The City of Lake George decided to establish an internal service fund to account
ID: 2570298 • Letter: T
Question
The City of Lake George decided to establish an internal service fund to account for the perations of a Print Shop. The Print Shop is to begin operations on July 1, 2016, the first day of the City's fiscal year. During the fiscal year ended June 30, 2017, the following transactions occurred: The General Fund made a permanent contribution of $400,000 that was transferred to the Print Shop Fund, and a long-term advance of $800,000 to the Print Shop Fund. The advance is to be repaid by the Print Shop Fund in four equal annual installments; the first installment is due 6/30/2017. The advance is non-interest bearing and is considered issued for the purchases of equipment. During the year, equipment was purchased (for cash) in the amount of $890,000. During the year, printing supplies costing $120,000 were purchased; all but $30,000 was paid in cash. a) b) c) d) Bilings to departments during the year totaled $400,000 at selling price. All but $50,000 was received in cash. The cost of supplies used during the year totaled $73,000. e) f Salaries and wages were $19,000 and utilities were $3,000 (all paid in cash). 8) h) Depreciation was charged on equipment, $80,000. The first installment of the advance was repaid. Required: 1) Prepare journal entries in the general journal of the City of Lake George Print Shop Fund to reflect the above transactions 2) Prepare the closing entry for the Print Shop Fund.Explanation / Answer
General Journal Ref. Account Title & explanation Debit Credit a) Cash $1,200,000 Contribution $400,000 Long term liability $800,000 (To record receipt of fund ) b) Equipment $890,000 Cash $890,000 (To record purchase of equipment) c) Supplies $120,000 Accounts payable $30,000 Cash $90,000 (To record purchase of supplies) d) Cash $350,000 Accounts receivable $50,000 Sales $400,000 (To record sales ) e) Supplies expenses $73,000 Supplies $73,000 (To record supllies expenses) f) Salaries and wages expenses $19,000 Cash $19,000 (To record salaries and wages expenses) Utilities expenses $3,000 Cash $3,000 (To record utilities expenses) g) Depreciation expenses $80,000 Accumulated depreciation-Equipment $80,000 (To record depreciation expenses) h) Long term liability $200,000 Cash $200,000 (To record payment of instalment of advance) Ref. CASH ACCOUNT Debit Credit a) Contribution $400,000 a) Long term liabilities $800,000 b) Equipment $890,000 c) Supplies $90,000 d) Sales $350,000 f) Salaries & wages expenses $19,000 f) Utilities expenses $3,000 h) Long term liabilities $200,000 Balance $348,000 TOTAL $1,550,000 $1,550,000 Closing balance brought forward $348,000 TRIAL BALANCE Account Debit Credit Cash $348,000 Contribution $400,000 Long term liabilities $600,000 Equipment $890,000 Supples $ 47,000 (120000-73000) Accounts payable $30,000 Accounts receivable $50,000 Sales $400,000 Supplies expenses $73,000 Salaries and wages expenses $19,000 Utilities expenses $3,000 Depreciation expenses $80,000 Accumulated depreciation-equipment $80,000 TOTAL $1,510,000 $1,510,000 INCOME STATEMENT Contribution $400,000 Sales $400,000 Total income $800,000 Expenses: Supplies expenses $73,000 Salaries and wages expenses $19,000 Utilities expenses $3,000 Depreciation expenses $80,000 Total expenses $175,000 Net Income $625,000 BALANCE SHEET ASSETS: Cash $348,000 Supples $ 47,000 Accounts receivable $50,000 Equipment $890,000 Accumulated depreciation ($80,000) Total assets $1,255,000 Liabilities: Accounts payable $30,000 Long term liabilities $600,000 Net assets $625,000 Total Liabilities & net assets $1,255,000