Doctor Strange (DS) is a not-for-profit organization set up to research reducing the use of pesticide on Canadian and international farms. It is being funded by an annual government grant of $525,000 for each of the next 5 years. DS has recently completed its first year of operations and has come to you for advice regarding its first set of financial statements for the year ended December 31, 2019. DS's accounting systems are run by Joseph, who has several years experience from the accounting department of a major farm coop, but who has never done not-for-profit accounting. It is now January 15, 2020 and Joseph would like to set up accounting policies that can be used for a least the term of the government grant. He has specifically asked that you provide advice on the following issues.

REQUIRED:

a) Doctor Strange completed its first fundraising campaign in December 2019. It was successful and resulted in for use at management's discretion, to be collected in March 2020. Joseph is hopeful that .

i) Explain whether the pledges can be set up as an asset on the statement of financial position as at December 31, 2019.

ii) Disregard your answer to (i) and assume that the pledges can be recorded for financial statement purposes. Prepare the journal entry that would be recorded.

b) Doctor Strange received a donation hybrid tractor on January 1, 2019. It had a list price of $40,000, but Joseph decided that the $40,000 price was unreasonable and recorded the tractor at the nominal price of $1,000. Joseph was considering buying a similar hybrid tractor for his own use and received a quoted cash price of $35,000. He was told the tractor should last 10 years. Joseph would like you to:

i) Briefly discuss how DS should account for donated capital assets.

ii) Provide all of the journal entries that should be made relating to the tractor for 2019,

assuming that DS uses the deferred contribution method of accounting.

c) Doctor Strange also received a donation of land with a value of $250,000 for a future head office building. Joseph would like you to briefly discuss the following, assuming that DS elects to
use restricted fund accounting.

i) Indicate how DS would account for the land if it had a separate capital fund.

ii) Indicate how DS would account for the land if it had no separate capital asset fund. (Journal entries are not required).

d) Doctor Strange also received a $200,000 donation on December 31, 2019 with a requirement that the $200,000 must be retained by DS, but that interest on the donation can be spent on operations. Prepare the journal entry DS should record on December 31, 2019 Corp under:

i) Restricted fund accounting, assuming DS has a separate fund set up for such donations.

ii) The deferred contribution method of accounting.

e) Doctor Strange has many volunteers working in experimental agricultural land plots. Briefly

discuss how this should be accounted for.

Answer rating: 100% (QA)

a i The pledges cannot be set up as an asset on the statement of financial position as at December 3... View the full answer