The City of Carlsbad Established a Stores and Services Fund

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.