Question

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:

1. Education reported net expenses of $615,000.
2. Parks reported net expenses of $102,000.
3. Art museum reported net revenues of $51,000.
4. General government revenues for the year were $894,000 with an overall increase in the city's net position of $228,000.

The fund financial statements indicated the following for the entire year:

1. The general fund reported a $44,000 increase in its fund balance.
2. The capital projects fund reported a $64,500 increase in its fund balance.
3. The enterprise fund reported a $62,250 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.

An art display set up for the City of Coyote was recorded within the general fund and generated revenues of $9,150 but had expenditures of $46,600 ($15,800 in expenses and $30,800 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.

1. Based on the information provided, what was the correct change in the fund balance for the general fund for 2017?
2. What was the correct overall change in the city's net position on the government-wide financial statements?
3. What was the correct change in the net position of the enterprise fund on the fund financial statements?

Answer 1

ANS :-

Part A

$94600 increase

General fund balance (given) $44,000

Adding of amount that was erroneously recorded in general fund

$9,150 revenue

$46,600 expenditure

Therefore previous erroneous deduction =$37,450

So this will be added back to general fund and it will increase by 44,000 +37,450= 81,450 increase

Part B

$228,000– increase

As error that has been incurred has been already reported in general fund.

Part C

$53950 decrease

There will be decrease in net position as the revenue and expenditure on art display are not considered. So it will be 62,250 +9,150 -15,800 = 55,600 decrease

a	Correct change	81,450	Increase
b	Correct change	228,000	Increase
c	Correct change	55,600	decrease