Sun City accounts for its telecommunication services in an internal service fund. In a recent year its

Question:

Sun City accounts for its telecommunication services in an internal service fund. In a recent year its records indicated the following:

Billings to units accounted for in governmental funds $400,000

Billings to units accounted for in proprietary funds $100,000

Year-end accounts receivable from units accounted for in governmental funds $ 25,000

Year-end accounts receivable from units accounted for in proprietary funds $ 10,000

Per city policy, the telecommunications department bills other departments for the actual cost of providing its services.

1. Explain how each of the following would be reported in the city's government-wide statement of net position and statement of activities:

a. The billings of the internal service fund (and offset ting purchases of services by other funds)

b. The year-end accounts receivable and payable

2. Explain how each of the following would be reported in the balance sheets and statements of revenues and expenses/expenditures of the individual governmental and proprietary funds to which the internal service fund provided services and of the internal service fund itself:

a. The billings from the internal service fund

b. The year-end accounts payable and receivable

3. Internal service funds are classiﬁed as proprietary funds.

Yet in the government-wide statements, their assets and liabilities that have not been eliminated in the consolidation process are reported in the ''governmental activities'' column. How can you justify this apparent inconsistency?

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