Assignment Problems For Chapter 11 Page 42

Assignment Problems For Chapter 11

(The solutions for these problems are only available in the solutions manual that has been provided to your instructor.)

Assignment Problem Eleven - 1 (Restricted Fund And Deferral Method Accounting) The Osgoode Hospital was founded in 1982 in order to provide limited patient care services in the local community. It is a not-for-profit organization and was originally funded by donations of $8,400,000. These funds were used to acquire land and to construct and equip their current facility. Prior to 2008, all accounting was done through a single general fund.
In 2008, it instituted a new fund raising campaign to raise funds for replacing some of its aging equipment. As the funds raised in this campaign can only be used for this purpose, management has established a separate restricted fund. There are no restrictions on the use of any income produced by investments made in this fund. Osgoode will account for this Replacement Fund using the restricted fund method. However, they will continue to use the deferral method for the General Fund. As of December 31, 2008, the Balance Sheets of the Hospitals two funds are as follows: General Fund Cash Accounts Receivable Allowance For Bad Debts Supplies Inventory Investments (At Cost) Land Building Building - Accumulated Amortization Equipment Equipment - Accumulated Amortization Total Assets Accounts Payable Deferred Contributions Building And Equipment Invested In Land Externally Restricted Fund Balance Unrestricted Fund Balance Total Liabilities And Fund Balance Other Information: 1. During 2009, Osgoode billed the provincial government and its patients a total amount of $3,263,000. Of this amount, $2,247,000 was for room and board, with the balance being for professional services. All accounts are due within 30 days. 2. Collections of Accounts Receivable during 2009 totaled $2,984,000. 3. During 2009, $27,000 of Accounts Receivable had to be written off. At the end of the year, is is estimated that further write offs will be equal to 1 percent of annual billings. $ ( 65,000 105,000 18,000) 46,000 Replacement Fund $125,000

1,090,000 5,800,000 ( 1,550,000) 1,950,000 ( 588,000) $6,900,000 $ 46,000 5,612,000 1,090,000 N/A 152,000 $6,900,000

325,000

$450,000

$450,000 $450,000

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4. Equipment costing $82,000 was acquired with cash from the Replacement Fund. 5. During 2009, Osgoode paid operating expenses of $3,216,000. They also paid $196,000 for supplies. 6. During 2009, an individual contributes $375,000 on condition that this full amount be invested in government bonds. While the income from these bonds can be used for any purpose, the principal cannot be used. Osgoode established an Endowment Fund for this contribution. 7. During 2009, the hospital received unrestricted contributions of $161,000. In addition, it received interest payments of $12,000 from the investments held in the endowment fund. 8. Accounts Payable balances are related to operating expenses and to supplies. The respective amounts at December 31, 2008 and December 31, 2009, are as follows: December 31 2008 Operating Expenses Inventory Of Supplies Total $32,000 14,000 $46,000 December 31 2009 $35,000 18,000 $53,000

9. Supplies on hand on December 31, 2009 totaled $28,000. 10. Amortization on the building for 2009 was $65,000. For the equipment, the total amortization was $97,000, of which $12,000 related to equipment purchased by the Replacement Fund. 11. On December 31, 2009, accrued interest on the investments in the Replacement Fund was $17,000. There are no restrictions on the use of this income. Required: Provide the journal entry that would be required to record each item of Other Information. In addition, indicate the fund in which each journal entry would be recorded.

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Assignment Problem Eleven - 2 (Fund Accounting) The Bookkeepers Rehabilitation Fund is a registered Canadian charity, organized to provide rehabilitation for those Chartered Bookkeepers (CBs, hereafter) that have found so much stress in their daily work that they have been driven to various acts of depravity.
The fund maintains several residences where such individuals are provided with a comprehensive program of physical and mental therapy. The program is carefully designed to restore them to their former status as esteemed professionals. The work of the fund is supported by a combination of user fees, support from various community organizations, and an annual fund raising dinner. The accounting system of this organization is based on three funds. These are an Operating Fund, a Capital Fund, and a Capital Asset Fund. As the name implies, all operating revenues and most operating expenses are recorded in the Operating Fund. The Capital Fund is used to record major grants from government organizations. Also recorded here would be allocation of these grants to either the Capital Asset Fund or the Operating Fund, as well as income from investments made with Capital Fund resources. The Capital Asset Fund is designed to record capital assets purchased from both the Capital Fund and the Operating Fund. Amortization of these assets is also recorded in this fund as a direct reduction of the Fund Balance On January 1 of the current year, the Balance Sheets of the three Funds are as follows: Operating Fund Assets Cash Temporary Investments (At Cost) Interest Receivable Fees Receivable Total Equities Accounts Payable Wages Payable Unrestricted Balance Total Capital Fund Assets Cash Term Deposits Total Equities Fund Balance Total Capital Asset Fund Assets Furniture and Fixtures Buildings Accumulated Amortization Total $4,150,000 3,110,000 ( 2,585,000) $4,675,000 $ 28,000 895,000 $923,000 $923,000 $923,000 $290,000 605,000 28,000 47,000 $970,000 $205,000 155,000 610,000 $970,000

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Assignment Problems For Chapter 11 Page 45

Equities Fund Balance Total Other Information:

$4,675,000 $4,675,000

1. During the year, the Fund billed user fees totalling $3,395,000. Collections for the year were $3,102,000 while, at the end of the year, $172,000 in billed fees were judged to be uncollectible. 2. During the year, community organizations pledged total contributions of $11,215,000. At the end of the current year, $275,000 of this amount had not been received. There are no restrictions on the use of these contributions. 3. The annual fund raising dinner is scheduled for December 1. A separate Dinner Fund is established to account for this event and, on November 1, $875,000 was advanced from the Operating Fund to set up this special Fund. The event was a success, generating total revenues of $3,425,000 and incurring total costs of $1,015,000. All revenues had been collected at the event but there were $130,000 in costs which had not been paid. The Dinner Fund repaid the original $875,000 advanced from the Operating Fund and, in addition, disbursed $2,395,000 as a loan to the Operating Fund. 4. During the year, salaries and wages of $11,422,000 were paid. At the end of the current year, accrued salaries and wages amounted to $217,000. 5. During the year, invoices for goods and services were received in the amount of $4,427,000. Payments on Accounts Payable for the year were $4,425,000. 6. The Temporary Investments in the Operating Fund were sold during the year for $617,000. Also during the year, the Operating Fund collected interest of $63,000, including the $28,000 accrual in the January 1 Balance Sheet. 7. Under a special grants program, the Federal Government has agreed to provide $5,000,000 towards the acquisition of an existing building. The building is to be converted into a large new residence to accommodate the increasing numbers of CBs requiring the help of the Fund. The first $2,000,000 of this grant was received during the current year. The Bookkeepers Rehabilitation Fund incurred costs of $205,000 in anticipation of acquiring the new building. A total of $15,000 of these costs were unpaid at year end. Of the remaining cash, $1,750,000 was invested in term deposits. Both the principal and interest of all term deposits were rolled over every thirty days, with the total balance rising to $2,765,000 on December 31 of the current year. 8. Amortization on the capital assets amounts to $890,000 for the year. Required : For each of the four funds, including the temporary Dinner Fund: A. Provide the journal entry that would be required to record each item of Other Information. Your solution should indicate the fund in which each journal entry would be recorded. B. Provide a Statement Of Operations And Fund Balances and a Statement Of Financial Position. Note that there is no Statement Of Operations And Fund Balances for the Capital Asset Fund.

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Assignment Problem Eleven - 3 (Accounting Recommendations) On August 15, 2006, the European Exchange Club (EEC) was formed in an effort to create a united social group out of several separate regional clubs in the vicinity of the city of Decker, located in central Canada. The purpose of the group is to combine resources to meet the recreational, cultural, and social needs of its collective members. EEC was formed through the collaboration of the following clubs and their memberships:
Members The Canadian Russian Society The Italian Clubs Of Canada Portuguese Cultural Foundation Association Of Greeks Of The World The German Groups Other Total 12,300 10,800 4,100 2,700 1,100 1,700 32,700

It is now December 2009. EECs executives have spent the past few years planning and preparing for its operation. The clubs community centre is expected to be fully completed next year. The facilities of the club will include the following:

a multi-purpose building to house banquets, meetings and arts activities hiking trails indoor/outdoor tennis facilities bicycle trails baseball diamonds an indoor/outdoor pool a soccer field

The multi-purpose building is 75 percent complete, and EECs executives have stated that it is approximately within budget. Estimated building costs were outlined in a 2006 feasibility study, as follows: Construction Cost Site Preparation Costs Furniture And Fixtures Consulting Fees Miscellaneous Total $2,300,000 400,000 550,000 120,000 80,000 $3,450,000

The four acres of land on which the facility is built were provided by the provincial government by way of a five-year lease at $1 a year. The adjacent land of 60 acres was contributed to the club by The Italian Clubs Of Canada. Previously, this land had been leased to a farmer for $54,000 a year. The 64 acres will be used for the following projects, which will incur the additional costs listed below: Hiking Trails Baseball Diamonds Soccer Field Bicycle Trails Indoor/Outdoor Pool Indoor/Outdoor Tennis Facilities Total $ 595,000 30,000 22,000 95,000 700,000 300,000 $1,742,000

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In addition to these development costs, the club faces annual operating costs of approximately $740,000, outlined in Exhibit I. John Mendez-Smith, the newly elected president of the club, has approached your firm, Young and Kerr Accountants, to prepare a report that provides recommendations on accounting . You took the notes appearing in Exhibit II at a meeting with the clubs president and executive committee. Required: Prepare the report. (CICA Adapted)

Exhibit I European Exchange Club Yearly Budget Operating Revenues Membership Fees Social Rentals Meeting Rentals Sport Rentals Concessions Fundraising Events Total Operating Revenues Operating Costs Salaries Administrative Costs Maintenance Utilities Educational Scholarships Total Operating Costs Exhibit II Notes Taken From Your Meeting With Mr. Mendez-Smith And The Executive Committee 1. Under the lease agreement with the province, EEC is responsible for maintenance and all costs of improvements. The lease agreement provides for 20 renewal terms of five years duration each. Renewal is based on the condition that EEC makes the clubs services available to all present and future EEC member-clubs and their membership. 2. EEC has requested an operating grant from the provincial government. Its proposal requests the province to provide EEC with annual funds to cover 50 percent of approved operating costs incurred to provide services to all club members. The City of Decker wishes to construct an arena and a swimming pool and has opposed the proposed operating grant. The City has asked to be the first in line for available provincial funds. The committee members suspect that they will have to compromise on their proposal and are having problems determining the minimum annual funds required by the club from the province. 3. The Russian and Italian clubs have been arguing with other clubs over the equalization Canadian Advanced Accounting (2nd IC Edition) - Assignment Problems $ 91,000 185,000 50,000 23,000 61,000 225,000 $635,000

$363,000 39,000 126,000 112,000 100,000 $740,000

Assignment Problems For Chapter 11 Page 48

payments required from each club. Currently, each club makes payments to EEC based upon their proportionate membership. Payments for each calendar year are made on February 1 of the following year. The Russian group performs the administrative functions of EEC and has charged, and will continue to charge, the club only 50% of the market value of these services. 4. The accounting function is a major concern of the member-club representatives. In particular, they have raised the following issues: a) Several fund raising events are organized by individual member clubs. b) Any donations to EEC are received through the member clubs. c) No accounting has been made of services donated to EEC by the members of the individual clubs.

d) EEC has approached a bank to assist in future phases of the clubs development. The bank has informed EEC that it is interested in asset values and EECs ability to repay the loans.

Canadian Advanced Accounting (2nd IC Edition) - Assignment Problems