70) “Enterprise funds should not be permitted to accumulate unrestricted net position, since to do
so would indicate overpricing of its services.” Do you agree? Why or why not?
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72) Explain the difference between operating revenues/expenses and nonoperating
revenues/expenses. Why does the GASB require that operating revenues/expenses be reported
separately on proprietary statements of revenues, expenses, and changes in fund net position?
73) Explain how capitalization of interest costs differs for enterprise funds as opposed to
governmental funds.
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74) What are the alternative methods of dissolving an internal service fund?
Answer: As Chapter 7 explains, dissolution of an internal service fund may be accomplished in
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75) During the current fiscal year, the following transactions (summarized) occurred in the Town
of Berthoud Information Technology Internal Service Fund:
1. Employees were paid $290,000 wages in cash.
2. Utility bills received from the Town of Berthoud’s Utility Fund during the year amounted to
$23,500. The amount had previously been accrued by the Utility Fund.
3. Office expenses paid in cash during the year amounted to $10,500.
4. Service supplies purchased on account during the year totaled $157,500.
5. Parts and supplies used during the year totaled $152,300 (at cost).
6. Charges to departments during the fiscal year were as follows:
General Fund
$
308,700
Street Fund
279,300
7. Payments to the Utility Fund totaled $21,800.
8. Annual depreciation totaled $30,000 for machinery and equipment.
Prepare the journal entry. (If no entry is required for a transaction/event, select “No Journal
Entry Required” in the first account field.)
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Answer: Town of Berthoud
Information Technology Fund
General Journal
Debits
Credits
1.
WAGE EXPENSE
290,000
CASH
290,000
2.
UTILITY EXPENSE
23,500
DUE TO OTHER FUNDS
23,500
3.
OFFICE EXPENSES
10,500
CASH
10,500
4.
SERVICE SUPPLIES INVENTORY
157,500
ACCOUNTS PAYABLE
157,500
5.
COST OF PARTS AND SUPPLIES USED
152,300
SERVICE SUPPLIES INVENTORY
152,300
6.
DUE FROM OTHER FUNDS
588,000
BILLINGS TO DEPARTMENTS
588,000
7.
DUE TO OTHER FUNDS
21,800
CASH
21,800
8.
DEPRECIATION EXPENSE
30,000
ALLOWANCE FOR DEPRECIATION
30,000
Explanation: No further explanation details are available for this problem.
Difficulty: 3 Hard
Topic: Internal Service Funds
Learning Objective: 07-02 Prepare journal entries and financial statements for an internal service
fund.
Bloom’s: Understand
AACSB: Knowledge Application
AICPA: FN Reporting