Reference no: EM131645029

Case Study -

Q1. Corwin City establishes an Internal Service Fund (ISF) to account for the costs of printing services that it will provide to the various City departments. Make journal entries to record the following transactions in the ISF only.

a. The General Fund transfers $425,000 to the ISF as a contribution to start the printing activity.

b. The ISF immediately uses $400,000 of the cash to purchase printing equipment. (The printing equipment is estimated to have an average useful life of 8 years.)

c. On various occasions during the year, the ISF buys paper and other supplies in the amount of $90,000 on open account. The supplies are put into inventory.

d. Invoices for the supplies purchased in c., above are paid.

e. Employee salaries for the year amounting to $345,000 are paid

f. The ISF makes a payment of $41,000 to the City's Pension Trust Fund for pensions applicable to the salaries of its personnel.

g. The ISF receives an invoice of $28,000 from the General Fund for occupancy costs, which includes space and utility costs.

h. The ISF sends invoices throughout the year to several City agencies for printing services, as follows:

(1) To General Fund departments $575,000

(2) To the Water Enterprise Fund 9,500

Q2. Moody Village maintains a Pension Trust Fund for its employees. At the start of the year, the Fund holds cash of $150,000 and investments that have a fair value of $4,000,000. The Fund has the following transactions. Prepare entries to record them in the Fund's accounts

a. Bills the General Fund $200,000 for the required annual contribution. The pension plan does not require contributions from the employees

b. Receives payment of $200,000 from the General Fund

c. Receives interest and dividend income of $150,000 in cash on its investment portfolio

d. Receives $215,000 from selling investments carried on the books at $200,000                                                                                                                                                          

Q3. On January 1, 2012, a county's government-wide financial statements shows general fixed assets of $2,400,000. For the year ended December 31, 2012, the county's fund financial statement shows an amount of $125,000 next to the caption "Expenditures - capital outlay." To prepare its 2012 government-wide financial statements, the preparer makes a worksheet that uses the 2012 fund-level financial statements as the starting point. As a result, the worksheet does not show any capital assets at the beginning of the year. Make adjusting entry is needed to report the facts about capital assets on the government-wide statements.

Q4. What does the Financial Reporting Entity include? Explain.