Agovernmental fund's statement of revenues, expenditures, and changes in fund balances reported expenditures of $40 million, including capital outlay expenditures of $12 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 position would reflect a(an): a) $4 million increase.b) $5 million decrease.c) $5 million increase.d) $4 million decrease.

C) $5 million increase.

Explanation:

The computation of the change in fund balances to governmental activities is shown below:

= Capital outlay expenditures - actual expenditure

where,

capital outlay expenditure is $12 million

And, the actual expenditure would be assumed as a depreciation expense which is calculated below

= (Total capital cost - land value) ÷ (useful life)

= ($80 million - $10 million) ÷ (10 years)

= ($70 million) ÷ (10 years)  

= $7 million

As land is not depreciated  so we excluded it from the capital assets

Now put these values to the above formula  

So, the value would equal to

= $12 million - $7 million

= $5 million increase

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