A school district establishes a vehicle repair shop that provides service to oth

Question

A school district establishes a vehicle repair shop that provides service to other departments, all of which are accounted for in its general fund. During its first year of operations the shop engages in the following transactions: It purchases equipment at a cost of $24 million and issues long-term notes for the purchase price. The useful life of the equipment is eight years, with no residual value. It purchases supplies at a cost of $4 million. Of these it uses $3 million. In its governmental funds, the district accounts for supplies on a purchases basis. It incurs $13 million in other operating costs. It bills other departments for $19 million. Prepare journal entries using general fund and prepare journal entries using internal service fund.

Explanation / Answer

Answer:  Part A: Journal entries using General Fund Sl No. Date Particulars Amount($) Amount($) 1 xxxx Equipment A/c Dr 2,40,00,000 To Long Term Note Payable A/c 2,40,00,000 2 xxxx Expenditures A/c Dr 40,00,000 To Cash A/c 40,00,000 3 a) xxxx Operating Cost A/c Dr 1,30,00,000 To Operating Cost Payable A/c 1,30,00,000 3 b) xxxx Operating Cost Payable A/c Dr 1,30,00,000 Revenue A/c Dr 60,00,000 To Other Deparment A/c 1,90,00,000 Part B: Journal entries using Internal Service Fund Sl No. Date Particulars Amount($) Amount($) 1 xxxx Equipment A/c Dr 2,40,00,000 To Long Term Note Payable A/c 2,40,00,000 2 xxxx Expenditures A/c Dr 40,00,000 To Due to Internal Service Fund A/c 40,00,000 3 a) xxxx Operating Cost A/c Dr 1,30,00,000 To Operating Cost Payable A/c 1,30,00,000 3 b) xxxx Operating Cost Payable A/c Dr 1,30,00,000 Revenue A/c Dr 60,00,000 To Due from Other Deparment A/c 1,90,00,000

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