The City of Westboro Established a Stores and Services Fund

Essay

The City of Westboro 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
$\begin{array}{|l|r|}\hline\text { Data for the budget year are: }\\\hline\text { Cost of supplies expected to be issued } & \$ 4,000,000 \\\hline \text { Salaries } & 980,000 \\\hline \text { Utility expenses } & 130,000 \\\hline \text { Insurance and miscellaneous expenses } & 90,000\\\hline\end{array}$ Capital assets used by the Stores and Services Fund include a building which cost $300,000 and had a 10 year life and equipment which cost $150,000 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 Westboro 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