The Science Learning Institute (SLI), a not-for-profit educational center that provides science tutoring to middle school students, uses accrual accounting to prepare its annual financial statements. The SLI ended FY 2010 with the following balances in its accounts:

Accounts Payable	0
Cash	103,100
Grants Receivable, net	35,100
Inventory	2,300
Net Assets	273,500
Notes Payable	595,000
Pledges Receivable, net	10,000
Property &Equipment, net	735,000
Wages Payable	17,000

The SLI recorded the following transactions during FY 2011, which ended on August 31, 2011.

1. SLI took out an $850,000 bank loan on September 1, 2007. The loan has an annual interest rate of 6.5% and is the only borrowing the organization has done since its inception. Principal repayments are due in 10 equal installments beginning on the last day of FY 2008. Interest payments on the loan must be made in full on the last day of the fiscal year. SLI is in full compliance with the terms of the loan.

2. SLI used the proceeds from the bank loan to purchase its office space on March 1, 2008. The office space cost $775,000. It is expected to have a useful life of 25 years and no salvage value. The organization uses the straight-line method of depreciation.

3. On the first day of FY 2011, SLI purchased new classroom equipment worth $20,000. The equipment is expected to have a useful life of 8 years and a salvage value of $2,000. Equipment and furniture SLI purchased in previous years depreciated by $9,000 in FY 2011.

4. SLI earned $325,000 in state grants during FY 2011, spread evenly throughout the year. This was an increase from the $304,200 in state grants that SLI earned evenly throughout FY 2010. In both FY 2010 and FY 2011, the state paid SLI with a six-week lag.

5. During FY 2011, SLI received $75,000 in donor pledges, 80% of which was collected in cash. The organization also collected $7,500 in outstanding pledges from the previous fiscal year. SLI has a policy of writing down 2% of its total outstanding pledges at the end of the year as bad debt.

6. SLI's employees earned $17,500 per month in FY 2011, a monthly increase of $500 from FY 2010. In both FY 2010 and FY 2011, SLI paid its employees with a one-month lag.

7. During FY 2011, SLI ordered $40,000 worth of classroom supplies on credit and used $35,000 of those supplies throughout the year. At the end of FY 2011, SLI still owed its vendors $7,000 for the supplies it ordered.

8. SLI pays $900 a month in utilities. Utilities are paid timely.

Record these events on the transactions worksheet and then create a balance sheet and an activity statement for FY 2011. (Activity Statement = 10 points and Balance Sheet = 10 points. Total = 20 points). (Hint: To receive full credit, you need to report the previous year's (FY 2010) as well as current year (FY 2011) balances on the balance sheet).