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Unformatted text preview: ACCT 4650 – Financial Reporting Comprehensive Example Assume that the Canadian Heart Institute is established on January 2, 2005. The Canadian Heart Institute is a national clinic for people with severe heart problems and operates two programs: the regular clinical program where doctors treat patients and a research program. Sources of funding are as follows: • unrestricted government contributions for the treatment program • unrestricted government contributions for the research program • restricted contributions received from various sources for the research program • endowment funds The Institute will have a December 31 year-end. Unless otherwise stated, assume that the common revenues and/or expenses are to be split 40% to the clinic and 60% to research. The following transactions occurred during the year: 1. The federal government made the following contributions: • Donation of a building whose useful life is 40 years with no salvage value. The agreement specifies that the Institute has to use the building for the delivery of its programs. • Fair market value of the building $2,000,000 The land belongs to the federal government and is provided rent free to the Institute for 40 years. • Annual funding to be used at the discretion of the Institute. $1,000,000 The board of directors allocates $800,000 of this to the operation of the clinic and the balance towards the research program. • Grant to be used towards research $500,000 2. Receipts of endowment contributions in the amount of $3,000,000. These funds were invested in government bonds and generated income of $140,000 in 2005. There are no restrictions on the income generated by these investments. The board of directors allocates $40,000 of these funds to the research program and $100,000 to the clinic. 3. Several fundraising activities were conducted during the year. A total of $300,000 was raised. Of this amount, $140,000 was collected. The balance is pledged and is expected to be received in 2004. The fundraising activities implied that the funds generated would be used for research (restricted use). Fundraising expenses of $60,000 were incurred and paid. ACCT 4650 – Financial Reporting...
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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.
- Spring '12