The City of Evansville operated a summer camp program for at-risk youth. Busines
ID: 2554350 • Letter: T
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 $18,000.
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 $800.
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.
Explanation / Answer
a. cash a/c dr 1250000
to registration fee (Income) 125000
b. cash/ Bank a/c dr 50000
to loan from Bank (current liabilities) 50000
c. BUS (fixed Asset) dr 600000
to Cash a/c 60000
d. interest on bank dr 1500
to cash 1500
e. Insurance a/c dr 60000
to cash 6000
f. payroll taxes a/c dr 9000
to cash a/c 9000
g. wages a/c dr 66575
to cash 66575
h. depreciation a/c dr 9000 (amount/useful life)* period = (60000/60)* 9
TO bus a/c
i. payroll taxes a/c dr 800
to taxes payable (CL) 800
j. interest on loan dr 750
to Interest accrued (CL) 750
(amount borrowed * rate of Interest * period ) = 50000* 6%*3/12 = 750 [from 1 october to december]
Statement of Revenue
Registration Fee 1,25,000
Total 1,25,000
Statement of Expense
wages 66575
payroll taxes 9800
Insurance 6000
depreciation 9000
Interest 2250
Total 93625