Reference no: EM132923376
Question - It has been a busy year at Wayfair Counselling. In January 2020, Kendal Wilson incorporated Wayfair as a not-for-profit organization. Its mandate is to provide counselling services for youth in need. During the year, the organization organized a fundraising drive, signed a 10-year lease for office space, and started offering services to the public. The office space was found in the downtown core of Victoriaville. Most of the town's poorest people live in this area of town. Wayfair took possession of the space on April 1, 2020, and completed leasehold improvements by June 30, 2020, at a cost of $90,000. On July 2, 2020, Kendal opened the doors for business and took on the job of director of the organization at an annual salary of $72,000. However, she worked July and August 2020 for free. On September 1, 2020, two social workers were hired to meet the demands of the growing organization.
It is now December 2020. You, CPA, have been asked by Kendal to prepare the financial statements for Wayfair for the ten-month period ending October 31, 2020. Kendal provided the following schedule of cash receipts and disbursements.
Cash receipts
Donations from individuals and businesses $280,000
Grant from provincial government 238,500
518,500
Cash disbursements
Leasehold improvements 90,000
Furniture & Equipment 72,000
Rent 31,500
Office supplies 15,000
Wages and benefits 84,000
Other expenses 25,500
318,000
Cash on hand at October 31, 2020 $200,500
Additional Information:
1) Of the $280,000 received from individuals and businesses, $60,000 was designated for the purchase of furniture and equipment and $45,000 was designated for the purpose of hiring a program director in 2021. The remaining funds were unrestricted.
2) The grant revenue of $238,500 represented Kendal's calculation of a provincial grant. The provincial government agreed to provide an annual grant equal to 75% of all expenses to a maximum of $300,000 a year. To maximize the grant received from the provincial government, Kendal wants to record the value of all donated goods and services and to claim the full cost of the leasehold improvements and furniture and equipment in the year when these assets are acquired.
3) An endowment of $50,000 was received December 30, 2020 to be used as follows: "The principal is to remain intact but any interest earned can be used for any charity purposes." The cash remains in the bank and will be invested in January 2021.
4) The fundraising drive in 2020 raised $23,000 in pledges. These pledges are to be received early 2021.
The furniture and equipment are expected to have a useful life of five years. Revenue is to be recognized using the deferral method. At the end of October 2020, $9,000 of wages and benefits had been earned but not yet paid for and $3,000 was owing for other expenses.
Required - Produce a Statement of operations and a statement of financial position for the 10-month period ending October 31, 2020. Note - you will need to make some assumptions on what accounting policies to follow. Make sure to state your assumptions, chose an accounting policy and provide reasons for choosing that accounting policy.