Question $1(15$ points$)$

VD $-$ Voices of Hope $($VOH$)$ is a not$-$for$-$profit organization formed $7$ years ago by

Ella, a retired professional singer$.$ The choir won several major singing competitions

across North America and is in the process of producing their own music available on

its Christmas concert

its Christmas concert music, which will also be available by download on itunes.

Ella is in charge of VOH's daily operations. All major financial and operating decisions

are approved by the Board of Directors. Initial financing for VOH came from private

donations. This year a fundraising committee was formed to raise funds for special

projects.

Your CPA firm has a policy of supporting its staff in volunteering their time to not$-$

for$-$profit activities. You recently joined VOH's board of directors and volunteered to

assist with all accounting issues. Details on VOH's accounting policies and other

related information are provided below in Exhibit A$.$

Exhibit A:

Donation $-$ Historical Sheet Music: A donor recently died and, in her will, left

a large selection of historical sheet music to VOH. Since the sheet music is

very old, it is not possible to objectively determine its historical value in

dollars. The music will be performed by VOH during concerts. The original

sheet music will be preserved and displayed in a glassed$-$in case to preserve it

and make it available for public display.

Restricted Government Grants: This year, VOH plans to submit applications

to receive two restricted government grants. The first grant for $$30,000$ was

restricted for the purchase of new choir garments. The second grant for

$$75,000$ was restricted to purchasing and install a new air$-$conditioning and

heating unit to protect the historical sheet music from damage due to

temperature changes. The government requires that VOH attaches audited

financial statements to its two grant applications to prove financial need.

Annual Pledges: Every Christmas, VOH holds and annual benefit concert and

fundraising drive. Singers ask all concert guests to provide a donation or

pledge an amount. All pledge revenue is recognized when the pledge is made

by the donor.

Capital Asset Purchases This Year: A local music store provided sheet music

stands at manufacturer's direct cost of $$20,000.$ The music stands normally

retail for $$40,000.$

Revenues: VOH members provided singing lessons to the public this year to

raise revenue. The singing lesson revenue earned this year was $$40,000.$

Annual revenue from all sources was $$200,000$ last year and $$350,000$ this

year.

Depreciation $($Amortization$)$: VOH does not depreciate $($amortize$)$ capital

assets.

Fundraising Costs: Part of the advertising and promotion costs for

fundraising are allocated to education each year since part of the purpose of

these campaigns is to educate the public on VOH's goals.

Required: Prepare a memo to the Board of Directors to identify and explain how

these accounting related issues should be handled in accordance with CPA

Handbook recommendations, how they impact financial reporting and

recommendations based on the accounting policies and practices described in the

case, including exhibit $A.$ State any assumptions you make.