Question

The City of Sandstorm purchased a swimming pool from a private operator as of April 1, 2020, for $600,000, of which $300,000 was provided by a one-time contribution from the General Fund, and $300,000 was provided by a loan from the Great National Bank, secured by a note.

The loan has an annual interest rate of 6 percent, payable semiannually on October 1 and April 1; principal payments of $100,000 are to be made annually, beginning on April 1, 2021. The City has a calendar year as its fiscal year.

During the year ended December 31, 2020, the following transactions occurred related to the City of Sandstorm Swimming Pool:

1. The amounts were received from the City General Fund and the Great National Bank.

2. A loan was provided in the amount of $130,000 from the Water Utility Fund to provide working capital.

3. The purchase of the pool was recorded. Based on an appraisal, it was decided to allocate $150,000 to the land, $210,000 to improvements other than buildings (the pool), and $90,000 to the building.

4. Charges to patrons during the season amounted to $238,000, all received in cash.

5. Salaries paid to employees amounted to $120,000, all paid in cash, of which $90,000 was cost of services and $30,000 was administration.

6. Supplies purchased amounted to $40,000; all but $5,000 was used. Cash was paid for the supplies, all of which was for cost of sales and services.

7. Administrative expenses amounted to $18,500, paid in cash.

8. The first interest payment was made to the Great National Bank.

9. The short-term loan was repaid to the Water Utility Fund.

10. Depreciation of $21,500 for the pool and $7,000 on the building was recorded for the nine months they were in operation. 11. Interest was accrued for the year. 12. Closing entries were prepared.

Required:

a. Prepare entries to record the transactions.

b. Prepare a Statement of Revenues, Expenses, and Changes in Fund Net Position for the year ended December 31, 2020, for the City of Sandstorm Swimming Pool Fund.

c. Identify the types of nonexchange revenues that are most likely to result in differences in the timing of recognition between the accrual and modified accrual bases of accounting.

Answer 1

Journal Entries

SR. No	Particulars	Debit Amount	Credit Amount
1	Cash	$   300,000.00
	Great National Bank Loan		$     300,000.00
2	Swimming Pool Fund	$   600,000.00
	City General fund		$     300,000.00
	cash		$     300,000.00
3	swimming pool fund (working capital loan)	$   130,000.00
	Water Utility Fund		$     130,000.00
4	Land	$   150,000.00
	Swimming Pool	$   210,000.00
	Building	$      90,000.00
	Swimming Pool Fund		$     450,000.00
5	Cash	$   238,000.00
	patron Charges		$     238,000.00
6	cost of services	$      90,000.00
	administration salary	$      30,000.00
	Cash		$     120,000.00
7	purchase	$      40,000.00
	Cash		$        40,000.00
8	Administrative Expenses	$      18,500.00
	Cash		$        18,500.00
9	interest on great national bank loan	$      13,500.00
	interest accrued		$          4,500.00
	cash		$          9,000.00
10	cash	$   130,000.00
	working capital loan		$     130,000.00
11	Water utility Fund	$   130,000.00
	swimming pool fund (working capital loan)		$     130,000.00
12	Depreciation	$      28,500.00
	building		$          7,000.00
	swimming pool		$        21,500.00

Statement of Revenue & Expenses
Particulars		Amount
patron Charges		$                                       238,000.00
cost of services:		$                                          95,000.00
purchase	$                     40,000.00
closing inventory of supplies	$                   (35,000.00)
other costs of services	$                     90,000.00
ross surplus		$                                       143,000.00
administration salary		$                                          30,000.00
Administrative Expenses		$                                          18,500.00
interest on great national bank loan		$                                          13,500.00
Depreciation		$                                          28,500.00
net surplus/(deficit)		$                                          52,500.00

Swimming Pool Fund
Particulars	Amount	Particulars	Amount
City General Fund	$                   300,000.00	Land	$ 150,000.00
Cash (loan from Great national bank)	$                   300,000.00	Swimming Pool	$ 210,000.00
water utility fund loan	$                   130,000.00	Building	$    90,000.00
patron Charges	$                   238,000.00	cost of services	$    90,000.00
		administration salary	$    30,000.00
		purchases	$    40,000.00
		Administrative Expenses	$    18,500.00
		interest on great national bank loan	$      9,000.00
		water utility fund loan repaid	$ 130,000.00
		closing balance	$ 200,500.00