Please explain the steps involved. Internal service funds are accounted for simi
ID: 2570970 • Letter: P
Question
Please explain the steps involved.
Internal service funds are accounted for similar to businesses
William County opted to account for its duplication service center in an internal service fund. Previously the center had been accounted for in the county’s general fund. During the first month in which
it was accounted for as an internal service fund the center engaged in the following transactions:
1.Five copiers were transferred to the internal service fund from the government’s general capital assets. At the time of transfer the copiers had a book value (net of accumulated depreciation) of $70,000.
2. The general fund made an initial cash contribution of $35,000 to the internal service fund.
3.The center borrowed $270,000 from a local bank to finance the purchase of additional equipment and renovation of its facilities. It issued a three-year note.
4.It purchased equipment for $160,000 and paid contractors $100,000 for improvements to its facilities.
5.It billed the county clerk’s office $5,000 for printing services, of which the office remitted $2,500.
6.It incurred, and paid in cash, various operating expenses of $9,000.
7.The fund recognized depreciation of $1,500 on its equipment and $900 on the improvements to its facilities.
Q: What is the total changes of Net Position?
Explanation / Answer
journal entries for above transactions
(1)
Debit Credit
General Capital Assets 70,000
ISF Capital Assets (equipment) 70,000
(2)
Debit Credit
General Fund Cash 35,000
ISF Capital Assets (Cash) 35,000
(3)
Debit Credit
ISF Short-term Liabilities 270,000
ISF Capital Assets (Cash) 270,000
(4)
Debit Credit
General Capital Assets (Cash) 260,000
ISF Capital Assets (Equipment) 160,000
ISF Operating expenses 100,000
(5)
Debit Credit
County's Clerk Office 5,000
ISF Capital Assets (Cash) 2,500
ISF Accounts Receivable 2,500
(6)
Debit Credit
ISF Capital Assets (Cash) 9,000
ISF Operating expenses 9,000
(7)
ISF Short-term Liabilities 270,000
ISF Capital Assets (Cash) 270,000
(4)
Debit Credit
General Capital Assets (Cash) 260,000
ISF Capital Assets (Equipment) 160,000
ISF Operating expenses 100,000
(5)
Debit Credit
County's Clerk Office 5,000
ISF Capital Assets (Cash) 2,500
ISF Accounts Receivable 2,500
(6)
Debit Credit
ISF Capital Assets (Cash) 9,000
ISF Operating expenses 9,000
(7)
Debit Credit
ISF Net Assets 2,400
ISF Depreciation (equipment) 1,500
ISF Depreciation (improvements) 900
From these it is clear the net position will decrease by $111400 (100000+9000+2400)