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.

Answer 1

	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