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

Answer 1

Answer:

= $1,000,000  

Explanation:

Given that:

• Expenditures for debt service: $12,000,000
• Interest:  $7,000,000
• Proceeds of bonds : $4,000,000  

Because interest and proceeds from the bonds have been included in the cost of debt service, so to find the exact change, we must minus two of this expenses. Because the cost of debt increases more than the total of other items, so it will increase in the net position

So the formula to find out the net change position as following:

= Expenditures for debt service - Interest - proceeds of bonds

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

= $1,000,000  

Hope it will find you well.