ACC 415 – P18-23

Student: Khanh “Kai” Nguyen

ACC 415_Section 001
Student: Khanh “Kai” Nguyen Professor: Jenny Teruya

Use the information in P18-23 in your textbook.

1) Prepare a reconciliation schedule of the balance sheet of the (total) governmental funds to the
government-wide statement of net position. The Fund balance for the total governmental funds is
given in the problem as $888,400. Identify the items that would reconcile this to the government-
wide Net position of $4,771,400.
2) Prepare a reconciliation schedule of the Statement of Revenues, Expenditures and Changes in
Fund Balance for the combined governmental funds and the Statement of Activities. The change
in fund balance is determined by taking the difference between the beginning and ending balance
as given. Identify the items that would reconcile this amount to the change in net position of the
government-wide financial statements of $153,400.
P18-23: The City of Sycamore is preparing its financial reports for the year and has requested
that you prepare the reconciliation schedules to accompany its government-wide financial
statements based on the following information:
1. The fund balances reported in the five governmental funds as of the end of the fiscal year
total $888,400. The fund balances in governmental funds at the beginning of the year
totaled $379,000.
2. The city has estimated its depreciation on capital assets to be $187,000 for the period.
The city expended a total of $287,000 in capital outlays from the governmental funds. At
year-end, the capital assets, net of depreciation, totaled $4,329,000. The internal service
fund reported $18,000 of net capital assets. Total accumulated depreciation at year-end
was $1,208,000.
3. The internal service fund reports $178,000 in total assets and $141,000 in total liabilities.
The internal service fund reported $48,000 of revenues and $39,000 of expenses during
the year.
4. The debt service fund paid $40,000 in interest during the year. The city sold bonds with a
face value of $500,000 and a coupon rate of 8 percent at the beginning of the year at
$460,000 for an effective interest rate of 10 percent. Interest is paid annually on the last
day of the fiscal year. The bonds were sold to provide current financial resources for the
governmental funds.
5. The permanent fund recorded interest received of $4,000 under the modified accrual
basis of measurement. If the accrual basis of measurement had been used in the fund, an
additional $1,000 of interest revenue would have been earned.
Required:
a. Prepare a reconciliation schedule of the balance sheet of the governmental funds to the
statement of net position.
b. Prepare a reconciliation schedule of the statement of revenues, expenditures, and changes
in fund balance of governmental funds to the statement of activities.

ANSWER

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ACC 415_Section 001
Student: Khanh “Kai” Nguyen Professor: Jenny Teruya

Part a.
City of Sycamore
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets
Fund balances reported in the governmental funds 888,400
Amounts reported for the governmental activities in the statement of
net assets are different because:
Capital assets used in governmental activities are not financial
resources and therefore are not reported in the governmental funds.
The internal service fund reported $18,000 in capital assets. Thus, the
amounts of the adjustment is for the capital assets not reported in just
the governmental funds
(4,311,000 = 4,329,000 - 18,000) 4,311,000
Internal service funds are used by management to charge costs of
certain activities. The assets and liabilities of the internal service fund
are included in governmental activities in the statement of net assets 37,000
Long-term liabilities, including bonds payable, are not due and
payable in the current period and therefore are not reported as
liabilities in the governmental funds. (460,000)
Interest in the governmental funds is recognized under the modified
accrual basis, but under the accrual basis for the government-wide
financial statements.
Net assets are adjusted for interest (5,000 = 6,000 – 1,000) (5,000)
Net assets of governmental activities 4,771,400

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ACC 415_Section 001
Student: Khanh “Kai” Nguyen Professor: Jenny Teruya

Part b.
City of Sycamore
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of
Governmental Funds to the Statement of Activities
Net change in fund balances – governmental funds 509,400
Governmental funds reported capital outlays as expenditures.
However, in the statement of activities, the cost of those assets is
capitalized and depreciated over their estimated useful lives. This is
the amount by which capital outlays in the governmental funds
(287,000) exceeded depreciation of the governmental assets (187,000) 100,000
Bond proceeds provide current financial resources for the
governmental funds. However, the issuance of debt increases long-
term liabilities in the statement of net assets. Bond proceeds of
460,000 are not reduced because there is no repayment of principal
during the year.(460 (460,000)
Revenues and expenses in the statement of activities are recorded on
the accrual basis. Interest in the governmental funds is recorded on the
modified accrual basis. Accrual interest revenue exceeded modified
accrual interest revenue recognized in the governmental funds by
1,000. Accrual interest expenses exceeded modified accrual interest
expense by 6,000 (46,000 – 40,000). The net interest adjustment is
5,000. (5,000)
Internal service funds are used by management to charge the costs of
certain services. The net revenue (expense) of the internal service
funds is reported with governmental activities. 9,000
Change in net assets of governmental activities 153,400

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