The Fara Littlebear Society is an NFPO funded by government grants and private donations. It was established in Year 5 by the friends of Fara Littlebear to encourage and promote the work of Native Canadian artists. Fara achieved international recognition for her art depicting images of journey and exploration. The society leased a small building in January Year 5. The building contains a small art gallery on the first floor and office space on the second floor. The society spent $83,850 for leasehold improvements. The art gallery opened for public viewing on April 1, Year 5.The unadjusted trial balance for the year ended December 31, Year 5, was as follows: Debis Credit Cash $ 5,000 Investment in bonds (Nole D) 80,000 Artwork (Nole 2) 300,000 Leasehold improvements (Note 3) 83,85D Government grant-operating costs (Nole 6) $ 90,000 Government grant-restricted for purchase of artwork 150,000 Corporate donations-restricted for purchase of artwork 150,000 Corporate donations-restricted for leasehold improvements 78,000 Individual donations restricted for scholarships (Nole I) 80,000 Interest income 4,000 Revenue from admission fees to art gallery 67,000 Rent expense (Nole ]) 26,000 Salaries expense (Note 4) 66,000 Other expenses 53,150 Scholarship awarded 5,000 $ 619,000 $619,000 Notes and Additional Information 1. A wealthy individual donated $80,000 with the condition that the principal be invested in low-risk investments. The principal was invested in long-term bonds, which are expected to be held to maturity. The interest on the bonds is to be used to provide scholarships to aspiring Native artists who wish to study art at a Canadian uni- versity or college. The first scholarship of $5,000 was awarded in September Year 5. 2. The artwork consists of 20 paintings from a number of Canadian artists. These paintings are expected to be held for at least 10 years. The paintings will likely appreciate in value over the time they are owned by the art gallery. 3. The society signed a five-year lease on the building with an option to renew for one further term of 5 years. The term of the lease commenced on January 1, Year 5. The total rent paid for the year included a deposit of $2,000 for the last month's rent. The leasehold improvements were completed on March 31, Year 5. The office space was occupied by the staff of the society, and the art gallery was opened for business on April 1, Year 5. 4. Salaries earned but not yet paid amounted to $5,000 at December 31, Year 5. 5. The society received office equipment from a local business person on January 1, Year 5. A donation receipt for $20,000 was given for this contribution. The office equipment has a useful life of five years with no residual value. 6. The provincial government provided an operating grant of $100,000 for Year 5, of which $90,000 was received by the end of the year. The remaining $10,000 will be received once the society provides financial statements prepared in accordance with GAAP. 7. The society will follow Part III of the CPA Canada Handbook and wishes to use the deferral method of account- ing for contributions.All facts about this NFPO are identical to those described in Problem 5, except for the following: 1. The Society will use the restricted fund method of accounting for contributions. 2. The Society will use three separate funds for reporting purposes-operating fund, collections and long-term capital assets fund, and scholarship fund. Long-term capital assets include depreciable assets with a useful life in excess of 5 years, for example, leasehold improvements. 3. The cash balance of $5,000 consisted of $1,000 in the scholarship fund and $4,000 in the operating fund. 4. The interest income is retained in the scholarship fund until it is paid out for scholarships. 5. The operating fund loaned $5,850 to the long-term capital asset fund for the shortfall between the cost of lease- hold improvements and the corporate donations for leasehold improvements