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,
Y
ear
5.
PERCH FALLS MINOR HOCKEY ASSOCIATION
($000s)
Operating fund Capital fund Endowment fund
|
Cash inflows
|
|
|
Government grant for operating costs
|
$90
|
|
|
Government grant for hockey arena
|
$500
|
|
Corporate donations for hockey arena
|
460
|
|
Registration fees
|
50
|
|
|
Contribution for tournaments Rental of
|
$50
|
hockey arena Interest received
|
70
|
|
|
Cash outflows
|
210
|
960
|
53
|
Operating expenses Construction of hockey
|
205
|
|
|
arena Purchase of marketable securities
|
960
|
|
Travel costs for tournament
|
50
|
|
05
|
960
|
53
|
Cash, end of year
|
$5
|
$0
|
$0
|
Additional Information
• The new hockey arena was completed in late August Year 5. The official open- ing 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 $100,000. The association gave a donation receipt to the donor.
• A former resident of Perch Falls donated ice-making and ice-cleaning equip- ment 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 $50,000 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
p
r
ovincial
government
pledged
$100,000
a
year
for
operating
costs.
Ninety
pe
r
cent
of
the
grant
is
advanced
th
r
oughout
the
yea
r
.
Upon
r
eceipt
of
the
association’s
annual
r
eport,
the
government
will
issue
the
last
10%
of
the
annual grant to the association.
•
Registration
fees
and
r
ental
fees
for
the
hockey
a
r
ena
a
r
e
r
eceived
at
the
begin-
nin
g
o
f
th
e
hocke
y
seaso
n
an
d
cove
r
th
e
enti
r
e
season
,
f
r
o
m
Septembe
r
1
,
Y
ea
r
5,
to
April 30,
Y
ear
6.
•
At
the
end
of
the
yea
r
,
the
association
owed
$7,000
for
services
r
eceived
in
the
month of Decembe
r
.
•
The
association
wants
to
use
the
r
estricted
fund
method
of
accounting
for
con-
tributions
and
to
use
th
r
ee
separate
funds:
operating
fund,
capital
fund,
and
endowment
fund.
All
capital
assets
a
r
e
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 300 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?