private Purpose Fund

Question 2

At January 31, the end of the first month of the year, the usual adjusting entry transferring expired insurance to an expense account is omitted. Which items will be incorrectly stated, because of the error, on (a) the income statement for January and (b) the balance sheet as of January 31? Also indicate whether the items in error will be overstated or understated.

shailee · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

b

Answer to Question 2

(a) Insurance expense (or expenses) will be understated. Net income will be overstated.
(b) Prepaid insurance (or assets) will be overstated. Owner's equity will be overstated.