Perth Housing Corporation (PHC) is a community- sponsored not- for- profit organization that was incorporated on September 1, 20X5. Its purpose is to provide residential accommodation for physically handicapped adults in the town of Perth.
The nature of PHC’s operations is described in Exhibit A. The sources of funding are described in Exhibit B.
The executive director has asked for your assistance in establishing accounting policies for PHC for its general purpose year-end financial statements. The accounting policies should comply with GAAP.

Required
Provide recommendations for accounting policies for PHC for the year ended August 31, 20X6. Assume that PHC would want to set up two funds for reporting purposes— a general fund and a capital fund—and that annual revenue exceed $ 1,050,000.
Exhibit A Nature of Operations
In October 20X5, PHC purchased a 15- unit apartment building in downtown Perth for $ 1,125,000. It then spent $ 375,000 in renovations to upgrade the building and make it accessible for physically handicapped adults.
PHC offers 24-hour non-medical attendant care. Support care services are provided through a combination of staff members and volunteers. The staff members receive a monthly salary. As an inducement to recruit and retain qualified support care workers, each staff member is allowed 15 sick days per year. The employee can bank the sick days not used in any one year. Upon termination or retirement, the employee is paid for banked sick days at the wage rate in effect at that time.
Rental payments are due the first day of each month and are geared to tenant income. Most of the ten-ants are very good about making their rent payments on time. Some rental payments are received late. On August 31, 20X6, there was $ 19,500 of unpaid rent.
PHC plans to install central air conditioning in the building in April 20X7 at an expected cost of $ 75,000. This expenditure is being financed by a special fundraising drive, which, by August 31, 20X6, has raised $ 30,000 in cash and $ 22,500 in pledges from citizens in the local community.
Exhibit B Sources of Funding
The cost of acquiring and renovating the apartment building was financed by a $ 1,500,000 cash donation received from the estate of Mr. Smith. The provincial government funds approximately 70% of non-medical and support costs. Claims are made monthly for the previous month’s eligible costs. PHC depends on outside fundraising efforts, primarily door-to-door canvassing and sponsored bingos, to cover the remaining non-medical care and support costs.