Reference no: EM133058432
Question - Manchester College (MC) is a private university located in Winnipeg, Manitoba. MC offers programs toward a bachelor's degree in science. Revenues consist of tuition fees, government grants, and donations.
MC is a not-for-profit organization that follows the deferral contribution method of accounting for restricted contributions, and it has a March 31 year end. MC had the following transactions during its fiscal year ended March 31, 2021:
On May 1, 2020, land and a building were donated, with a fair value of $450,000 and $1,670,000, respectively. The building is expected to have a useful life of 25 years with NO residual value.
On June 1, 2020, MC completed renovations to the building for $100,000, which were paid for from general donations. On this same date, the renovated building started holding new courses/programs.
On August 28, 2020, MC received a large cash donation of $600,000. As required by the donor, these funds must be invested in perpetuity (that is, only the income from these funds can be spent). MC immediately invested the funds in bonds, and MC's chancellor determined that the annual investment income earned will be used for a new scholarship called the Emily Stanton Scholarship. This scholarship will be awarded annually to students who demonstrate strong community involvement and high academic achievement. The chancellor will be creating a committee to select the annual recipients of the Emily Stanton Scholarship from the applications received.
On November 30, 2020, MC purchased equipment to be used in its classrooms, including projectors and overhead cameras. The total fair value of this equipment was $250,000, but a local supplier (and former student) decided to charge MC for only $170,000 related to the equipment plus $20,000 of installation costs, which MC paid immediately. The equipment is expected to last five years, with NO residual value.
During December 2020, MC held its annual fundraising campaign, when current MC students call alumni asking for donations. As a result of this campaign, pledges of $350,000 were committed. By March 31, 2021, $310,000 of these pledges had been received. Historically, MC has been able to collect 95% of the pledges within four months after its annual campaign.
On March 31, 2021, investment income of $17,500 was earned for the Emily Stanton Scholarship and the recipient was announced. The actual scholarship was paid on April 3, 2021. MC amortizes all its property, plant, and equipment on a straight-line basis over the number of months used.
Required -
a) Prepare the journal entries required to record MC's transactions during the fiscal year ended March 31, 2021, for each of the above items.
b) Explain the note disclosures that are required by MC related to its deferred contributions and endowment fund.