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Record the payment as a cash receipt

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Question - The city of Deauville entered into a service concession arrangement (SCA) with Water wonders, Inc. to operate the city pool for next 20 years.

Water Wonder has agreed to pay the city $3,000,000 up front as part of this agreement. According to the agreement, Water Wonders will be responsible for operating the pool, and the city will continue to be responsible for costs related to maintaining it. In addition, Water Wonders has the right to collect fees from the public for their use of the pool, although the rates are subject to approval by the city, The city should.

A. Remove the cost of the pool and the related accumulated depreciation from its record because it has effectively transferred the asset to Water Wonders.

B. Record the receipt of the cash payment, a liability for the cost of required future maintenance, and a deferred inflow of resources for the difference between the cash payment and the liability.

C. Record the payment as a cash receipt and as an other financing source for the General Fund.

D. Set up a proprietary fund to record all transactions related to the SCA.

Reference no: EM132093743

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