Question

Community Assist for Refugees (CAR) is a not-for-profit organization that assists refugees with various services including language and cultural training, transportation, a food bank, and translation services. Some selected transactions for CAR are presented below.

1. CAR received a $5,000 cheque from a local radio station. The letter that came with the donation says that it can be used by CAR on whatever is most urgent.
2. CAR received a $10,000 donation from the Literacy Fund for a homework assistance project. The project is expected to start in a few months.
3. CAR received a $25,000 endowment contribution from Dr. Koe for a scholarship fund.
4. CAR received a donation of 50 student desks for its homework assistance project from City Office Supplies Ltd. The desks are valued at $10,000 and are expected to last 10 years.
5. The city donated a tract of land, valued at $30,000 to CAR. CAR plans to raise funds to construct a new centre on the land.
6. Assume that the homework assistance program is underway. The $10,000 donation in part (b) has been spent on materials and a part-time instructor.
7. Assume that at the end of the year, the endowment contribution in part (c) earned $500 in interest. Dr. Koe had specified that interest must be spent on future scholarships. CAR will wait until there is at least $2,000 in accumulated interest before distributing any scholarships.
8. At the end of the year, CAR records depreciation on the desks, using the straight-line method.

Required:

Prepare journal entries to record the above transactions on CAR’s books using

i) the deferral method

Answer 1

Bank account Debit 5000

Donation received Credit 5000

Bank account Debit 10000

Home work assistance project Credit 10000

Bank account Debit 25000

Endowments received - scholarship fund Credit 25000

Student Desks Debit 10000

Home work assistance project Credit 10000

Land account Debit 30000

Donation received for new centre Credit 30000

Home work assistance project    Debit 10000

Bank account Credit 10000

Bank account Debit 500

Interest earned - Endowment contribution Credit 500

Depreciation expense Debit 1000

Student desks Credit 1000