Aaronsborough’s city manager, Thomas Smith, is facing a financial dilemma. The General Fund will not have enough revenues to cover the current year’s expenditures. After an all- night session, he reduced the expenditures by only 5 percent, which is not enough to balance the budget. His wife mentions to him that whenever they did not have enough money to meet their bills for a particular month, she merely borrowed money from the bank. Smith decides to borrow from the Pension Trust Fund. His intention is to repay the loan as soon as possible. Will the loan solve his problem? Explain. Is an ethical problem raised here? Explain.
Answer to relevant QuestionsAssume the same facts as stated in D8- 4 except that the Pension Trust Fund is operated by a five-member board of directors. Before the end of the current fiscal year, three of the board members’ terms expire. If Smith ...Record the following journal entries in the Children’s Book Fund, a city’s Private Purpose Trust Fund that supplies books for children in privately owned battered women’s shelters. 1. A citizen donated $ 500,000 to a ...Why would one entity permit another entity to invest its resources?Assume that the Town of Boonsville maintains an Agency Fund for its employees’ insurance with-holdings, another for its employees’ income tax withholdings, and a third for its employees’ pension contributions. The ...What measurement focus and basis of accounting should be used in reporting each of the three fund categories in fund financial statements?
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