ExpertHard1 markMultiple Choice
CPA · Question 47 · Area III: State & Local Governments
A City purchased a fire truck for $500,000 cash in the General Fund. <br/>General Fund Entry: DR Expenditures $500,000; CR Cash $500,000.<br/><br/>What adjustment is needed to convert this to the Government-Wide Statement of Net Position?
A City purchased a fire truck for $500,000 cash in the General Fund. <br/>General Fund Entry: DR Expenditures $500,000; CR Cash $500,000.<br/><br/>What adjustment is needed to convert this to the Government-Wide Statement of Net Position?
Answer options:
A.
DR Capital Assets $500,000; CR Net Position $500,000 (eliminate expenditure).
B.
DR Depreciation Expense; CR Accumulated Depreciation.
C.
No adjustment needed.
D.
DR Net Position; CR Expenditures.
How to approach this question
Fund World: Expenditure (Income Stmt). Govt-Wide World: Asset (Balance Sheet). Adjustment: Add Asset, Remove Expenditure.
Full Answer
A.DR Capital Assets $500,000; CR Net Position $500,000 (eliminate expenditure).✓ Correct
A
The General Fund records a capital outlay expenditure. The Government-Wide statements capitalize assets. The adjustment eliminates the expenditure (increasing Net Position) and records the Capital Asset.
Common mistakes
Forgetting to eliminate the expenditure.
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