Prepare Journal entries for an Internal Service Fund Capital City establishes an
ID: 2492841 • Letter: P
Question
Prepare Journal entries for an Internal Service Fund
Capital City establishes an Internal Service Fund (ISF) to account for the costs of printing services that it will provide to the various City departments. Make journal entries to record the following transactions in the ISF.
a. The General Fund transfers $425,000 to the ISF as a permanent contribution to start the printing activity.
b. The ISF immediately uses $400,000 of the cash to purchase printing equipment. (The printing equipment is estimated to have an average useful life of 8 years.)
c. On various occasions during the year, the ISF buys paper and other supplies in the amount of $90,000 on open account. The supplies are put into inventory.
d. The invoices received in c., above are paid.
e. Employee salaries for the year amounting to $345,000 are paid. Of this amount, however, $20,000 is withheld from the employees for federal income taxes.
f. Taxes withheld from the employees in e., above, are paid to the federal government.
g. The ISF makes a payment of $41,000 to the City's Pension Trust Fund for pensions applicable to the salaries of its personnel.
h. The ISF receives an invoice of $28,000 from the General Fund for occupancy costs, which includes space and utility costs.
i. The ISF sends invoices throughout the year to several City agencies for printing services, as follows:
(1) To General Fund departments $575,000
(2) To the Water Enterprise Fund $9,500
j. The ISF receives payments of $555,000 from General Fund agencies and $9,500 from the Water Enterprise Fund.
Explanation / Answer
Journal Entries:
Particulars DEBIT CREDIT a Cash $425,000 Contrubuted capital from General Fund $425,000 b Printing Equipment $400,000 Cash $400,000 At the end of the year, Depreciation entry will passed as: Depreciation Expenses $50,000 Accumulated Depreciation $50,000 c Printing and Stationary Supplies $90000 Suppliers for Printing and Stationery $90000 d Suppliers for Printing and stationery $90000 Cash $90000 e Salries $345,000 Cash $325,000 Federal Income Tax Deduction Liabilities $20,000 f Federal Income tax Deduction Liabilities $20,000 Cash $20,000 g City's Pension Trust Fund $41,000 Cash $41,000 h Occupancy Cost $28,000 Due to General Fund $28,000 i Due from General fund $575,000 Due from Water Enterprice $9,500 Revenue $584,500 j Cash $564,500 Due from General Fund $555,000 Due from Water Enterprise $9,500