The City of Carlsbad Established a Stores and Services Fund

question 120

Essay

The City of Carlsbad established a Stores and Services Fund.To provide working capital,the Stores and Services Fund borrowed $800,000 from the General Fund,to be paid back over 8 years with no interest.The Stores and Services Fund is expected to set user charges at a level which will recover all expenses and provide cash for the repayment of the loan.
Capital assets used by the Stores and Services Fund include a building which cost $350,000 and had a 10 year life,and equipment which cost $200,000 and had a 5 year life.Straight-line depreciation is to be used,with no salvage value.
Required:
a.Prepare a break-even budget for the City of Carlsbad Stores and Services Fund.Include a mark up percentage,as a percentage of cost so that revenue will equal expenses.
b.Record the issuance of supplies,costing $16,500,to the Water Utility Fund.The perpetual inventory system is used.Show computations in good form.

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Definitions:

Binomial Probability Experiment

An experiment or process that has exactly two possible outcomes (success or failure) for each trial and where the probability of success is the same for each trial.

Probability

The measure of the likelihood that an event will occur, quantified between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Standard Normal Distribution

A standard normal distribution characterized by a mean of 0 and a standard deviation of 1.

Values of Z

Refers to the scores derived from a standard normal distribution used in statistical analysis to determine probabilities.