Chapter 18, Problem 18.10E

Internal Service Fund Entries and Statements
Bellevue City’s printing shop had the following trial balance on January 1, 20X2:

Additional Information for 20X2

1. During 20X2, the printing shop acquired supplies for $96,000, furniture for $1,500, and a copier for $3,200.
2. Printing jobs billed to other funds amounted to $292,000; cash received from other funds, $287,300; costs of printing jobs, $204,000, including $84,000 of supplies; operating expenses, $38,000, including $8,400 of supplies; depreciation expense, $23,000; and vouchers paid, $243,000.

Required

1. Prepare entries for the printing shop for 20X2, including closing entries.
2. Prepare a statement of net position for the fund on December 31, 20X2. No debt is related to the year-end amount of the fund’s capital assets.
3. Prepare a statement of revenues, expenses, and changes in fund net position for 20X2.
4. Prepare a statement of cash flows for 20X2.

To determine

Proprietary funds: These funds are established for governmental operations for income determination and capital maintenance. There are two major proprietary funds, the internal service fund, and the enterprise fund. As their funds are for revenue generation for government accrual method of accounting is used, these funds record their own long-term assets and record depreciation of these assets, and long-term debt as commercial operations. The entries for 20X2 including closing entries.

Explanation of Solution

Entries for 20X2

Particulars	Debit $	Credit $
Inventory of supplies	96,000
Furniture and equipment	4,700
Vouchers payable		100,700
(Acquisition of supplies furniture and office equipment recognized)
Due from other funds	292,000
Billings to departments		292,000
(Billings for completed jobs recognized)
Cash	287,300
Due from other funds		287,300
(Cash collection on billings recognized)
Costs of printing jobs	204,000
Operating expenses	38,000
Inventory of supplies		92,400
Vouchers payable		149,600
(Cost of printing jobs recognized)
Depreciation expense	23,000
Accumulated depreciation		23,000
(Depreciation for the period recorded)
Vouchers payable	243,000
Cash		243,000
(Paid approved vouchers)
Closing entries:
Billings to departments	292,000
Costs of printing jobs		204,000
Operating expenses		38,000
Depreciation expense		23,000
Profit and loss summary		27,000
(All the nominal accounts closed and balance transferred to profit and loss summary)
Profit and loss summary	27,000
Net Assets − Unrestricted		27,000
(Profit and loss summary account closed)
Net Assets − Invested in capital assets, net related debt	18,300
Net assets − unrestricted		18,300
(Reclassification of net asset as of end of period)

Reclassification of net assets as of end of period:

Beginning balance in net assets	$210,000
Less: Ending balance of net capital assets	$191,700
	$18,300

To determine

Proprietary funds: These funds are established for governmental operations for income determination and capital maintenance. There are two major proprietary funds, the internal service fund, and the enterprise fund. As their funds are for revenue generation for government accrual method of accounting is used, these funds record their own long-term assets and record depreciation of these assets, and long-term debt as commercial operations. The preparation of statement of net position for the fund on December 31, 20X2

Answer to Problem 18.10E

Net Assets as per statement of net position $275,000

Explanation of Solution

B Printing Shop Fund

Statement of Net Assets

December 31, 20X2

	$	$
Assets:
Cash		68,900
Due from other funds		20,300
Inventory of supplies		13,400
Furniture and equipment	$264,700
Less: Accumulated depreciation	(73,000)	191,700
Total assets		294,300
Liabilities:
Vouchers payable		19,300
Net assets:
Invested in capital assets net of related debt		191,700
Unrestricted		83,300
Total net assets		275,000

To determine

Proprietary funds: These funds are established for governmental operations for income determination and capital maintenance. There are two major proprietary funds, the internal service fund, and the enterprise fund. As their funds are for revenue generation for government accrual method of accounting is used, these funds record their own long-term assets and record depreciation of these assets, and long-term debt as commercial operations. The preparation of Statement of revenues, expenses and changes in fund net position for 20X2

Answer to Problem 18.10E

Net Assets as per statement of net position $275,000

Explanation of Solution

B Printing shop fund

Statement of revenue, expenses and

Change in fund net assets

December 31, 20X2

	$	$
Revenue:
Billing to departments		292,000
Expenses:
Costs of printing jobs	204,000
Operating	38,000
Depreciation	23,000	(265,000)
Income		27,000
Net assets January 1		248,000
Net assets December 31		275,000

To determine

Proprietary funds: These funds are established for governmental operations for income determination and capital maintenance. There are two major proprietary funds, the internal service fund, and the enterprise fund. As their funds are for revenue generation for government accrual method of accounting is used, these funds record their own long-term assets and record depreciation of these assets, and long-term debt as commercial operations. The preparation of statement of cash flow as of December 31, 20X2

Answer to Problem 18.10E

Net change in cash at the end $68,900

Explanation of Solution

B Printing shop fund

Internal service fund

Statement of cash flows

December 31, 20X2

	$	$
Cash flows from operating activities:
Cash received from customers	287,300
Cash payments for printing jobs	(283,300
Net cash provided by operating activities		49,000
Cash flow from non-capital financing activity		0
Cash flow from capital and related activity:
Acquisition of capital assets:
Furniture and copier	($4,700)
Cash flow from financing activity		(4,700)
Cash flow from investing activities		0
Net increase in cash		44,300
Cash at beginning of year		24,600
Cash at end of year		68,900

Reconciliation of operating income to net cash

	$	$
Operating income		27,000
Adjustments to reconcile operating income to net cash used by operating activities:
Depreciation	23,000
Change in assets and liabilities:
Increase in due from other funds from billings	(4,700)
Increase in inventory of supplies	(3,600)
Increase in vouchers payable	7,300
Total adjustments		22,000
Net cash provided by operating activities		49,000