Question

Cannedy agreed to pay off the $60,000 used to buy the computer over a 5 year period, starting December 31, 2019. On that date, Cannedy paid the first installment on the debt, $9,000 in principal and $2,300 in interest. How much should be reported as an expenditure in a governmental-type fund and in an enterprise fund?

Answer 1

In a governmental-type fund, the expenditure will be $9,000. In an enterprise fund, the expenditure will be $11,300.

Step-by-step explanation:

In a governmental-type fund, the expenditure will be the principal amount paid, which is $9,000. This is because only the principal is considered an expenditure in this case. The interest portion is not considered an expenditure.

In an enterprise fund, both the principal and the interest will be reported as expenditures. So the total expenditure in an enterprise fund will be $9,000 + $2,300 = $11,300.