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    Incorporate the Internal Service Fund

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    The city of Brookville maintains its books to prepare fund accounting statements. It prepares worksheet adjustments in order to prepare government-wide statements. As such, Brookville's internal service fund--a print shop fund--is included in the proprietary funds statements.

    Required: Prepare necessary adjustments in order to incorporate the internal service fund in the government-wide statements as a part of governmental activities:

    a. Balance sheet accounts include: Cash, $100,000; Inventories, $400,000; Capital Assets, $1,000,000; Accumulated Depreciation, $500,000; Accounts Payable, $150,000; Bonds Payable, $500,000, Net Assets, $350,000.

    b. The only transaction in the internal service fund that is external to the government is interest income in the amount of $15,000.

    c. Exclusive of the interest expense, the internal service fund reported net income of $48,000. An examination of the records indicates that services were provided as follows: one half to general government, one-fourth to public safety, one fourth to culture and recreation.

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    Solution Summary

    Incorporate and internal service funds are examined. The necessary adjustments in order to incorporate the internal service funds in the government-wide statements are provided.