The operating cash flows of internal service funds can be reconciled with operating income. What follows are the statement of revenues, expenses, and changes in net position, and the statement of cash flows for Tucson, Arizona's fleet services internal service fund. 1. How do you account for the difference between net operating income of $105 and cash from operating activities of $10,789? Prepare a reconciling schedule in which you account for the difference.

Granof-c09.indd414 11/25/20153:17:30 PM

Problems 415

2. How would the revenues and expenses of the fund be reported on the city's government-wide statement of activity? 3. How would the revenues and expenses of the fund be reported on the city's statement of revenues, expenses, and changes in net position? 4. How would the difference between charges for services and cash received from customers be reflected on the city's government statement of net position? 5. How would the charges for services most likely be reflected on the city's general fund statement of revenues and expenditures and changes in fund balance?

Fleet Services Fund Statement of Revenues, Expenses, and Changesin Net Position Balance (in thousands)

Charges for services $24,019 Operating expenses Wages and salaries $4,609 Contractual services 1,765 Supplies 8,826 Depreciation8,714 Total operating expenses23,914 Net operating income $105 Nonoperating revenues (expenses) Investment income $498 Interest expense (182) Gain from sale of property 751 Capital grants215 Total nonoperating revenues $1,282 Net income $1,387 Net position Beginning of year $3,880 Net positionEnd of year $5,267

Fleet Services Fund Statement of Cash Flows (in thousands)

Cash flows for operating activities Cash received from customers $24,530 Cash payments to suppliers for goods and services (9,023) Cash payments to employees(4,718) Net cash provided by operating activities $10,789 Cash flows from noncapital financing activities0 Cash flows from capital and related financing activities Acquisition or construction of capital assets $ (9,219) Proceeds from sale of property and equipment 1,914 Principal paid on capital debt (1,168) Interest paid on capital debt(182) Net cash flows from capital and related financing activities $(8,655) Cash flow from investing activities Investment income $467 Net cash flows from investing activities $467 Net increase in cash and cash equivalents $2,601 Cash and cash equivalents, beginning of year5,253 Cash and cash equivalents, end of year $7,854