Question

1. In its government-wide Statement of Net Assets, a government reported assets of $155 million, including $50 million in capital assets (net of depreciation), and liabilities of $80 million, including long-term debt of $60 million, $40 million of which was issued to acquire capital assets. In addition, $30 million was restricted for debt service and other purposes. The government's unrestricted net assets would be reported as:

            A) $85 million.

            B)   $55 million.

            C)   $45 million.

            D) $35 million.

2. A governmental fund’s Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of $40 million, including capital outlay expenditures of $11 million. Capital assets for that government cost $80 million, including land in the amount of $10 million. Depreciable assets are amortized over 10 years, on average. The reconciliation from governmental fund changes in fund balances to governmental activities change in net assets would reflect a(an):

A) $4 million increase.

B) $4 million decrease.

C) $3 million decrease.

D) $11 million decrease.

Answer 1

1. Calculation of governments unrestricted net assets

Government reported net assets. =$155 million

Less:-

a) Including capital asset. =$50 million

b) Issued to acquire capital asset. =$40 million

c) Restricted to debt service. =$30 million

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There for unrestricted net assets. =$35 million

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There for option D is write

2. Calculation of effect of change in net assets

Capital outlay expenditure. = $11 million  

(-) Actual expenditure on =$7 million

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Increase in expandire =$4 million

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Actual expenditure of asset is nothing but depreciation on asset value

Here asset value $80 million including the value of land $10 million. But land is not a depreaciable asset . So, no depreciation she be provided on land .

There for value of depreciation=cost asset/amortization period

=($80-$10) million/10

=$7 million

There for option A is write