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Akron Established an Internal Service Fund for Its Data Processing

question 41

Essay

Akron established an internal service fund for its data processing activities on July 1, 20X8. During the fiscal year ended June 30, 20X9, the following transactions and events occurred:
1) On July 1, 20X8, the city council authorized the general fund to contribute $1,000,000 to help establish the internal service fund on July 20, 20X8.
2) The internal service fund spent $900,000 of the contribution to acquire a mainframe computer on July 25, 20X8.
3) During the year ended June 30, 20X9, the internal service billed other funds of the city $300,000 for use of the computer. By year end, all of the billings were collected except for $30,000.
4) The internal service fund incurred general operating expenses of $100,000, exclusive of depreciation, during the year ended June 30, 20X9. All of the expenses were paid by June 30, 20X9, except for $24,000.
5) Depreciation expense related to the computer was $180,000.
Required:
A) Prepare all journal entries that would be recorded by Akron's internal service fund for the year ended June 30, 20X9. Explanations for journal entries are not necessary.
B) Prepare a statement of revenues, expenses, and changes in fund net assets for the internal service fund for the year ended June 30, 20X9.
C) Calculate the amount of unrestricted net assets at June 30, 20X9.

Definitions:

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as beginning inventory plus purchases less cost of goods sold.

Overstated Inventory

A situation where the recorded amount of inventory is higher than the actual inventory available, often due to error or mismanagement.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, often referred to as shareholders' equity or owners' equity.

Gross Profit

A company's revenue minus the cost of goods sold, which measures how much a company earns after deducting the costs associated with producing its products or services.