Acct 4650 Ethnic Radio - CKER-F M Ethnic Radio ACCT 4650...

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Unformatted text preview: CKER-F M Ethnic Radio ACCT 4650 Assignment #7 Group 5: Frank Wu, Eunji Lee, Susan Robertson, Jeremy Yu, Michelle Cho, Chuan Wei, Philip Cheung CKER— FM Ethnic Radio and‘t’he Next'S’YEars Hm Advertising Revenue* Membership Fee Studio Rent Total revenue Expenses Commission (15% of Adv revenue) Admin/Rent/Other Net Income ii Advertising Revenue Prime time Regular time Off Peak time Advertising Revenue Prime time Regular time Off Peak Total Revenue/ Day Total Revenue/Y ear Rate/Min (Market) 40 30 25 Year 1 BED 1 ,200 300 2,950 1,080,400 Year 1 Year 2 Year 3 1,080,400 1,350,500 1,620,600 15,000 18,000 21,600 26,400 31,200 36,000 1,121,800 1,399,700 1,678,200 162,060 202,575 243,090 1,237,000 1,237,000 1,237,000 -277,260 -39,875 198,110 Time Year 1 Year 2 (hour/day) (4minlhr) (5minlhr) E 24 30 10 40 50 E 32 40 Year 2 Year 3 1,200 1,440 1,500 1.800 1,000 1,200 3,700 4,440 1,350,500 1,620,600 Year 3 (6minlhr) 36 60 48 This Not—for-Profit organization of CKER-FM Ethnic Radio plans to obtain start—up funding from membership, donations and personal loans. To continue operations they plan to receive funding from memberships, donations and selling advertising space. In \ one month the organization is optimistic they will receive the license needed to start broadcasting. Based on the estimated revenue and expenses, CKER-FM may continue to have / funding problems within the first two years if it is to rely on revenue without funding or donations. Below is our recommendations on how to start this Not for Profit on the correct accounting path. Recommendations on Accounting Policies How to prepare financial Report CKER needs to submit its financial statements to the CRTC in order to get the licence because the station has to have a minimum of $8900 at the end of each year to obtain the licence. -— T144; :3 a. [1.61/6 uu/Mfi‘fffi. Accounting Methods There are three different types of methods that you can use to prepare financial statements; deferral method, deferral method with activity based method, and restricted fund method. Deférral method is used when an NPU'dOes not wish to report on a fund accounting basis. This method is relatively simple so could save costs in preparing financial statements. The deferral method with activity based is used when an NPO wishes to show activities. The restricted fund method is used when an NPO w-ishes-toreport on afund accounting basis and wish to show restrictions. To use the restricted method, there should be at least one restricted fund and one general fund. In your company, deferral method is recommended because there aren’t many restricted contributions and it’s simpler. Therefore, it is recommended that CKER FM Ethic Radio use the defiarral methedas mostfunds will bercelleeted by salesin the future. Future Changes to Sigpificant Accounting Policies The Canadian Institute of .ChaaemdAcwunmntshasrecentbz.. issueiacompnehensive set of new accounting standards for not-for-profit organizations effective for fiscal periods beginning on or after January 1, 2012. How to record volunteer work Volunteer work can be recorded as a donation if you would have paid for the donated work anyways, suchasthe legal work donated andif the value of the servicecan be reasonably estimated. If you received volunteer work from people helping to hand out fliers at an event this probably would not be recorded as if they were not available you would just hand the fliers yourself. Therefore, the volunteer work is not to be included. Insurance Issue The committee hasn’t touched the policies regarding to the various necessary insurances; such as the insurance coverage for the volunteers and the members; so the insurance expenses haven’t been considered and calculated. How to Manage the membership The NF P organizations have no owners and shareholders, therefore, the members have to select the board of directors. The members of the CKER committee are equally weighted so it would be difficult to choose and appoint members to the board of directors. There are two types of membership, which are open and closed. In this case we recommend open membership because we want members that are clearly specified in the constitution or bylaws of the organization, and membership is available to anyone who is able to fulfill the membership requirements. Expenditures management In for-profit organizations, the leader will focus on the relationship between the revenue and cost. Since the CKER FM Ethic Radioreceived itsf-undsmestlyv from the CKER committee members, the relationship between revenue and cost is broken. For the next 3 years, CKER FM Ethic Radio needs to establish an effective set of accounting policies to help the board control its expenditures. Revenue Recognition $15,000 of membership revenue is an unrestricted contribution and should be recognized as revenue only when received. Even in the future, don’t record any- membership revenue until it’s actually received. Rent revenue from the unused recording studio is recognized only when performance is achieved go it shouldn’t he reononi7erl until the snare is. aotuallv rented out UD 1 irm‘giieauom Almost everyone must register and collect GST on their taxable supplies except provincial and territorial governments, Indians, and Indian bands. If a non-profit charity is registered with the CRA, they obtain the tax exempt status. However, there are GST implications from the operating the radio station. Being a commercial entity, the rt'ilierr '11P ir- eelleet end rerei'. {7.9T err “.0 taxable Fllflriifl'i? and rervieer. *. rein-“r i“- the form of a GST income tax credit is available. CKER will still have to file regular GST returns on these taxes. CKER’S membership fees are exempt from GST, as it provides no benefits other than to accrue all the members together into a group. Start-up Expenditures Start—up costs, such as the intended equipment purchases, are to be capitalized and "inertieed river their tireli" ii're" 'i'he r3001? ir:*:'_5rre’_I it? L'Zti': {$0,000 in lrerteperliili'w and meeting costs) will also be capitalized as they’re treated as an investment in your business assets. Possible issues and resolutions we see in the future Will you be asking the government for money or grants? If yes, you may be classified as a Government Not for Profit Organization. You .will need '5‘ Elle": 1r:'_'r."_tr!‘.in:_; T‘T"-”"-'i‘l."_‘E-' :rmier 1‘1? F'flk'i‘.‘ Fee'er *f‘fi‘“"!‘-‘li“: iii-“11"” “1"” section 4200. This will also allow the government to put restrictions on your organization based on the contracts signed when you receive the funds and your orgamza'uon can be consolidated to be part oi the government. Will your company accept any pledges? Pledges are merely promises to donate and aren’t legally binding. When accounting for wedges ream“ “Mm renewable sbceid be fl“: 9!“ pvnpregnnp 12:35 \.-i- Hr:- suns eel, m , '3 9,214; K y¢:;,,g!wrgu; economic times, character of the person if you know them and so on. You cannot record a promise you are'not certain of. For example, you have $78,000 committed contributlon through Reverse Llietlme Contribution program. You can record this amount as pledge, but not the 7 other people’s contribution since they are still considering. / How to solve Broadcasting dispute Based on research, Disputes can generally be classified as follows: (1) disputes bETHI'E'E'E'! lT'FfTRLlfil‘lflfig distribumrfi and {.‘rrfgrnmming service-v “3"Pfi‘fi'1'“:“g the fern!“ 17"" distribution, including wholesale rates; (2) disputes between competing broadcasting distributors over access to buildings and to the end-user; and (3) disputes between programmers regarding programming rights and markets served. ihe station needs a proper dispute resolution to solve this problem. Reverse Life Time Contribution There are two phases that the reverse life time contribution goes through. The initial capital sum of $50,000 is to be recognized as a capital asset that gets amortized over the period in which the donor is still alive. The “useful life” of this asset ;._. Hy. new-.1.)— “rul... .JMN TL,..,r..r...nI.w......r1u.- Iw:.". Mm .m. it...“ “mum: ..... amortization and are calculated based on the formula given, which is the capital amount divided by the difference between 90 and the donor’s age. Upon the death of the donor, the remaining sum of money from the capital investment becomes a bequest. This amount can only be recognized as contributions received once flu-I r‘nllnr'linn FE I-Ent'n'nal-Ihll annular-H In Hair r'nt': H'I'fl F1: III-1'15!!! 1hr! finnnr purer-I: “H'Ifl'l'l' ...
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This note was uploaded on 02/18/2012 for the course ACCT 4650 taught by Professor Jemery during the Spring '12 term at Kwantlen Polytechnic University.

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Acct 4650 Ethnic Radio - CKER-F M Ethnic Radio ACCT 4650...

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