Central Duplicating Internal Service Fund. As of September 30, 2010, the Central Duplicating Fund of the
Town of Fredericksburg had the following post-closing trial balance:
Cash $ 15,000 Due from Other Funds 20,200 Service Supplies Inventory 35,300 Machinery and
Equipment 300,000 Allowance for Depreciation $ 90,000 Due to Federal Government 1,500 Due to Other
Funds 800 Accounts Payable 12,700 Net Assets—Invested in Capital Assets 210,000 Net Assets—
Unrestricted 55,500 $370,500 $370,500
During the fiscal year ended September 30, 2011, the following transactions (summarized) occurred:
1. Employees were paid $290,000 wages in cash; additional wages of $43,500 were withheld for
federal income and social security taxes. The employer’s share of social security taxes amounted to
$23,375.
2. Cash remitted to the federal government during the year for withholding taxes and social security
taxes amounted to $65,500.
3. Utility bills received from the Town of Fredericksburg’s Utility Fund during the year amounted to
$23,500.
4. Office expenses paid in cash during the year amounted to $10,500.
5. Service supplies purchased on account during the year totaled $157,500.
6. Parts and supplies used during the year totaled $152,300 (at cost).
7. Charges to departments during the fiscal year were as follows:
General Fund $308,700 Street Fund 279,300
8. Unpaid balances at year-end were as follows:
General Fund $10,000 Street Fund 20,000
9. Payments to the Utility Fund totaled $21,800.
10. Accounts Payable at year-end amounted to $13,250.
11. Annual depreciation rate for machinery and equipment is 10 percent.
12. Revenue and expense accounts for the year were closed.
Required
a. Prepare a statement of revenues, expenses, and changes in net assets for the year.
b. Comment on the evident success of the pricing policy of this fund, assuming that user charges are
intended to cover all operating expenses, including depreciation, but are not expected to provide a net
income in excess of 3 percent of billings to departments.
c. Prepare a statement of net assets for the Central Duplicating Fund as of September 30, 2011.
d. Prepare a statement of cash flows for the Central Duplicating Fund for the year ended September
30, 2011.
12 first journal entries
Debits
1
WAGE EXPENSE
Credits
290,000
PAYROLL TAX EXPENSE
CASH
66,875
290,000
DUE TO FEDERAL GOVERNMENT
2
DUE TO FEDERAL GOVERNMENT
CASH
3
65,500
65,500
UTILITY EXPENSE
23,500
DUE TO OTHER FUNDS
4
23,500
OFFICE EXPENSES
CASH
5
10,500
10,500
SERVICE SUPPLIES INVENTORY
ACCOUNTS PAYABLE
6
66,875
COST OF PARTS AND SUPPLIES USED
SERVICE SUPPLIES INVENTORY
157,500
157,500
152,300
152,300
7
DUE FROM OTHER FUNDS
588,000
BILLINGS TO DEPARTMENTS
8
CASH
588,000
558,000
DUE FROM OTHER FUNDS
9
DUE TO OTHER FUNDS
CASH
10
ACCOUNTS PAYABLE
CASH
11
558,000
21,800
21,800
156,950
156,950
DEPRECIATION OF MACHINERY AND
30,000
EQUIPMENT
ALLOWANCE FOR DEPRECIATION
12
30,000
Closing Entries:
BILLINGS TO DEPARTMENTS
588,000
WAGE EXPENSE
290,000
PAYROLL TAX EXPENSE
66,875
UTILITY EXPENSE
23,500
OFFICE EXPENSES
10,500
COST OF PARTS AND SUPPLIES USED
152,300
DEPRECIATION OF MACHINERY AND EQUIPMENT
OPERATING INCOME
OPERATING INCOME
30,000
14,825
14,825
NET ASSETS—UNRESTRICTED
14,825
NET ASSETS—INVESTED IN CAPITAL ASSETS
NET ASSETS—UNRESTRICTED
30,000
30,000
