Chapter 10 Homework 20.0 21 370 1020 The Morrell Minor Hockey Association was established in Morrell in January Year 5. Its mandate is to promote recreational hockey in the small community of Morrell. With the support of the provincial government, local businesspeople, 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. Morrell Minor Hockey Association (5000) Operating Fund Capital Fund Endowment Fund Cash inflows Government grant for operating costs 450 Government grant for hockey arena 4000 Corporate donations for hockey arena 2000 Registration fees Contribution for tournaments 350 Rental of hockey arena 400 Interest Received 1050 Cash outfows: Operating expenses Construction of hockey arena 6000 Purchase of corporate bonds Travel costs for tournament 1020 6000 Cash end of year 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 Morrell 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 Morrell 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 Morrell donated ice- making and ice- cleaning equipment to the association. A receipt for $60,000 was issued for the donation. The equipment has a useful life of 10 years and no residual value. 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. 350 21 371 SOLO 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. (b) 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? What costs did you include/exclude and why? (c) All facts about this NFPO are identical to those described above, except that the association wants to use the deferral method of accounting for contributions. The association will continue to use the three separate funds. 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. -2
