ExpertHard1 markMultiple Choice
CPA · Question 32 · Area III: State & Local Governments
Which of the following reconciling items would be SUBTRACTED from the Net Change in Fund Balance of Governmental Funds to arrive at the Change in Net Position of Governmental Activities in the government-wide statement of activities?
Which of the following reconciling items would be SUBTRACTED from the Net Change in Fund Balance of Governmental Funds to arrive at the Change in Net Position of Governmental Activities in the government-wide statement of activities?
Answer options:
A.
Depreciation expense on capital assets
B.
Capital outlay expenditures
C.
Principal payments on long-term debt
D.
Proceeds from issuance of long-term debt
How to approach this question
Think: Fund = Modified Accrual (Expenditures). Gov-wide = Full Accrual (Expenses). <br/>1. Capital Outlay: Fund expensed it. Gov-wide capitalizes it. ADD back to income.<br/>2. Depreciation: Fund ignored it. Gov-wide expenses it. SUBTRACT from income.<br/>3. Debt Proceeds: Fund called it Source (Income-like). Gov-wide calls it Liability. SUBTRACT from income.<br/>4. Debt Principal: Fund expensed it. Gov-wide reduces liability. ADD back to income.
Full Answer
A.Depreciation expense on capital assets✓ Correct
A
.
Common mistakes
Confusing Add/Subtract direction; confusing Capital Outlay (Add) with Depreciation (Subtract).
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