Question

Following are some of Friendly Village’s transactions during the calendar year 2019. For each transaction, state (a) the amount the Village would report as expenditures for the year 2019 if the transaction occurred in a governmental‑type fund and (b) the amount it would report as expenses for the year if the transaction occurred in an Enterprise Fund.
1. Friendly paid $600,000 in salaries during the year. In addition, during the last pay period, Friendly’s employees earned $5,000 by December 31, but that amount was not paid until the first week of January, 2020.
2. Friendly used the proceeds of long‑term bonds to buy a sanitation truck. The truck was delivered on July 1, 2019, and immediately placed into service. The truck cost $100,000 and had an estimated useful life of 10 years.
3. Friendly had agreed to pay off the $100,000 used to buy the sanitation truck (see previous transaction) over a 5‑year period, starting December 31, 2019. On that date, Friendly paid the first installment on the debt, $10,000 in principal and $3,000 in interest.

Answer 1

Answer:

1. Governmental type fund $605,000

Enterprise fund $605,000

2. Governmental type fund $100,000

Enterprise fund $5,000

3.Governmental type fund $13,000

Enterprise Fund $3,000

Explanation:

1a) Calculation to determine the amount the Village would report as expenditures for the year 2019

Governmental type fund=$600,000+$5,000

Governmental type fund=$605,000

1b) Calculation to determine the amount it would report as expenses for the year

Enterprise fund=$600,000+$5,000

Enterprise fund=$605,000

Therefore the amount the Village would report as expenditures for the year 2019 and the amount it would report as expenses for the year will be :

Governmental type fund $605,000

Enterprise fund $605,000

2a) Calculation to determine the amount the Village would report as expenditures for the year 2019

Based on the information the Governmental type fund will be the amount of $100,000 reason been that The truck cost the amount of $100,000

Governmental type fund=$100,000

2b) Calculation to determine the amount it would report as expenses for the year

Enterprise fund=[($100,000/10 years)*6/12]

Enterprise fund=$100,000*6/12

Enterprise fund=$5,000

Note that July 1 to December 31 will give us 6 months

Therefore the amount the Village would report as expenditures for the year 2019 and the amount it would report as expenses for the year will be :

Governmental type fund $100,000

Enterprise fund $5,000

3a. Calculation to determine the amount the Village would report as expenditures for the year 2019

Governmental type fund= $10,000+$3,000

Governmental type fund= $13,000

3b. Calculation to determine Calculation to determine the amount it would report as expenses for the year

Based on the information given we were told that he paid the interest amount of $3,000 as the first installment on the debt which means that the amount it would report as expenses for the year is $3,000

Enterprise fund $3,000

Therefore the amount the Village would report as expenditures for the year 2019 and the amount it would report as expenses for the year will be :

Governmental type fund $13,000

Enterprise Fund $3,000