Question

Garden County provides the following information in order to prepare reconciliations between governmental fund financial statements and government-wide financial statements (fiscal year 1/1/2022 to 12/31/2022).

Total Fund Balance 12/31/22 $200,000

Total Change in Fund Balance for the year ending 12/31/22 $50,000

Capital Assets: 1) Acquisition value of 1/1/22 capital assets of $10,000,000 with an associated accumulated depreciation $5,200,000; 2) During 2022 Garden County purchased new capital assets equal to $1,000,000; 3) During 2022 Garden County sold capital assets with a book value of $30,000 for $32,000 cash; 4) 2022 Depreciation expense is equal to $500,000.

Bonds Payable: 1) Bonds Payable outstanding as of 1/1/22 is $3,200,000; 2) An additional issuance at face value during 2022 equals $400,000; 3) A repayment of bonds payable of $200,000 occurred during 2022.

Interest on LT Debt: 1) Accrued interest payable exists as of 12/31/2022 but was not accrued in the governmental fund (not due and payable) in the amount of $180,000.

Property taxes: All property taxes receivable were collected in 2022 with the exception of $80,000. Of that $80,000, $60,000 is expected to be collected within the first 60 days of 2023 and the remainder beyond that time period.



Part A: Prepare a reconciliation between the Governmental Fund Balance Sheet and the Government-wide Statement of Net Position at 12/31/22. Use proper headings and show any supporting computations for full credit.



Part B: Prepare a reconciliation between the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balance and the Government-wide Statement of Activities for the year ending 12/31/22. Use proper headings and show any supporting computations

Answer 1

governmental fund financial statements and government-wide financial statements have different purposes and accounting methods. Governmental fund financial statements focus on the short-term financial performance and accountability of individual funds, using the modified accrual basis of accounting. Government-wide financial statements provide a broader and longer-term perspective of the government's financial position and activities, using the full accrual basis of accounting.

To reconcile between these two types of statements, some adjustments are needed to account for the differences in measurement focus and basis of accounting. Here are the steps to prepare the reconciliations for Part A and Part B:

Part A: Reconciliation between the Governmental Fund Balance Sheet and the Government-wide Statement of Net Position at 12/31/22.

- Start with the total fund balance of the governmental funds as reported in the fund balance sheet ($200,000).

- Add the net value of capital assets (acquisition value minus accumulated depreciation) as reported in the government-wide statement of net position. This is because capital assets are not reported in governmental fund financial statements, but are reported in government-wide financial statements. The net value of capital assets can be calculated as follows:

- Acquisition value of capital assets as of 1/1/22: $10,000,000

- Plus: Purchases of capital assets during 2022: $1,000,000

- Less: Sales of capital assets during 2022: $30,000

- Equals: Acquisition value of capital assets as of 12/31/22: $10,970,000

- Less: Accumulated depreciation as of 1/1/22: $5,200,000

- Less: Depreciation expense for 2022: $500,000

- Equals: Accumulated depreciation as of 12/31/22: $5,700,000

- Net value of capital assets as of 12/31/22: $5,270,000

- Subtract the amount of bonds payable as reported in the government-wide statement of net position. This is because bonds payable are not reported in governmental fund financial statements, but are reported in government-wide financial statements. The amount of bonds payable can be calculated as follows:

- Bonds payable as of 1/1/22: $3,200,000

- Plus: Issuance of bonds payable during 2022: $400,000

- Less: Repayment of bonds payable during 2022: $200,000

- Bonds payable as of 12/31/22: $3,400,000

- Subtract the amount of accrued interest payable on long-term debt as reported in the government-wide statement of net position. This is because accrued interest payable is not reported in governmental fund financial statements, but are reported in government-wide financial statements. The amount of accrued interest payable is given as $180,000.

- Add the amount of property taxes receivable that are not available to pay current liabilities as reported in the governmental fund balance sheet. This is because property taxes receivable that are not available are not recognized as revenues in governmental fund financial statements, but are recognized as revenues in government-wide financial statements. The amount of property taxes receivable that are not available can be calculated as follows:

- Total property taxes receivable as of 12/31/22: $80,000

- Less: Property taxes receivable expected to be collected within 60 days of year-end: $60,000

- Property taxes receivable that are not available as of 12/31/22: $20,000

- The resulting amount is the net position of governmental activities as reported in the government-wide statement of net position.

The reconciliation can be presented in a table format as follows:

| Reconciliation of Total Fund Balance to Net Position | Amount |

| ----------------------------------------------------- | ------ |

| Total fund balance - governmental funds | \$200,000 |

| Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds | \$5,270,000 |

| Long-term liabilities applicable to governmental activities are not due and payable in the current period and therefore are not reported in the funds | \(-\$3,580,000\) |

| Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds | \$20,000 |

| Net position - governmental activities