A governmental fund’s Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of $40 million, including capi

A governmental fund’s Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of $40 million, including capital outlay expenditures of $12 million. Capital assets for that government cost $80 million, including land in the amount of $10 million. Depreciable assets are amortized over 10 years, on average. The reconciliation from governmental fund changes in fund balances to governmental activities change in Net Position would reflect a(an):A) $4 million increase.B) $5 million decrease.C) $5 million increase.D) $4 million decrease.

0 thoughts on “A governmental fund’s Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of $40 million, including capi”

  1. Answer:

    C) $5 million increase.

    Explanation:

    The computation of the change in fund balances to governmental activities is shown below:

    = Capital outlay expenditures – actual expenditure

    where,

    capital outlay expenditure is $12 million

    And, the actual expenditure would be assumed as a depreciation expense which is calculated below

    = (Total capital cost – land value) ÷ (useful life)

    = ($80 million – $10 million) ÷ (10 years)

    = ($70 million) ÷ (10 years)  

    = $7 million

    As land is not depreciated  so we excluded it from the capital assets

    Now put these values to the above formula  

    So, the value would equal to

    = $12 million – $7 million

    = $5 million increase

    Reply

Leave a Comment

thirty seven − = 30