Saskatoon Home for Vets $($SHV$)$ has provided its records for the current year. Its volunteer controller resigned at the beginning of the year, and no replacement has been found. As a result, no entries have been made in the current year. SHV has hired you, CPA, to help with the preparation of its December $31,2026$ year$-$end statements.

Additional information:

$1)$ SHV$\text{'}$s main objective is to provide homes for veterans that are homeless. It also provides various services to the veterans to help get them back on their feet. To increase the availability of homes, SHV has purchased a large piece of land on which to build a tiny home community. These homes are rented to veterans, based on their income level. If a veteran has no income, no rent is charged. SHV also subsidizes the rent for veterans who are in rental properties not owned by SHV$.$

$2)$ SHV uses the restricted fund method and has the following funds: operating, endowment, and capital asset. The operating fund is used to pay for mental health services, utilities, rent, etc.

Opening balances at January $1,2025$:

General fund Endowment Capital asset Total

Cash $ $25,000$ $ $-$ $ $10,000$ $ $35,000$

Land $-950,000950,000$

Furniture $($net$)*60,00060,000$

Buildings $($net$)*-145,000145,000$

Investments $-150,000-150,000$

Total $ $25,000$ $ $150,000$ $ $1,165,000$ $ $1,340,000$

Current liabilities $ $10,000$ $ $-$ $ $2,500$ $ $12,500$

Fund balance $15,000150,0001,162,5001,327,500$

Total $ $25,000$ $ $150,000$ $ $1,165,000$ $ $1,340,000$

$*$The remaining useful life of the furniture and building is $5$ and $30$ years, respectively. Original cost of the furniture and building was $$75,000$ and $$150,000,$ respectively.

$3)$ On April $1,2026,$ a wealthy donor provided $$1,500,000$ in contributions, with $$750,000$ to be retained and invested in perpetuity, and the interest to be used as the organization sees fit. The remaining $$750,000$ is to be used to build tiny homes for veterans $($homes will be part of the capital fund$).$ Immediately, the amount to be held in perpetuity of $$750,000$ was invested in a government bond that pays interest annually on December $31$ at a rate of $5\%.$

$4)$ On June $30,2026,$ a local contractor volunteered his crew to build three tiny homes in the new community. The cost of the crew to the contractor was $$65,000.$ The CEO of SHV was happy to receive the free labour, as it saved SHV from having to pay for the contractors to build the homes.

$5)$ Total cost of materials and labour for the three homes built in $2026$ was $$250,000$ and $$115,000,$ respectively. These homes were inhabited on September $1,2026$ and are expected to have a remaining useful life of $30$ years.

$6)$ Salary expense for $2026$ was $$75,000,$ with $$6,500$ still owing at year end. The current liabilities in the general fund represented salaries owed at the end of $2025($last year$$s current liabilities were settled in cash during the year$).$

$7)$ Total unrestricted contributions of $$650,000$ were received in the year. Rent of $$250,000$ and utilities of $$10,000$ were paid in the year. There are utilities owing of $$1,500$ at the end of $2026.$

$8)$ SHV amortizes its capital assets on a straight$-$line basis, assuming no residual value, based on the number of months available in the year.

$9)$ The $$2,500$ current liability owing at the end of $2025$ in the capital asset fund was paid in $2026.$ On October $1$ of this year, additional appliances and furnishings, at a discounted cost $$25,000,$ were purchased. The value of the appliances and furnishings was $$40,000$ and had an estimated useful life of $8$ years.

Required:

$1)$ Prepare the required journal entries for the above transactions.

$2)$ Prepare the statement of operations and statement of financial position for the year ending December $31,2026.$