Question

Please see with section B below in Bold. I have included all information needed.

B. Delight City Bus System is accounted for in an enterprise fund. Delight City Bus System had the following transactions for 2015.

Delight City Bus System issued $10,000,000 is 8 percent revenue bonds. The bonds were issued at par.

Delight City Bus System used the proceeds from the bond issue to acquire new buses.

Delight City Bus System accrued nine month’s interest ($600,000) at year end.

Delight City Bus System incurred $50,000 of repair costs paying for them with cash.

Required:

a. Prepare appropriate journal entries.

b. Which financial statements would be required for Delight City Bus System for the year end June 30, 2015? State the titles and show the general format of the classifications that would be reported in each of the required financial statement.

c. Edgerton County has a duplication service center that it accounts for in an internal service fund. During 2015 Edgerton County duplication service center had the following transactions:

1. The general fund made an initial cash contribution of $35,000 to the internal service fund.               

2. The Edgerton County duplication service center purchased copiers that were accounted for as Equipment and paid cash in the amount of $70,000.

3. The Edgerton County duplication service center borrowed $270,000 from a local bank to finance the purchase of additional equipment and renovation of its facilities. It issued a three-year note.

4. The Edgerton County duplication service center purchased the equipment for $160,000 and paid contractors $100,000 for improvements to its facilities – cash was paid.

5. The Edgerton County duplication service center billed the county clerk’s office $5,000 for printing services; the duplication service center then received $2,500 cash from the county clerk’s office.

6. The Edgerton County duplication service center incurred and paid in cash operating expenses for $9,000.                                             

7. The Edgerton County duplication service center recognized depreciation in the amount of $1,500 on its equipment and recognized depreciation in the amount of $900 on the improvements to its facilities.

Required:

a. Prepare journal entries in the internal service fund.

b. Which financial statements would be required for Edgerton County duplication service center for the year ended July 31, 2015? State the titles and show the general format of the classifications that would be reported in each of the required financial statement

Answer 1

PART-1)

	Debit	Credit
Cash	10,000,000
Bonds Payable		10,000,000
(Bonds issued at Par and acquirement of new buses)
Interest Expense	600,000
Accrued Interest Payable		600,000
(Accrued nine months’ interest)
Repair Expense	50,000
Restricted Assets		50,000

PART-2)

Account/Description	Debit	Credit
Cash	35,000
Non Reciprocal Transfer in		35,000
(Initial cash conrtibution)
Equipment	70,000
Non-Reciprocal Transfer in		70,000
(Transfer of photocopiers)
Cash	270,000
Notes Payable		270,000
(Loan from bank)
Equipment	160,000
Improvement to Facilities	100,000
Cash		260,000
(Purchase of equipment and improvement on facilities)
Cash	2,500
Dues from Funds	2,500
Revenue from billing		5,000
(Record of print billing)
Operating Expenses	9,000
Cash		9,000
(Record of operating expenses)
Depreciation	2,400
Accumulated Depreciation on Equipment		1,500
Accumulated Depreciation on Improvements		900
(Record of depreciation)

B) Although the equipment and facilities were earlier not reported in a particular fund (only in the government-wide statements and the schedule of fixed assets), however now will be reported in the internal service fund. In the same manner the long-term note would also be reported in the internal service fund itself.