Lilly County, faced with the prospect of declining revenues, decides it can save money by doing all printing in house. The county creates the Lilly Printing Fund (an Internal Service Fund), directs departments to fulfill their bulk printing needs through that fund, and directs departments to pay the fund promptly to minimize its working capital needs. The fund had the following transactions and events during 2013.
Prepare
(a) Journal entries to record these transactions in the Lilly Printing Fund;
(b) A statement of net position as of December 31, 2013; and
(c) A statement of revenues, expenses, and changes in net position for the year ended December 31, 2013.
1. Received a loan on January 2 from the county in the amount of $ 6,000, to be repaid in four equal annual installments of $ 1,500, starting December 31, 2013, with interest at the rate of 1 percent per annum on the outstanding balance. The specified purpose of the loan was to purchase equipment for $ 4,800 and to use the balance of $ 1,200 to meet working capital needs.
2. Purchased reproduction equipment for $ 4,800 on January 2, using cash provided in transaction 1. The equipment has an estimated useful life of 4 years and no salvage value.
3. Purchased paper and supplies for $ 4,500 on credit. (Because inventories are kept to a mini-mum, charge the purchase to Supplies expense.)
4. Sent invoices for $ 65,000 to departments financed by the General Fund.
5. Received cash in the amount of $ 63,000 as a result of transaction 4.
6. Paid the $ 4,500 invoice received in transaction 3.
7. Paid salaries in the amount of $ 50,000 and utility bills in the amount of $ 6,000.
8. Repaid the county $ 1,500 of principal on the loan, plus interest of 1 percent.
9. In preparation for year end financial statements, recorded depreciation on the equipment for 12 months.