TGF Care Facility (TGF) is a not-for-profit organization (NFPO) that was established on

April 1, 20X6. Its mandate is to provide rehabilitation services to people with spinal-cord

injuries. A select list of TGF's transactions during its first year of operations follows.

On April 1, 20X6, TGF received unrestricted contributions totalling $600,000 cash.

Additionally, a total of $75,000 in pledges was made.

On May 1, 20X6, TGF received a contribution of $50,000 cash for the purpose of

purchasing office equipment. TGF immediately paid a total of $45,000 cash to

purchase office equipment. The equipment, which was brought into use on the

purchase date, is expected to last five years and to have a residual value of $0 at

the end of that time.

On June 1, 20X6, the provincial government contributed $1,000,000 to TGF on the

condition that the amount be invested in perpetuity. The government did not place

any restrictions on the use of the investment income. TGF immediately invested

$900,000 of this contribution in a one-year guaranteed investment certificate (GIC).

During June 20X6, TGF earned $2,000 of interest on this investment and received a

cheque for this amount on June 30, 20X6.

On June 1, 20X6, TGF received a donation of $200,000 cash for the purchase of

land. On June 15, 20X6, TGF paid $210,000 cash to purchase an undeveloped

parcel of land.

During July 20X6, benefactors constructed a small office for TGF on the land

purchased in June. The cost of the materials and supplies provided by donation

totalled $240,000. The fair market value of the building was $300,000. The building

has an estimated useful life of 20 years and an expected residual value of $0 at the

end of that time. The building was completed and ready for occupancy on August 1,

20X6. TGF accounted for this transaction in August.

TGF planned to launch an awareness campaign in the neighbourhood and, although

it knew its members would volunteer time to assist, it budgeted $10,000 to cover any

additional wages for this purpose. During August 20X6, members of TGF donated

1,000 hours of their time and conducted the campaign on a much larger scale than

TGF had planned and would have paid for. The volunteer effort was so large that

TGF did not have to pay any additional wages to carry out the campaign. The fair

market value of the donated services was estimated to be $25,000.

During September 20X6, TGF incurred $70,000 of operating expenses (excluding

amortization). $40,000 of expenses was paid in cash; $30,000 was payable.

Other relevant information follows:

TGF's first year end will be March 31, 20X7. TGF accrues contributions and

expenses monthly when it compiles its interim monthly statements.

TGF uses the straight-line method to amortize all depreciable assets and records

amortization expense on a monthly basis.

TGF elects to recognize the contribution of materials and services when the

necessary criteria are met.

A summary of TGF's property, plant, and equipment accounts as at August 1, 20X6,

follows. The balances are reported on a gross basis, rather than net of accumulated

amortization.

Asset

Balance

(gross)

Estimated

useful life

Expected residual

balance

Land $400,000 N/A N/A

Buildings $480,000 20 years $0

Equipment $180,000 5 years $0

1. Assume that TGF uses the deferral method to account for contributions and does

not disclose separate funds. Which of the following would be included in the journal

entries to record the contributions received and pledges made on April 1, 20X6?

a) A net credit to deferred contributions for $600,000

b) A net credit to deferred contributions for $675,000

c) A net credit to contribution revenue for $600,000

d) A net credit to contribution revenue for $675,000

2. Assume that TGF uses the deferral method to account for contributions and does

not use separate funds. Which of the following would be included in the journal

entries to record the equipment-related transactions in May 20X6?

a) A net credit to contribution revenue for $750

b) A net credit to deferred contributions for $45,000

c) A net credit to deferred contributions for $50,000

d) A net credit to deferred contributions for $5,000

3. Assume that TGF uses the restricted fund method to account for contributions. It

maintains a general fund, an endowment fund, an equipment fund, and a land fund.

Which of the following would be included in the journal entries to record the

transactions in June 20X6 related to the $1,000,000 government contribution?

a) A net debit to cash (endowment fund) for $102,000

b) A net credit to contribution revenue (endowment fund) for $1,000,000

c) A net credit to contribution revenue (general fund) for $102,000

d) A net credit to contribution revenue (endowment fund) for $1,002,000

4. Assume that TGF uses the deferral method to account for contributions and does

not disclose separate funds. Which of the following would be included in the journal

entries to record the land transactions in June 20X6?

a) A net debit to the land account for $200,000

b) A net debit to net assets for $10,000

c) A net credit to deferred contributions for $200,000

d) A net credit to net assets for $200,000

5. Assume that TGF uses the restricted fund method to account for contributions. It

maintains a general fund, an endowment fund, an equipment fund, and a land fund.

Which of the following would be included in the journal entries to record the

transactions in August 20X6 related to the donation of members' time to TGF?

a) A net credit to deferred contributions for $10,000

b) A net debit to awareness campaign expenses for $10,000

c) A net credit to contribution revenue for $25,000

d) A net debit to awareness campaign expenses for $25,000