The City of Evansville operated a summer camp program for at-risk youth. Busines

Question

The City of Evansville operated a summer camp program for at-risk youth. Businesses and nonprofit organizations sponsor one or more youth by paying the registration fee for program participants. The following Schedule of Cash Receipts and Disbursements summarizes the activity in the program’s bank account for the year.

At the beginning of 2017, the program had unrestricted cash of $25,000.

The loan from the bank is dated April 1 and is for a five-year period. Interest (6 percent annual rate) is paid on October 1 and April 1 of each year, beginning October 1, 2017.

The bus was purchased on April 1 with the proceeds provided by the bank loan and has an estimated useful life of five years (straight-line basis—use monthly depreciation).

All invoices and salaries related to 2017 had been paid by close of business on December 31, except for the employer’s portion of December payroll taxes, totaling $1,400.

Required:
a. Prepare the journal entries, closing entries, and a Statement of Revenues, Expenses, and Changes in Fund Net Position assuming the City intends to treat the summer camp program as an enterprise fund.
b. Prepare the journal entries, closing entries, and a Statement of Revenues, Expenditures, and Changes in Fund Balance assuming the City intends to treat the summer camp program as a special revenue fund.

Cash Basis 12 months Cash receipts: Registration fees $ 129,000 Borrowing from bank 55,000 Total deposits 184,000 Cash disbursements: Wages 70,000 Payroll taxes 9,400 Insurance (paid monthly) 6,400 Purchase of bus 64,000 Interest on bank note 1,650 Total checks 151,450 Excess of receipts over disbursements $ 32,550

Explanation / Answer

a

Journal Entries

1

01.10.2017

Interest Account ….Dr

1375

To Bank Loan Account

1375

2

01.04.2017

Bus Account …..Dr

64000

To Bank Loan

55000

To Cash

9000

3

31.3.2018

Depreciation Account …..Dr

12800

To Bus

12800

4

31.12.2017

Payroll Taxes Account …Dr

1400

To Employer Payable

1400

5

31.3.2018

Surplus Account …Dr

25975

To Enterprise Fund

25975

Statement of Revnue and Expenses

Expenses

Amount

Revenue

Amount

Wages

70000

By Registraton Fees

129000

Payroll Taxes

10800

Insurance

6400

Interest on Bank Notes

1650

Depreciation

12800

Interest on Loan

1375

To Surplus

25975

129000

129000

Changes in Fund Position

Sources of Fund

Amount

Application of Fund

Amount

Reserve Fund

25000

Bus

51200

Surplus

25975

Cash Balance

57550

Bank Loan

56375

Employer Payable

1400

108750

108750

b.

All Entries Remains same as above except

31.3.2018

Surplus Account …Dr

25975

To Special Revenue Fund Fund

25975

a

Journal Entries

1

01.10.2017

Interest Account ….Dr

1375

To Bank Loan Account

1375

2

01.04.2017

Bus Account …..Dr

64000

To Bank Loan

55000

To Cash

9000

3

31.3.2018

Depreciation Account …..Dr

12800

To Bus

12800

4

31.12.2017

Payroll Taxes Account …Dr

1400

To Employer Payable

1400

5

31.3.2018

Surplus Account …Dr

25975

To Enterprise Fund

25975

Statement of Revnue and Expenses

Expenses

Amount

Revenue

Amount

Wages

70000

By Registraton Fees

129000

Payroll Taxes

10800

Insurance

6400

Interest on Bank Notes

1650

Depreciation

12800

Interest on Loan

1375

To Surplus

25975

129000

129000

Changes in Fund Position

Sources of Fund

Amount

Application of Fund

Amount

Reserve Fund

25000

Bus

51200

Surplus

25975

Cash Balance

57550

Bank Loan

56375

Employer Payable

1400

108750

108750

b.

All Entries Remains same as above except

31.3.2018

Surplus Account …Dr

25975

To Special Revenue Fund Fund

25975

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