Question 2 (23 marks) Calgary Drama Club (CDC) is a drama club for young Calgarians. It...

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Question 2 (23 marks) Calgary Drama Club (CDC) is a drama club for young Calgarians. It provides an opportunity for young people to learn about drama and perform in the theatre at levels consistent with their skills and commitment. The club has operated as a not-for-profit organization since its inception in 2020. CDC has a June 30th year-end. CDC's statement of financial position at June 30, 2022 was as follows: Assets Cash Grant receivable Membership dues receivable Land Liabilities and net assets Accounts payable Net assets, unrestricted Net assets, restricted - land $ 46,000 35,000 5,700 350,000 $436,700 $ 12,600 74,100 350,000 $436,700 Additional information for the year ended June 30, 2023: ⚫ In July 2022, the provincial government released the grant receivable for the 2022 fiscal year and confirmed the annual operating grant for fiscal 2023 of $400,000. All but $40,000 of the grant was received by June 30, 2023. The remaining grant money will be received after submitting audited financial statements for the year. ⚫ Membership fees amounting to $146,000 were collected for the year. Membership fees of $3,500 remained due and not yet collected at year-end. • Rent was paid for the year, $96,000. Other operating expenses amounted to $364,000, of which $22,000 was still payable at year-end. In an effort to enhance the image of the club and to promote club members' careers in theatre, CDC initiated their first fundraising program in January 2023 to raise funds to build a theatre and to create an endowment fund for scholarships. The fundraising program was a huge success. By June 30, 2023, the club had received the following contributions: ⚫ Cash contributions, $2,100,000, of which $1,800,000 were specifically designated for the construction of the theatre. The remaining amount was for operational use. ⚫ An additional $300,000 worth of pledges were also received. CDC management is hopeful that it will be able to collect 90% of these pledges. The construction of the theatre began in April 2023, and is expected to cost $2,200,000. By June 30, 2023, construction costs of $1,200,000 were incurred. The theatre is slated to open by September 2023 and is expected to have a useful life of 30 years and no residual value. Sound system equipment valued at $200,000 was purchased from Future Buy Electronics at a special price of $50,000. The sound system was installed in the theatre being constructed. It is expected to have a useful life of 15 years and no residual value. The Smith Family donated $1,000,000 in cash which was specifically designated for a scholarship fund. The cash received from the Smith Family was invested with a professional investment advisor. The income earned from the investment will be used to provide scholarships to students attending an arts college starting in fiscal 2024. As per the account statement received from the investment advisor, the income earned on the investment by June 30, 2023 amounted to $6,500. • A wealthy benefactor donated artwork to decorate the new theatre. The artwork has not been professionally valued, but CDC estimates that it is worth at least $100,000. CDC chooses to record the artwork at a nominal value of $1,000. Required: a. CDC uses the deferral method of accounting with a single operating fund for contributions. Prepare a statement of operations for the year ended June 30, 2023 and a statement of financial position at June 30, 2023. (20 marks) b. Assume instead that CDC uses the restricted fund method of accounting for contributions. Explain how the contribution for the scholarship should be reported in the year ending June 30, 2023 and in the future years when the scholarships are disbursed. Clearly state any assumptions you need to make in this regard. (3 marks) Question 2 (23 marks) Calgary Drama Club (CDC) is a drama club for young Calgarians. It provides an opportunity for young people to learn about drama and perform in the theatre at levels consistent with their skills and commitment. The club has operated as a not-for-profit organization since its inception in 2020. CDC has a June 30th year-end. CDC's statement of financial position at June 30, 2022 was as follows: Assets Cash Grant receivable Membership dues receivable Land Liabilities and net assets Accounts payable Net assets, unrestricted Net assets, restricted - land $ 46,000 35,000 5,700 350,000 $436,700 $ 12,600 74,100 350,000 $436,700 Additional information for the year ended June 30, 2023: ⚫ In July 2022, the provincial government released the grant receivable for the 2022 fiscal year and confirmed the annual operating grant for fiscal 2023 of $400,000. All but $40,000 of the grant was received by June 30, 2023. The remaining grant money will be received after submitting audited financial statements for the year. ⚫ Membership fees amounting to $146,000 were collected for the year. Membership fees of $3,500 remained due and not yet collected at year-end. • Rent was paid for the year, $96,000. Other operating expenses amounted to $364,000, of which $22,000 was still payable at year-end. In an effort to enhance the image of the club and to promote club members' careers in theatre, CDC initiated their first fundraising program in January 2023 to raise funds to build a theatre and to create an endowment fund for scholarships. The fundraising program was a huge success. By June 30, 2023, the club had received the following contributions: ⚫ Cash contributions, $2,100,000, of which $1,800,000 were specifically designated for the construction of the theatre. The remaining amount was for operational use. ⚫ An additional $300,000 worth of pledges were also received. CDC management is hopeful that it will be able to collect 90% of these pledges. The construction of the theatre began in April 2023, and is expected to cost $2,200,000. By June 30, 2023, construction costs of $1,200,000 were incurred. The theatre is slated to open by September 2023 and is expected to have a useful life of 30 years and no residual value. Sound system equipment valued at $200,000 was purchased from Future Buy Electronics at a special price of $50,000. The sound system was installed in the theatre being constructed. It is expected to have a useful life of 15 years and no residual value. The Smith Family donated $1,000,000 in cash which was specifically designated for a scholarship fund. The cash received from the Smith Family was invested with a professional investment advisor. The income earned from the investment will be used to provide scholarships to students attending an arts college starting in fiscal 2024. As per the account statement received from the investment advisor, the income earned on the investment by June 30, 2023 amounted to $6,500. • A wealthy benefactor donated artwork to decorate the new theatre. The artwork has not been professionally valued, but CDC estimates that it is worth at least $100,000. CDC chooses to record the artwork at a nominal value of $1,000. Required: a. CDC uses the deferral method of accounting with a single operating fund for contributions. Prepare a statement of operations for the year ended June 30, 2023 and a statement of financial position at June 30, 2023. (20 marks) b. Assume instead that CDC uses the restricted fund method of accounting for contributions. Explain how the contribution for the scholarship should be reported in the year ending June 30, 2023 and in the future years when the scholarships are disbursed. Clearly state any assumptions you need to make in this regard. (3 marks)

Answer rating: 100% (QA)

a Statement of Operations for the year ended June 30 2023 Revenue Membership fees collected 146000 C... View the full answer