A county's Central Warehouse Internal Service Fund provides 65% of its services to governmental funds, 30% of its services to Enterprise Funds, and the remaining 5% to a local municipality. If there was a $10,000 loss in the Internal Service Fund during 20X9, the expenses in the governmental activities column would

Question

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Since 65% of the services are provided to governmental funds, the loss of $10,000 will be allocated to these funds. 65% of $10,000 is $6,500. However, since governmental funds use the modified accrual basis of accounting, expenses are recognized when they are incurred, not necessarily when they are paid. Therefore, the expenses in the governmental activities column will increase by $7,000 ($6,500 + $500 from the remaining 5% allocated to the municipality) to reflect the loss incurred during the year.

A County's Central Warehouse Internal Service Fund Provides 65% of Its