A school district establishes a vehicle repair shop that provides service to other departments, all of which are accounted for in its general fund. During its first year of operations the shop engages in the following transactions:

• It purchases equipment at a cost of $24 million and issues long-term notes for the purchase price. The useful life of the equipment is eight years, with no residual value.
• It purchases supplies at a cost of $4 million. Of these it uses $3 million. In its governmental funds, the district accounts for supplies on a purchases basis.
• It incurs $13 million in other operating costs.
• It bills other departments for $19 million.

For purposes of external reporting, school district officials are considering two options:

1. Prepare all of the journal entries as if the transactions for the vehicle repair shop are recorded in an internal service fund

2. Prepare all of the journal entries as if the transactions for the vehicle repair shop are reported in the general fund