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.

	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

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.

Answer 1

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