The City of Sinasonville operated a motor pool fund as an internal service fund.
ID: 2613264 • Letter: T
Question
The City of Sinasonville operated a motor pool fund as an internal service fund. A loan of $500,000 was made from an enterprise fund, to be repaid over 10 years with no interest. Capital assets were purchased as follows: land, $200,000; buildings (40 year life), $800,000; equipment (10 year life), $300,000; automobiles (4 year life), $1,200,000. In addition, fuel costs were expected to be $100,000 and salaries were expected to be $200,000. A budget is prepared to breakeven, using full accrual accounting, plus pay back one year's principal on the loan. It is anticipated that cars will be driven 2,000,000 miles. The cost per mile would be:
Please show all work and calcuations!!!!
Explanation / Answer
Asset
Value $
Life Years
Depreciation%
Depreciation $
Building
800000
40
1.58%
12640
Equipment
300000
10
6.33%
18990
Automobiles
1200000
4
15.83%
189960
TOTAL
221590
Fuel cost = $100000
Salaries = $ 200000
Loan principal paytment = $ 50000
Total Depreciation = $ 221590
Total expenses $ 571590
Since Land is not revalued every year its appreciation value cannot be considered
It is given that the cars would be driven 2000000 miles ( assumes that the miles driven are foe one year)
Therefore, cost per mile is Total expences/ Total miles driven
= 571590 / 2000000 = $ 0.28
If the miles deiven are for through out their life, for one year it would be 2000000 / 4 = 500000
Then, cost per mile is Total expences/ Total miles driven
= 571590 / 500000 = $ 1.143
Asset
Value $
Life Years
Depreciation%
Depreciation $
Building
800000
40
1.58%
12640
Equipment
300000
10
6.33%
18990
Automobiles
1200000
4
15.83%
189960
TOTAL
221590