At the beginning of fiscal year 2014, the City of Wooster established a central supplies storehouse to service its several funds. The general fund contributed $25,000,000 (nonrefundable) to aid in the establishment of the supplies storehouse. It was agreed that the storehouse would charge other funds for the purchase price of supplies plus 20 percent. During the year, the storehouse purchased $20,000,000 of supplies, paid operating expenses of $2,000,000, and billed other funds for $19,200,000. All accounts are settled except $1,500,000 remaining to be collected from the general fund for supplies billed.
Required
a. Prepare the statement of revenues, expenses, and changes in net position for fiscal 2014, and the statement of net position at the end of fiscal 2014 for the central supplies storehouse.
b. State any effects of the transactions on the financial statements of the general fund of Wooster. Assume the general fund bought supplies for $12,000,000, consumed $11,700,000 of supplies, uses the purchases method, and supplies balances are significant.
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SOLUTION
a.
City of Wooster
City of Wooster
Central Supplies Storehouse
Central Supplies Storehouse
Statement of Revenues, Expenses, and Changes in Net Position
Statement of Revenues, Expenses, and Changes in Net Position
For the Year 2014
For the Year 2014
(in thousands)
(in thousands)
Operating revenues
$
19,200
19,200
Operating expenses (1)
18,000
18,000
Operating income
1,200
1,200
Capital contributions
25,000
25,000
Change in net position
26,200
26,200
Total net position—beginning
0
Total net position—ending
$
26,200
26,200
City of Wooster
City of Wooster
Central Supplies Storehouse
Central Supplies Storehouse
Statement of Net Position
Statement of Net Position
At Fiscal Year-End 2014
At Fiscal Year-End 2014
(in thousands)
(in thousands)
Assets
Current assets:
Cash (2)
$
20,700
20,700
Due from general fund
1,500
1,500
Inventory (3)
4,000
4,000
Total assets
$
26,200
26,200
Net position
Unrestricted
$
26,200
26,200
Total net position
$
26,200
26,200
Supporting calculations:
Supporting calculations:
(1)
Cost of goods sold ($19,200/1.2)
$
16,000
16,000
Other operating expenses
2,000
2,000
Total operating expenses
$
18,000
18,000
(2)
Beginning cash balance
$
0
0
General fund transfer
25,000
25,000
Collections from other funds ($19,200 - $1,500)
17,700
17,700
Operating expenses
(2,000)
(2,000)
(2,000)
Purchase of supplies
(20,000)
(20,000)
(20,000)
(20,000)
Ending cash balance
$
20,700
20,700
(3)
Beginning inventory balance
$
0
Plus: Purchases
20,000
Less: Cost of goods sold
(16,000)
(16,000)
Ending inventory balance
$
4,000
b.
The general fund balance sheet shows supplies inventory of $300,000, and nonspendable fund balance of $300,000. A liability for $1,500,000 appears on the balance sheet as "Due to Central Supplies Storehouse." The general fund statement of revenues, expenditures and changes in fund balances includes $12,000,000 of supplies expenditures, and a $25,000,000 transfer out is listed under other financing uses for the nonrefundable transfer.