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Enterprise Fund Golf Course Management.* (LO7-1) Kaui County has operated a popular oceanside municipal golf course for more than 30 years. Local patrons as well as tourists enjoy reasonable rates in a picturesque setting. Ten years ago, the course was quite profitable, so the county created an enterprise fund and moved accounting for the golf operations from the General Fund to the new enterprise fund. Over the years, however, course usage has declined and costs have increased. During the current year, the course suffered a $650,798 shortfall that had to be covered by the county’s General Fund. In the upcoming fiscal year, the county projects the shortfall to be more than $1 million. Many have criticized the county for injecting money into a business that should be primarily funded through user charges. Supporters of the golf course note that the municipal course is part of the county’s Parks and Recreation department, which benefits the entire community, hence county support of the course is warranted.
Required
- a. Is the Kaui County golf course required to be accounted for as an enterprise fund? What are the accounting implications of operating the golf course as part of a General Fund department rather than an enterprise fund activity?
- b. Assume you are a member of a task force that the county has appointed to address the current golf course situation. Consider each of the following options and draft a list of questions that come to mind as you evaluate the potential for each option.
- (1) Status Quo. The county could continue to operate its golf course with all revenues, expenses, and employees belonging to the municipality.
- (2) Concession Agreements or Management Contracts. The county could hire a management company to operate all aspects of the golf facility, or grant a license to an outside vendor to operate a portion of the facility. This option offers several combinations, whereby the county maintains control of the golf operations but outsources the golf pro shop, food and beverage operations, and course maintenance to one or more concessionaires.
- (3) Operating Lease. The county could lease the golf facility to a private operator in exchange for an annual (or monthly/quarterly) lease payment to the municipality. The lease could be established to include certain lessee requirements, including capital investment in facility improvements, minimum standards of maintenance, and greens fee restrictions.
- (4) Selling the Golf Course. The county could place the golf course up for sale. This removes the facility from the books of the municipality.
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Chapter 7 Solutions
Loose-leaf For Accounting For Governmental & Nonprofit Entities
- A tax exempt municipality is considering the construction of a new municipal waste water treatment facility. Two different sites have been selected as technically, politically, socially, and financially feasible. The city council uses 6% interest rate for all analyses for public projects. The expected cash flow for the two alternatives are as follow: Year Alt. A Alt. B - $14082160 - $26368476 $1826323/year $3081175/year 0 1- 75 What is the incremental benefit/cost ratio? Enter your answer as follow: 12.34arrow_forwardThe board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about $69,000 of new equipment each year and wants to begin a fund to purchase a $619,000 piece of property for club expansion. The club manager is concerned about the club’s capability to purchase equipment and expand its facilities. One club member has agreed to help prepare the following financial statements and help the manager ascertain whether the plans are realistic. Additional information follows the financial statements. CORTEZ BEACH YACHT CLUB Statement of Income (Cash Basis) For the Year Ended October 31 Year 9 Year 8 Cash revenues Annual membership fees $ 900,000 $ 619,000 Lesson and class fees 492,700 379,000 Miscellaneous 5,900 4,900 Total cash received $ 1,398,600 $ 1,002,900 Cash costs Manager’s salary and benefits $ 91,000 $ 91,000 Regular…arrow_forwardThe board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about $64,000 of new equipment each year and wants to begin a fund to purchase a $614,000 piece of property for club expansion. The club manager is concerned about the club’s capability to purchase equipment and expand its facilities. One club member has agreed to help prepare the following financial statements and help the manager ascertain whether the plans are realistic. Additional information follows the financial statements. CORTEZ BEACH YACHT CLUB Statement of Income (Cash Basis) For the Year Ended October 31 Year 9 Year 8 Cash revenues Annual membership fees $ 850,000 $ 614,000 Lesson and class fees 486,200 374,000 Miscellaneous 5,400 4,400 Total cash received $ 1,341,600 $ 992,400 Cash costs Manager’s salary and benefits $…arrow_forward
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- [The following information applies to the questions displayed below.]The Township of Thomasville’s General Fund has the following net resources at year end: $69,000 of prepaid insurance $410,000 rainy day fund approved by the township governing board with specific conditions for its use $1,800 of supplies inventory $60,000 state grant for snow removal $150,000 contractual obligations for the purchase of equipment Outstanding encumbrance of $105,000 for the purchase of furniture & fixtures (assume no contractual obligation) Total Fund Balance is $1,010,500 What would be the total Nonspendable fund balance? Multiple Choice $70,800 $150,000 $69,000 $410,500 What would be the total Restricted fund balance? Multiple Choice $60,000 $150,000 $479,000 $410,000arrow_forwardProvide the right answers for the city of Boca A) The City of Boca Raton has decided to borrow funds to improve the NW/SW 4th Ave roadway improvement project. Kayla gives them a cost estimate of $14 million, including her fees. What is the annual debt service amount if the bonds are 4% for 30 years? B) The City of Boca Raton is expected to see growth of 5% in population over the next 5 years in its utility. FPL says power costs will rise 2%/yr over that period. If the City utility’s power cost is $450,000/year, what should the projected budget be in 5 years?arrow_forward[The following information applies to the questions displayed below.]The Township of Thomasville’s General Fund has the following net resources at year end: $69,000 of prepaid insurance $410,000 rainy day fund approved by the township governing board with specific conditions for its use $1,800 of supplies inventory $60,000 state grant for snow removal $150,000 contractual obligations for the purchase of equipment Outstanding encumbrance of $105,000 for the purchase of furniture & fixtures (assume no contractual obligation) Total Fund Balance is $1,010,500 What would be the total Committed fund balance? Multiple Choice $410,000 $210,000 $560,000 $562,500 What would be the total Assigned fund balance? Multiple Choice $129,000 $165,000 $315,000 $105,000arrow_forward
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