8/18/2020 UNNAMED ASSIGNMENT

1. Award: 10.00 points Problems? Adjust credit for all students.

The Perch Falls Minor Hockey Association was established in Perch Falls in January, Year 5. Its mandate is to promote recreational hockey
in the small community of Perch Falls. With the support of the provincial government, local business people, and many individuals, the
association raised sufficient funds to build an indoor hockey arena, and it also established an endowment fund for paying travel costs to
tournaments on an annual basis.

The following schedule summarizes the cash flows for the year ended December 31, Year 5.

PERCH FALLS MINOR HOCKEY ASSOCIATION

($000s)
Operating Capital Endowment
fund fund fund
Cash inflows:
Government grant for operating costs $ 45
Government grant for hockey arena $ 400
Corporate donations for hockey arena 200
Registration fees 20
Contribution for tournaments $ 35.0
Rental of hockey arena 40
Interest received 2.1
105 600 37.1
Cash outflows:
Operating expenses 102
Construction of hockey arena 600
Purchase of corporate bonds 35.0
Travel costs for tournament 2.1
102 600 37.1
Cash, end of year $ 3 $ 0 $ 0

Additional Information

The new hockey arena was completed in late August, Year 5. The official opening was held on August 30, with a game between the Perch
Falls Old-Timers and the local firefighters. The arena is expected to have a 40-year useful life and no residual value.
A long-time resident of Perch Falls donated the land on which the arena was built. The land was valued at $70,000. The association gave
a donation receipt to the donor.
A former resident of Perch Falls donated ice-making and ice-cleaning equipment to the association on April 1, Year 5. A receipt for
$60,000 was issued for the donation. The equipment has a useful life of 10 years and no residual value.

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8/18/2020 UNNAMED ASSIGNMENT

The donation for tournaments was contributed on January 1, Year 5, with the condition that the principal amount of $35,000 be invested in
6% corporate bonds. The interest earned on the investment can be used only for travel costs for out-of-town tournaments. All investments
in bonds will be held to their maturity date.
The provincial government pledged $50,000 a year for operating costs. Ninety percent of the grant is advanced throughout the year. Upon
receipt of the association’s annual report, the government will issue the last 10% of the annual grant to the association.
Registration fees and rental fees for the hockey arena are received at the beginning of the hockey season and cover the entire season,
from September 1, Year 5, to April 30, Year 6.
At the end of the year, the association owed $3,000 for services received in the month of December.
The association wants to use the restricted fund method of accounting for contributions and to use three separate funds: operating fund,
capital fund, and endowment fund. All capital assets are to be capitalized and amortized, as applicable, over their estimated useful lives.

Required:
(a) Prepare a statement of financial position and statement of operations for each of the three funds as at and for the year ended December
31, Year 5. (Negative amounts should be indicated by minus sign. Enter your answer in thousands. Round "Endowment Fund"
answers in "Statement of Operations" to 1 decimal place. Leave no cells blank - ensure that "0" is entered wherever required. Omit
$ sign in your response.)

Perch Falls Minor Hockey Association

Statement of Operations
For the Year ended December 31, Year 5
(in $000s)
Operating Capital Endowment
Fund Fund Fund
Revenue
Operating grant $ 50 $ 0 $ 0
Capital grant 0 400 0
Corporate donations 0 200 0
Contribution of land 0 70 0
Contribution of equipment 0 60 0
Registration fees 10 0 0
Contribution of endowment 0 0 35.0
Rental income 20 0 0
Interest income 0 0 2.1
$ 80 $ 730 $ 37.1
Expenses
Operating expenses $ 105 $ 0 $ 0
Travel costs for tournament 0 0 2.1
Amortization of arena 0 5 0
Amortization of equipment 0 2 0
105 7 2.1
$ -25 $ 723 $ 35.0
Excess (deficiency) of revenues over expenses
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8/18/2020 UNNAMED ASSIGNMENT

Perch Falls Minor Hockey Association

Statement of Financial Position
As at December 31, Year 5
(in $000s)
Operating Capital Endowment
Fund Fund Fund
Cash $ 3 $ 0 $ 0
Accounts receivable 5 0 0
Investment in bonds 0 0 35
Land 0 70 0
Hockey arena 0 600 0
Equipment 0 60 0
Accumulated amortization 0 -7 0
$ 8 $ 723 $ 35
Accounts payable $ 3 $ 0 $ 0
Unearned revenue 30 0 0
Fund balance -25 723 35
$ 8 $ 723 $ 35

(b) (i) Assume that 500 children registered with the Association in Year 5. What was the average cost per registered child for Year 5 for
running the Association? (Enter your answer in dollars rounded to 1 decimal place. Round your answer to 1 decimal place. Omit $
sign in your response.)

Average cost per child $ 228.2

(b) (ii) Not available in Connect.

Explanation:

(a)
(in 000s)
1. Amortization of hockey arena ($600 × 1/40 × 4/12) = $5
2. Amortization of equipment ($60 × 1/10 × 4/12) = $2
3. Accounts receivable (10% × $50) = $5
4. Unearned revenue [50% × ($20 + $40)] = $30

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8/18/2020 UNNAMED ASSIGNMENT

Operating grant ($45 + $5) = $50

Registration fees ($20 / 2) = $10
Rental income ($40 / 2) = $20
Operating expenses ($102 + $3) = $105

(b)
(i)
The average cost per child for running the association for Year 5 was $228.2 (($105,000 + $7,000 + $2,100) / 500 children).

References

Worksheet Learning Objective: 12-03

Explain the objectives of fund
accounting, and prepare
financial statements using
fund accounting.

Learning Objective: Learning Objective: 12-04

12-02 Describe and Prepare journal entries and
apply the not-for- financial statements under
profit accounting and the restricted fund method.
reporting practices
currently mandated in
the CPA Canada
Handbook.

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