Question

Use the following information to determine whether the Development Special Revenue and the Debt Service Funds should be reported as major funds based on asset amounts provided. Development Special Revenue Fund Assets $740,000 Debt Service Fund Assets $150,000 Total Governmental Fund Assets $7,500,000 Total Governmental Fund and Enterprise Fund Assets $8,750,000.

Answer 1

Answer:

Only the Development Special Revenue Fund should be reported as major.

Explanation:

According to Statement No. 34 of the Government Accounting Standards Board (GASB), a fund can be categorized as a major fund if its liabilities, assets, expenditures, or revenues represent at least 10% of totals of all corresponding governmental or enterprise funds and at least 5% of the aggregate amount recorded for all governmental and enterprise funds.

Based on the above, we can calculate the percentage proportional percentage for both the Development Special Revenue and the Debt Service Funds as follows:

1. Development Special Revenue percentage representation:

a. In Total Governmental Fund Assets = ($740,000/$7,500,000)*100 =  9.87% approximately 10%

b, In Total Governmental Fund and Enterprise Fund Assets = ($740,000/$8,750,000)*100 = 8.46% approximately 8%.

2. Debt Service Funds representation:

a. In Total Governmental Fund Assets = ($150,000/$7,500,000)*100 = 1.71% approximately 2%

b. In Total Governmental Fund and Enterprise Fund Assets = ($150,000/$8,750,000)*100 = 2.00%

Based on the above, Development Special Revenue should be reported as major funds since its amount represents 10% in Total Governmental Fund Assets and 8% in Total Governmental Fund and Enterprise Fund Assets. However, Debt Service Funds representation should not be reported a major fund since it does not meet the requirement of at least 10% representation of totals of all corresponding governmental or enterprise funds and at least 5% of the aggregate amount recorded for all governmental and enterprise funds .