Question

P-3 A school district establishes a vehicle repair shop that provides service to other departments, all of which are accounted for in it general fund. During its first year of operations the shop engages in the following transactions: It purchases equipment 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. 4. What would be the reported revenue and expenses relating to the vehicle-repair shop in the district's government-wide statements? Would it matter whether the district accounted for the shop in an internal service fund or in the general fund?

Answer 1

4. What would be the reported revenue and expenses relating to the vehicle-repair shop in the district's government-wide statements? Would it matter whether the district accounted for the shop in an internal service fund or in the general fund?.

Equipment (asset) $24 million

Accumulated depreciation $3 million (for first year)

Yes, it would matter whether the district accounted for the shop in an internal service fund in the general fund because the cost would be different in both situations.