In: Accounting
The County of Maxnell decides to create a sanitation department and offer its services to the public for a fee. As a result, county officials plan to account for this activity within the enterprise funds. Make journal entries for this operation for the following 2015 transactions as well as necessary adjusting entries at the end of the year. Assume that the information is being gathered for fund financial statements. Only entries for the sanitation department are required here:
January 1—Received unrestricted funds of $160,000 from the general fund as permanent financing.
February 1—Borrowed an additional $130,000 from a local bank at a 12 percent annual interest rate.
March 1—Ordered a truck at an expected cost of $108,000.
April 1—Received the truck and made full payment. The actual cost amounted to $110,000. The truck has a 10-year life and no salvage value. Straight-line depreciation is to be used.
May 1—Received a $20,000 cash grant from the state to help supplement the pay of the sanitation workers. The money must be used for that purpose.
June 1—Rented a garage for the truck at a cost of $1,000 per month and paid 12 months of rent in advance.
July 1—Charged citizens $13,000 for services. Of this amount, $11,000 has been collected.
August 1—Made a $10,000 cash payment on the 12 percent note of February 1. This payment covers both interest and principal.
September 1—Paid salaries of $18,000 using the grant received on May 1.
October 1—Paid truck maintenance costs of $1,000.
November 1—Paid additional salaries of $10,000, first using the rest of the grant money received May 1.
December 31—Sent invoices totaling $19,000 to customers for services over the past six months. Collected $3,000 cash immediately.
Date |
Particulars |
Ledger folio |
Debit |
credit |
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Jan 1 |
Cash a/c |
$160000 |
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To capital a/c |
$160000 |
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(Being cash received ) |
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Feb 1 |
Cash a/c |
$130000 |
||||
To local bank loan a/c |
$130000 |
|||||
(being loan taken from local bank) |
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Apr 1 |
Truck a/c |
$110000 |
||||
To cash a/c |
$110000 |
|||||
(being truck purchased and amount paid) |
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May 1 |
Cash a/c |
$20000 |
||||
To government grant a/c |
$20000 |
|||||
(being grant recived) |
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Jun 1 |
Rent a/c |
$12000 |
||||
To cash a/c |
$12000 |
|||||
(being rent paid for full year) |
||||||
Rent paid in advance a/c |
$5000 |
|||||
To rent a/c |
$5000 |
|||||
(being rebt paid in advance carry forward to next year ) |
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Jul 1 |
Cash a/c |
$11000 |
||||
Debtors a/c |
$2000 |
|||||
To sales a/c |
$13000 |
|||||
(being service provided) |
||||||
Aug 1 |
Local bank loan a/c |
$2200 |
||||
Interest a/c |
$7800 |
|||||
To cash a/c |
$10000 |
|||||
(being loan and interest amount has been paid ) |
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Interest = $130000*12% = 15600 |
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15600 is for 1 full year, so for half year it amounts to $7800 |
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Sep 1 |
Salaries a/c |
$18000 |
||||
To cash a/c |
$18000 |
|||||
(being salaries paid) |
||||||
Oct 1 |
Truck maintenance expenses a/c |
$1000 |
||||
To cash a/c |
$1000 |
|||||
(being truck maintenance paid) |
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Nov 1 |
Salaries a/c |
$10000 |
||||
To cash a/c |
$10000 |
|||||
(being salaries paid) |
||||||
Dec 31 |
Cash a/c |
$3000 |
||||
Debtors a/c |
$16000 |
|||||
To sales a/c |
$19000 |
|||||
(being service provided) |
||||||
depreciation a/c |
$8250 |
|||||
to truck a/c |
$8250 |
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(being depreciation provided) |
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depreciation per year =$110000/10 years = $11000 |
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depreciation for 9 months( April to december) = $11000*9/12 = $8250 |
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JANUARY 1
cash