Reference no: EM132226029
Question - Expenditures vs. Expenses
Shining Starrs, a small governmental pre-school, began operations on January 1, 20X7, with $1,350,000 cash and $60,000 worth of equipment, on which $45,000 was owed to Regional Bank. The equipment was expected to have a remaining useful life of 5 years with $5,000 salvage value. During its first year of operations, ending December 31, 20X7, Shining Starrs paid or accrued the following:
1. Bought software, games, books worth $270,000, $180,000 in cash and $90,000 on account on 6/1/20X7. Distributed $152,000 to needy children over the course of the year. (Hint: Just because you buy something, is it an expense or an expenditure?)
2. Salaries and other personnel costs, $415,000.
3. Rent $24,000
4. Debt Service:
a. Interest at 5% APR on the equipment note and $7000 of principle is paid on Dec. 31, 20X6.
b. Interest at 6% APR on the software account and $77,000 of principle is paid on Dec. 31, 20X6.
5. Office supplied paid for with cash and used, $25,700.
6. Fundraising costs for fieldtrips, $600, paid for with cash.
7. Capital outlay: truck to deliver books purchased on April 1, 20X6, $42,000, expected to last 10 years with salvage value of $7,000. Paid with cash.
8. Utilities, $3,800.
Compute for Shining Starrs, for the year ended December 31, 20X7, its total expenses and expenditures. Use the straight-line method for any depreciation.