An Internal Service Fund billed other departments $1,200,000 for services provided during the year. Expenses of $700,000 for salaries, $250,000 for supplies and materials used, $100,000 for depreciation, and $100,000 for interest expenses were incurred. The fund received a $42,000 transfer from the General Fund during the year. The Internal Service Fund should report operating income for the year of

Question

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Operating income is calculated as total revenues minus total operating expenses. The total revenues from billing other departments are $1,200,000. The total operating expenses are the sum of salaries ($700,000), supplies and materials ($250,000), and depreciation ($100,000), totaling $1,050,000. Interest expenses and transfers are not included in operating income calculations. Therefore, the operating income is $1,200,000 - $1,050,000 = $150,000.

An Internal Service Fund Billed Other Departments $1,200,000 for Services