Question

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Assume that the City of Coyote has already produced its financial statements for December 31, 2017 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. The government-wide financial statements indicated the following figures: • Education reported net expenses of $636,000. • Parks reported net expenses of $150,000. . Art museum reported net revenues of $64,500. • General government revenues for the year were $873,500 with an overall increase in the city's net position of $152,000. The fund financial statements indicated the following for the entire year: • The general fund reported a $43,250 increase in its fund balance. • The capital projects fund reported a $51,750 increase in its fund balance. • The enterprise fund reported a $79,250 increase in its net position. The CPA firm of Abernethy and Chapman has been asked to review several transactions that occurred during 2017 and indicate how to correct any erroneous reporting and the impact of each error. View each of the following situations as independent During 2017, the City of Coyote contracted to build a bus stop for schoolchildren costing $13,500 as a special assessments project for which it collected $13,500 from affected citizens. The government had no obligation in connection with this project. Both a $13,500 revenue and a $13,500 expenditure were recorded in the capital projects fund. In preparing government-wide financial statements, an asset and a general revenue were recorded for $13,500. a. In the general information above, the capital projects fund reported a $51.750 increase in its fund balance for this year. What was the correct change in the capital projects fund's balance during 2017? b. In the general information, a $152.000 overall increase in the city's net position was found on the government wide financial statements. What was the correct overall change in the city's net position on the government-wide financial statements?

Answer 1

Part A

Correct change

Increase

$51750

According to the information there is increase of $51750 after considering revenues and expenditure of $13500 related to the construction of bus stop.

These costs have been reported in the agency fund as the government had no obligation. Both revenue and expenditure being of the same amount will not be considered by the auditing firm, leaving the increase of $51750 in the fund balance.

Part B

Correct change

Increase

$138500

Net assets increase in government-wide financial statements was reported as $152000. Revenue of $13500 is also reported within in this net assets increase. However, this revenue should be have been included as a liability to the contractor in an Agency Fund as the city had no obligation. Thus, the amount of revenue will be decrease from Net assets increase and it will reduce from $152000 to $138500.