Assume that the City of Coyote has already produced its financial statements for
ID: 2551471 • Letter: A
Question
Assume that the City of Coyote has already produced its financial statements for December 31, 2015, and the year then ended. The city’s General Fund was only for education and parks. Its Capital Projects Funds worked with each of these functions at times during the current year. The city also had established an Enterprise Fund to account for its art museum.
General government revenues for the year were $916,500 with an overall increase in the city’s net position of $184,000.
The CPA firm of Abernethy and Chapman has been asked to review several transactions that occurred during 2015 and indicate how to correct any erroneous reporting and the impact of each error. View each of the following situations as independent.
An art display set up for the City of Coyote was recorded within the General Fund and generated revenues of $10,900 but had expenditures of $53,000 ($17,200 in expenses and $35,800 to buy land for the display). The CPA firm has determined that this program should have been recorded as an Enterprise Fund activity because it was offered in association with the art museum.
Based on the information provided above, what was the correct change in the fund balance for the General Fund for 2015?
What was the correct overall change in the city’s net position on the government-wide financial statements?
.
What was the correct change in the net position of the Enterprise Fund on the fund financial statements?
Assume that the City of Coyote has already produced its financial statements for December 31, 2015, and the year then ended. The city’s General Fund was only for education and parks. Its Capital Projects Funds worked with each of these functions at times during the current year. The city also had established an Enterprise Fund to account for its art museum.
Explanation / Answer
a. Calculating the correct change in the fund balance for the General Fund for 2015:
correct change = increase in fund balance + decrease in fund balance
Here,
Decrease in fund balance = 53,000 –17,200 = $ 35,800
The General Fund reported a $ (16,700) decrease in its fund balance.
Therefore correct change = 52,500 + 35,800= 88,300
b. The overall change will still be $ 184,000
c. For the Enterprise Funds, the correct change will be 53,950
Explanation:
Here, for the fund financial statements, proprietary funds are accounted for like government-wide financial statements (and for-profit businesses).
Thus, adding in the $10,900 revenue and deducting the $17,200 expense = $6,300 net reduction
that implies decrease in the value as $60,250 - 6,300 = $53,950.