Question

The City of Wolfe has issued its financial statements for Year 4 (assume that the city uses a calendar year). The city’s general fund is made up of two functions: (1) education and (2) parks. The city also utilizes capital projects funds for ongoing construction and an enterprise fund to account for an art museum. It also has one discretely presented component unit.

The government-wide financial statements indicated the following Year 4 totals:

Education had net expenses of $764,000.

Parks had net expenses of $154,000.

Art museum had net revenues of $62,500.

General revenues were $1,076,500; the overall increase in net position was $221,000.

The fund financial statements issued for Year 4 indicated the following:

The general fund had an increase of $50,250 in its fund balance.

The capital projects fund had an increase of $40,250 in its fund balance.

The enterprise fund had an increase of $74,750 in its net position.

Officials for Wolfe define “available” as current financial resources to be paid or collected within 60 days.

Assume that the one component unit had program revenues of $35,600 and expenses of $53,500 and spent $11,600 for land during Year 4. However, it should have been handled as a blended component unit, not as a discretely presented component unit. According to the information provided above, the overall increase in net position reported was $221,000.

What was the correct overall change in the net position in the government-wide financial statements?

The correct overall change in net position is $____________

Answer 1

As the revenues of $35,600 and expenses of $53,500 were not handled as a blended component unit, we will have to consider the impact of these two figures on the overall net position and net asset in the government-wide financial statements.

The correct overall change in the net position in the government-wide financial statements is determined as below:

The overall increase in net position will get reduced by $17,900 (35,600 (Revenues) – 53,500 (Expenses)) from $221,000 to $203,100 (221,000 – 17,900). Therefore, the value of overall change in net position will be $203,100.

The correct increase in net asset is $17,900.