Question

For years beginning January 1,2018, the city of Arbor Hills finances its park and recreation activities with a special property tax levy. Accordingly, it will account for resources related to parks and recreation in a special revenue fund. During 2018, it engaged in the following transactions:

1) the fund received $6million from the city special park and recreation property tax levy

2) the employee earned $0.17 million in sick leave but were paid for only $0.14 million. The leave accumulates but does not vest.

3) During 2018, the city ordered $0.80million in parks and recreation supplies. Of this amount,it received $0.70million, used $0.55million, and paid for $0.5million. The city uses the purchases mathod to account for supplies inventory.

4) In January 2018, the city purchased $1million in parks and recreation equipment. It paid. $0.20million in cash and gave an installment note for the balance. The first payment on the note ($0.30 million plus interest of $0.05million)is due on January 12,2019

Required:

A) Prepare a statement of revenue,expenditure and change in fund balance and. Balance sheet for the park and recreation fund as a December 31,2018

B) indicate any assets,liability that would be reported in the city’s schedule of capital assets, or long term obligation as a consequence of the transactions engaged in by the park and recreation fund

Answer 1

Answer

For Better View please copy in Excel

Balance sheet of Arbor Hills
Parks and recreation equipment		$          900,000
Inventory		$          150,000
Cash		$       5,160,000
Total Assets		$ 6,210,000
Provision Earned leave		$           30,000
Equipment Finance		$          850,000
Vendor A/c		$          200,000
Special Revenue Fund		$       5,130,000
Total Liabilities		$     6,210,000

Arbor Hills
Statement of Revenue and Expenditure
Particulars	Note No	Amounts
City Special Park and Recreation Property tax		$     6,000,000
Less : Expense
Parks and recreation-Supplies	1	$        (700,000)
Inventories	2	$          150,000
Sick Leave	3	$        (170,000)
Interest Cost	4	$          (50,000)
Depreciation	5	$        (100,000)
Total Expenses		$      (870,000)
Net Income		$     5,130,000

Special Revenue Fund
Particulars		Amount
Opening Fund Balance		$                  -
Add: Current year net contributions		$   5,130,000.00
Closing Fund Balance		$5,130,000.00

Cash A/c
City Special Park and Recreation Property tax		$       6,000,000
Less: Leave fund paid		$        (140,000)
Less: Payment for Supplies		$        (500,000)
Less: Down Payment		$        (200,000)
Net Cash In Hand		$     5,160,000

Note 1, Parks and Recreation -Supplies were ordered for 0.8 Million but received only 0.7 million hence purchases are accounted only upto 0.7 million

2. Inventories 0.7 Million - 0.55 million Used , Balance 0.15 Million is inventory as at December 31

3. Sick leave is 0.17 million

4. Interest cost for the year accounted

5. It is assumed that the life of Equipment is 10 years , hence depreciation calculated on straight line method (ie 1000000/10 =$ 100,000)