Asked by Spencer Baker on Jun 25, 2024
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On January 1, 2020, some residents of the community of Kiterup,B.C., formed the Kiterup Winter Sports Association (KWSA) which was organized as a not-for-profit organization which has as its purposes encouraging participation in outdoor winter sports. In its first year, the board decided to restrict its activities to ice skating and skiing.
Initial funding was provided by a wealthy individual who made an endowment contribution of $200,000 which was invested in bonds and generated income during the year of $8,000. The donor placed no restrictions on the use of the income produced by the investment of the endowment contribution which were to be divided evenly between all programs undertaken by the Association.
During the year donations of $750,000 were received and a further $150,000 of pledges was outstanding of which the board estimated $130,000 would be collected. It was agreed that such donations, all of which were unrestricted, would be divided evenly between the skating and skiing programs. As a practical matter, donations not yet received at year-end were considered to be restricted for use in the following year. A special fund drive was undertaken to raise money to provide skates to needy youngsters and skiing equipment to needy senior citizens. During the year $25,000 was received in contributions for skates and $15,000 for contributions towards purchasing skis.
During the year ended December 31, 2020, the organization incurred the following costs.
Ice Skating Skiing Program Program Wages and salaries $193,000$81,000 Ice skates 8,000 Skiing equipment 9,000 Other equipment and supplies 58,00075,000 Transportation 43,00035,000 Rent 15,00015,000 Other expenses 35,00039,000$352,000$254,000\begin{array}{|l|r|r|}\hline & \text { Ice Skating } & \text { Skiing } \\\hline & \text { Program } & \text { Program } \\\hline \text { Wages and salaries } & \$ 193,000 & \$ 81,000 \\\hline \text { Ice skates } & 8,000 \\\hline \text { Skiing equipment } & &9,000 \\\hline \text { Other equipment and supplies } & 58,000 & 75,000 \\\hline \text { Transportation } & 43,000 & 35,000 \\\hline \text { Rent } & 15,000 & 15,000 \\\hline \text { Other expenses } & 35,000 & 39,000 \\\hline & \$ 352,000 & \$ 254,000 \\\hline\end{array} Wages and salaries Ice skates Skiing equipment Other equipment and supplies Transportation Rent Other expenses Ice Skating Program $193,0008,00058,00043,00015,00035,000$352,000 Skiing Program $81,0009,00075,00035,00015,00039,000$254,000 At December 31, 2020, the only outstanding payables were for $30,000 relating to the skiing program (the costs are included in the table above). The ice skates and skiing equipment were paid for out of the funds raised by the special fund drive and were expensed as acquired.
KWSA does not use fund accounting but uses the deferral method to account for restricted donations and uses programmatic reporting to report the results of its activities.
Prepare journal entries to record the transactions of the Kiterup Winter Sports Association for the year ended December 31, 2020. Closing entries are not required.
Deferral Method
An accounting principle where income or expenses are postponed to future reporting periods.
Programmatic Reporting
The process of generating reports and documents that are automatically created and distributed by software systems, often used in digital advertising and marketing.
Donations
Gifts of money or goods to charitable organizations or institutions, often tax-deductible for the donor.
- Apply principles of accountancy in genuine situations regarding financial transactions and record-keeping for not-for-profit entities.
- Evaluate the consequences of transactions on the financial documentation of not-for-profit entities.
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Learning Objectives
- Apply principles of accountancy in genuine situations regarding financial transactions and record-keeping for not-for-profit entities.
- Evaluate the consequences of transactions on the financial documentation of not-for-profit entities.
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