Question

3. (Comparative computations of expenditures and expenses based on the same underlying transactions) A department of a local government began operations at the beginning of the current fiscal year with $250,000 cash. During the fiscal year, the department made cash disbursements for the following: Salaries and other personnel costs, $100,000 # Office rent and utilities, $24,000 # Retirement of debt principal, $10,000; payment of interest, $2,200 # Purchased equipment at the beginning of the fiscal year for $30,000; the equipment is expected to last 6 years and have a salvage value of $6,000 # Photocopier rental, $10,500 Based on the preceding transactions, compute total annual expenditures for this department assuming it performs governmental-type activities and is accounted for in the General Fund. Then compute total annual expenses for this department assuming it performs activities within an Enterprise Fund.

Answer 1

Answer.

		General Fund Expenditure	Enterprise Fund Expenditure
Salaries and other Personnel costs	$	100000	100000
Office rent and utilities		24000	24000
Service of Debt
Repayment of principal		0	10000
Interest payment		2200	2200
Purchase of Equipment		30000	0
Depreciation expense ( W.N-1)		0	4000
Photocopier		10500	10500
Totals	$	166700	150700

Working note (W.N-1)

Equipment cost: 30000

Residual value : 4000

Useful life : 6 years

Depreciation : (Cost - Residual value)/Useful life

(30000-4000)/6000 = 4000