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Arlington Boat Club
Author(s):
Young, David W.
Functional Area(s):
   Financial Accounting
Setting(s):
   For Profit
Difficulty Level: Beginner
Pages: 3
Teaching Note: Available. 
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First Page and the Assignment Questions:

The Arlington Boat Club (ABC) was situated on the shores of Spy Pond, in Arlington, Minnesota. ABC had been in existence for over 25 years, and offered residents of Arlington and surrounding communities an opportunity for inland fresh water recreation. The club maintained a beach and seasonal dock facilities that were used for sailing, swimming, fishing, and more. The club also provided an opportunity to launch and moor all types of small craft, sponsored regattas, and even provided racks for sailboards and canoes. During the off season, it sponsored a variety of indoor activities in its clubhouse, such as bingo and bridge tournaments.

The club was open for an extended summer season for a membership fee that was, in the words of its president, “usually no more than the cost of a one-week vacation rental.” During the off season, there were no dues; the club derived its revenue by charging for its activities.

The club’s summer season was five months long, beginning on May 1, and running through September 30. The membership dues were payable on May 1 each year. For the summer season 2002, the dues had been set at $600 per member.

The club prepared financial statements quarterly, i.e. on March 31, June 30, September 30, and December 31. The balance sheet as of March 31, 2002 is shown in Exhibit 1.

During the second and third quarters 2002 (i.e. for the six-month period from April 1 to September 30, 2002), the following events took place:

  1. On April 1, 220 members enrolled. Of these, 200 members paid their dues for the entire season.
  2. On April 1, the club sold a boat winch for $3,000. The winch had cost $4,000 and had accumulated depreciation of $800 as of 30 March.
  3. On April 9, the remaining 20 members (see event #1) promised to pay. The club knew these members from prior summers, and had no doubt whatsoever that they would pay by the end of the season.
  4. A member of the board, who had been one of the 200 members in event 1 above, took out a $600 loan from a local bank to finance her seasonal dues.
  5. $10,000 of supplies were acquired on account (i.e., no cash payment was made).
  6. Wages of $11,000 were earned by the club’s employees. They were paid in cash.
  7. Another $2,000 had been earned by employees as of September 30, but no cash payment had been made.
  8. $6,000 was received from members in payment on their accounts.
  9. The club paid $10,500 to its suppliers on account.
  10. The mortgage interest payments were made as scheduled.
  11. On September 1, taking advantage of an end-of-season special, the club signed a . . .

Assignment

  1. Set up T accounts, enter beginning balances, and post the entries.
  2. Make any adjusting entries you deem necessary.
  3. Perform the closing process.
  4. Prepare an income statement for the six months ended September 30, 2002, and a balance sheet as of September 30, 2002.