Chapter 12 Question

University of Notre Dame **We aren't endorsed by this school
Nov 19, 2023
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Problem 12-4 Lo1, @2, 5 The Brown Training Centre is a charitable organization dedicated to providing computer training to unemployed people. Individuals must apply to the centre and indicate why they would like to take the three-month training session. If their application is accepted, they must pay a $200 deposit. The deposit is refunded upon successful completion of the course or is forfeited as a processing fee if the individual does not complete the course. During the first year of operations in Year 3, 80 individuals were accepted into the course. Of these 80 individuals, 50 completed the course, 11 dropped out, and 19 were still taking the course at the end of the fiscal year. The centre receives most of its funding from the provincial government. During the year, the government advanced $1,000,000 to cover operating costs. Within two months of the year-end, the centre must provide financial statements prepared in accordance with GAAP. The government will cover all operating costs. The excess of amounts advanced over the amount expended must be carried over and applied to operating costs of the next year. Operating costs to be reimbursed are defined to exclude purchases of capital assets and are to be reduced by the amount of application fees forfeited. A private company donated computers and office equipment with a fair value of $340,000. The centre was fortunate to receive this donation. Otherwise, it would have had to raise money through other means to purchase these items. The capital assets were put into use as of April 1, Year 3, and have an estimated useful life of three years. The centre uses the straight-line method to amortize its capital assets. The part-time bookkeeper for the centre prepared the following cash flow statement for the year ended December 31, Year 3: Cash receipts: Government grant $1,000,000 Deposits from course participants 16.000 Total cash receipts 1.016.000 Cash expenditures: Salaries and benefits 620,000 Administration and supplies 222,000 Rent and utilities 160,000 Refund of deposits 10.000 Total cash disbursements 1,012,000 Cash balance at end of year $ 4000 At the end of the year, the following costs had been incurred but not yet paid: Salaries and benefits $9,000 Utilities 6,000 The executive director of the centre has asked you for assistance in preparing the financial statements for the centre for the first year of operations. The deferral method should be used in accounting for the contributions.
Required (a) Briefly explain how the accrual basis of accounting is applied when accounting for capital assets for an NFPO. (b) Prepare the statement of revenues and expenses for the centre for the year ended December 31, Year 3. (c) Explain how a user of the financial statements might react to the dollar value of the Excess of revenues over expenses on the statement of revenues and expenses. (d) Compute the following liabilities on the statement of financial position for the centre at December 31, Year 3: (i) Accrued liabilities (ii) Deposits from course participants (iii) Deferred contributions (CPA Canada adapted)" Problem 12-6 @02, @3,Gl4 The following are selected transactions of the specific-purpose fund, the capital fund, and the endowment fund of Wadena Nursing Home, a not-for-profit entity: 1. Received in the endowment fund new permanent endowments totalling $150,000 and new term endowments totalling $120,000. 2. Received pledges of $1,500,000 in the capital fund for the new wing. The uncollectible pledges are estimated to be 10 percent. 3. Received gifts of $50,000 for research and $30,000 for education in the specific-purpose fund. 4 . Received the following interest and dividends on investments: Endowment fund (permanent) $100,000 Plant fund 45,000 Specific-purpose fund (research) 31,000 5. Notified that the specific-purpose fund had fulfilled the agreements related to restricted gifts of $87,000 and the funds could be transferred to the general fund. Transferred cash of $70,000 to the general fund with the balance to be sent later. 6. Made investments in GICs in the following funds: Endowment fund $270,000 Plant fund 160,000 Specific-purpose fund 75,000 Required Prepare appropriate journal entries for the transactions in the specific-purpose fund, capital fund, and endowment fund assuming that 'Wadena uses the restricted fund method of accounting for restricted funds.
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