Valley City's internal service fund reported net income of $50,000 for the year. This fund provides services exclusively to the city's police and fire departments (General Fund). How should this net income be reported in the government-wide Statement of Activities?

Internal Service Funds that predominantly serve governmental funds are reported in the Governmental Activities column of the government-wide financial statements. The 'profit' (change in net position) indicates that the user funds (Police/Fire) were charged more than the cost. To avoid overstating expenses, the ISF's net income is used to reduce the expenses of the functions that used the services.