Question

Washington City created an Information Technology department four years ago to centralize information technology (IT) functions for the city. The goal of the department was to reduce costs, avoid duplication of efforts, and provide up-to-date technology to all of the city’s operations. The fund was designed to be self-supporting; that is, all costs are to be recovered through user fees, but any excess of fees over expenses should be less than 5 percent. The preclosing trial balance for the IT department as of last year, is shown below.

	Debits				Credits
	(in thousands)
Cash	$	13,800
Due from Other Funds		3,990
Materials and Supplies Inventory		340
Machinery and Equipment		52,500
Accumulated Depreciation					$	29,600
Accounts Payable						1,640
Due to Federal Government						2,620
Due to Other Funds						1,170
Net Position—Net Investment in Capital Assets						22,900
Net Position—Unrestricted						12,700
	$	70,630			$	70,630

During the current fiscal year ended December 31, the following transactions (summarized in thousands of dollars) occurred:

1. Gross employee wages were $56,100, including the employer’s share of social security taxes amounting to $4,000. Federal income and social security taxes withheld from that amount totaled $18,280.
2. Office expenses in the amount of $3,630 were paid in cash.
3. Materials and supplies purchased on account during the year were $8,230.
4. A bill totaling $14,230 was received for utilities provided by Washington City’s utility fund.
5. Cash paid to the federal government for payroll taxes was $22,600.
6. Cash paid to the Utility Fund was $13,800.
7. Accounts payable at year-end totaled $2,890.
8. Materials and supplies used during the year were $8,090.
9. Charges to departments during the fiscal year were as follows:

General Fund	$	56,400
Special Revenue Fund		20,200

10. Unpaid balances at year-end were:

General Fund	$	3,500
Special Revenue Fund		1,900

11. The depreciation for the year was $6,000.
12. Revenue and expense accounts for the year were closed.

Required

1. a-1. Prepare journal entries for the Information Technology Fund for the current year ended December 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)

1. a-2. Prepare closing entry for the Information Technology Fund for the current year ended December 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)

1. a-3. Prepare a statement of revenues, expenses, and changes in net position for the Information Technology Fund for the current year ended December 31. (Enter your answers in thousands of dollars.)

2. Prepare a statement of net position for the Information Technology Fund as of December 31. (Enter your answers in thousands of dollars.)

3. Prepare a statement of cash flows for the Information Technology Fund for the current year ended December 31. (Negative amounts should be indicated by a minus sign. Enter your answers in thousands of dollars.)

4. Has the manager of the IT department been able to achieve the goal of recovering costs through user fees?

• Yes

• No

Answer 1

a-1. Prepare journal entries for the Information Technology Fund for the current year ended December 31.

No.	Trn.	General Journal	Debit	Credit
A	1	Wage Expense [$56100 - $4000]	$52,100
		Payroll Tax Expense	$4,000
		Due to federal government		$33,820
		Cash [$18280 + $4000]		$22,280
B	2	Office Expense	$3,630
		Cash		$3,630
C	3	Materials and Supplies Inventory	$8,230
		Accounts payable		$8,230
D	4	Utility Expense	$14,230
		Due to other funds		$14,230
E	5	Due to Federal Government	$22,600
		Cash		$22,600
F	6	Due to Other Funds	$13,800
		Cash		$13,800
G	7	Accounts payable	$6,980
		Cash [$1640 + $8230 - $2890]		$6,980
H	8	Cost of Materials and supplies used	$8,090
		Materials and supplies Inventory		$8,090
I	9	Due from Other Funds [$56400+$20200]	$76,600
		Billings to Departments		$76,600
J	10	Cash [$3990 + $76600 - $3500 - $1900]	$75,190
		Due from Other Funds		$75,190
K	11	Depreciation Expense	$6,000
		Allowance for depreciation		$6,000

_____________________________________________________________________

a-2. Prepare closing entry for the Information Technology Fund for the current year ended December 31.

No.	Trn.	General Journal	Debit	Credit
A	12(a)	Billings to Departments	$76,600
		Excess of cost over net billings to department	$11,450
		Wage Expense		$52,100
		Office Expenses		$3,630
		Utility Expenses		$14,230
		Cost of Materials and supplies used		$8,090
		Depreciation Expense		$6,000
		Payroll Tax Expense		$4,000
B	12(b)	Net position-Unrestricted	$11,450
		Excess of cost over net billings to departments		$11,450
C	12(c )	Net position-Net Investment in capital assets	$6,000
		Net position-unrestricted		$6,000