Question

A government's Statement of Revenues, Expenditures, and Changes in Fund Balances reflected expenditures for debt service in the amount of $12,000,000, including $7,000,000 for interest. It also reflected proceeds of bonds in the amount of $4,000,000. No interest accruals were involved. When moving from the changes in fund balances reported for the governmental funds to the change in Net Position for governmental activities, the net change would be:

A) $3,000,000 decrease
B) $1,000,000 decrease
C) $3,000,000 increase
D) $1,000,000 increaseA government's Statement of Revenues, Expenditures, and Changes in Fund Balances reflected expenditures for debt service in the amount of $12,000,000, including $7,000,000 for interest. It also reflected proceeds of bonds in the amount of $4,000,000. No interest accruals were involved. When moving from the changes in fund balances reported for the governmental funds to the change in Net Position for governmental activities, the net change would be:
A) $3,000,000 decrease
B) $1,000,000 decrease
C) $3,000,000 increase
D) $1,000,000 increase

Answer 1

D) $1,000,000 increase

Step-by-step explanation:

The computation of the change in net position would be shown below:

= Expenditures for debt service - Interest - proceeds of bonds

= $12,000,000 - $7,000,000 - $4,000,000

= $1,000,000

As the interest and the proceeds of bond is already included in the expenditure for debt service, so for accurate amount, we have to deduct these two items. Since the expenditure for debt increase is more than the total of other items, so it would increase in net position