The city of New Orleans establishes a print shop that provides services to other

Question

The city of New Orleans establishes a print shop that provides services to other departments that are accounted for in its general fund. During its first year of operations the print shop engages in the following transactions:

It purchases equipment at a cost of $50 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 $5 million. Of these it uses $3 million. In its governmental funds, the district accounts for supplies on a purchase basis.

It incurs $15 million in operating costs.

It bills other departments for $25 million.

For purposes of external reporting, city officials are considering two options:

(1)Account for the print shop in an internal service fund

(2)Account for the print shop in the general fund

Question to answer:

1)Record the transaction for the print shop assuming (1) the city selected the first option and (2) the city selected the second option.

Explanation / Answer

1) Amount in Million $ Particulars Debit Credit Equipment 50    Notes Payable 50 Depreciation 6.25 Accumulated Depreciation 6.25 Printing supplies expense 5 Cash 5 Operating Cost Expenses 15 Cash 15 Due from State Departments 25 Revenues 25 (2) General Fund Amount in Million $ PARTICULARS Debit Credit Equipment 50 Notes Payable 50 No Entry for Depreciation Expenditures 5 Vouchers Payable 5 Expenditures 15 Vouchers Payable 15 Receivables 25 Revenues 25

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