On April 1, 2020, the City purchased a swimming pool from a private operator for $500,000 and created a Swimming Pool (Enterprise) Fund. The city has a calendar year as its fiscal year. During the year ended December 31, 2020, the following transactions occurred related to the City’s Swimming Pool Fund: On April 1, 2020, $300,000 was provided by a one-time contribution from the General Fund, and $200,000 was provided by a loan from a local bank (secured by a note), both of which were received in cash. The loan (Notes Payable) has an annual interest rate of 5%, payable semiannually on October 1 and April 1. The purchase of the pool was recorded (paid in cash). Based on an appraisal, it was decided to allocate $100,000 to the land, $300,000 to improvements other than buildings (the pool), and $100,000 to the building. Charges for services amounted to $270,000, all received in cash. Salaries paid to employees amounted to $172,500, all paid in cash, of which $100,000 was cost of services and $72,500 was administration. The first interest payment (for the loan in transaction #1) was made to the bank. Depreciation of $28,125 for the pool and $7,500 on the building was recorded for the nine months they were in operation. Interest (for the loan in transaction #1) was accrued for the year. Required: Prepare journal entries to record the transactions of the swimming pool (enterprise) fund for the fiscal year ended December 31, 2020. (If no entry is required for a transaction/event, state “No entry.”)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On April 1, 2020, the City purchased a swimming pool from a private operator for $500,000 and created a Swimming Pool (Enterprise) Fund. The city has a calendar year as its fiscal year. During the year ended December 31, 2020, the following transactions occurred related to the City’s Swimming Pool Fund:

On April 1, 2020, $300,000 was provided by a one-time contribution from the General Fund, and $200,000 was provided by a loan from a local bank (secured by a note), both of which were received in cash. The loan (Notes Payable) has an annual interest rate of 5%, payable semiannually on October 1 and April 1.
The purchase of the pool was recorded (paid in cash). Based on an appraisal, it was decided to allocate $100,000 to the land, $300,000 to improvements other than buildings (the pool), and $100,000 to the building.
Charges for services amounted to $270,000, all received in cash.
Salaries paid to employees amounted to $172,500, all paid in cash, of which $100,000 was cost of services and $72,500 was administration.
The first interest payment (for the loan in transaction #1) was made to the bank.
Depreciation of $28,125 for the pool and $7,500 on the building was recorded for the nine months they were in operation.
Interest (for the loan in transaction #1) was accrued for the year.

Required:

Prepare journal entries to record the transactions of the swimming pool (enterprise) fund for the fiscal year ended December 31, 2020. (If no entry is required for a transaction/event, state “No entry.”)

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