Question

Question 4                                                                                    

Senior Immigrants (SI) is an NFPO established a few years ago to help senior immigrants learn English and integrate into Canadian society. SI has some paid staff supported by a large group of volunteers. The organization is funded by government grants and private donations. During the current year, the following events occurred:

SI was awarded a $1,000,000 government grant. The terms of the grant are:

$380,000 for the acquisition of four mini-buses

$120,000 for rent for the next 2 years

$500,000 for SI’s operations and programs

In the current year, SI received $750,000—$380,000 for the mini-buses, $120,000 for the rent, and $250,000 for its operations and programs. The remaining $250,000 will be released next year.

During the current year, SI paid actual rental costs of $55,000.

A local car dealership that has made substantial donations to SI in the past supplied the mini-buses and customized them to SI’s requirements. The customized vehicles have a fair value of $500,000, but the car dealership sold the vehicles to SI for $425,000. SI took delivery of the vehicles in the summer of the current year.

The vehicles are expected to have a 10-year useful life. SI’s policy is to take a full year’s of amortization in the year of acquisition.

In the current year, SI paid salaries of $150,000. $25,000 of the salaries related to fundraising for endowments and the rest was related to operations and SI’s annual fundraising projects.

In the current year, SI paid $10,000 for a training seminar for volunteers.

In the spring of the current year, SI held a karaoke fundraiser that raised $50,000. SI incurred $21,000 in costs related to this fundraiser. The funds raised have been designated by the donor for SI’s Canadian cooking program.

SI’s participation in an annual local television telethon resulted in pledges of $235,000. $169,000 had been collected by the end of the current year.

On July 1 of the current year, SI received an endowment of $250,000 from a refugee who became a successful business person in Canada. The investment income from this endowment can be used by SI as it sees fit. The funds were invested in bonds that have an annual yield of 3%.

Required:

Prepare the necessary journal entries for the current year using

the deferral method

and

the restricted fund method.

Be sure the account names you use clearly identify the type of account or fund.

Answer 1

Dear Student, I here providing journal entries for each every transaction in 2 methods.
please go through the answer. If any doubts feel free to ask.
	JOURNAL ENTRIES:	DEFFERAL METHOD
DATE/S.NO	PARTICULARS	DEBIT	CREDIT
1ST YEAR	CASH A/C DR	750000
	TO GROSS RECIEPTS		750000
	(GRANT RECEIVED)
1ST YEAR	RENT A/C DR	55000
	TO CASH		55000
	(ACTUAL RENT PAID)
1ST YEAR	MINI BUS A/C DR	425000
	TO CASH		425000
	( MINI BUS PURCHASED)
1ST YEAR	SALARIES A/C DR	150000
	TO CASH		150000
	(SALARIES PAID)
1ST YEAR	TRAINING EXPENSES A/C DR	10000
	TO CASH		10000
	(TRAINING SEMINAR FOR VOLUNTERS)
1ST YEAR	FUNDAISER COST A/C DR	21000
	TO CASH		21000
	( AMOUNT PAID TO FUND RAISER)
1ST YEAR	CASH A/C DR	250000
	TO GROSS RECEIEPTS		250000
	(ENDOWNMENT AMOUNT RECEIEVED)
1ST YEAR	INVESTMENT A/C DR	250000
	TO CASH		250000
	(ENDOWNMENT AMOUNT INVESTED)
1ST YEAR	AMORTISATIOIN	42500
	TO MINIBUS		42500
	JOURNAL ENTRIES:	RESTRICTED FUND METHOD
DATE/S.NO	PARTICULARS	DEBIT	CREDIT
1ST YEAR	CASH A/C DR	750000
	TO GROSS RECIEPTS		750000
1ST YEAR	MINI BUS FUND A/C	380000
	RENT FUND A/C	120000
	OPERATIONAL EXP FUND A/C	250000
	TO CASH		750000
1ST YEAR	RENT PAID A/C DR	55000
	TO RENT FUND A/C		55000
1ST YEAR	MINI BUS A/C DR	425000
	TO MINI BUS FUND A/C		425000
1ST YEAR	SALARIES A/C DR	175000
	TRAINING EXPENSES	10000
	FUNDAISER COST	21000
	TO OPERATION EXP FUND A/C		206000
1ST YEAR	MINI BUS FUND A/C	45000
	TO OPERATION EXP FUND A/C		45000