Raffle's Kids, a nonprofit organization that provides aid to victims of domestic violence, low-income families, and special-needs children, has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffle's bookkeeper is preparing financial statements for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the board hopes to be able to pay the mortgage off in full next year. Of the mortgage principal, $20,000 will be paid next year if Raffie's pays according to the mortgage agreement. The board members call you, their trusted CPA, to advise them on how Raffle's Kids should report the mortgage on its balance sheet. What is the ethical issue? Provide and discuss the reason for your recommendation.
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Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
- Arlington Town uses an Internal Service Fund to account for its motor poolactivities. You have the following information:Automobiles: The Motor Pool uses two 6-passenger vans, each costing $90,000and each estimated to have a 5-year life when they were acquired in 2020.Driver salaries: The Motor Pool has a driver-administrator, who earns $90,000a year, and a driver, who earns $70,000.The town uses a rate of 33 percent (to cover benefits, including pensions)for planning purposes.Insurance: In 2020, the town purchased a 3-year automobile accident policyat a cost of $12,000.Fuel and maintenance costs: Based on experience, the driver-administratorestimates that total fuel and maintenance costs for the year will be $16,000.Billing units: To simplify its record keeping, the Motor Pool charges a fixed priceper trip. Arlington’s budget office estimates it will provide 1,600 trips to thetown’s departments in 2021.Arlington Town had the following transactions and events during January 2021:1.…arrow_forwardThe Town Debt Service Fund accumulates resources to pay its $3 million general obligation debt. The debt is payable in equal annual installments of principal over 20 years with 5% interest on the unpaid principal. Prepare journal entries to record the following transactions in the Debt Service Fund. The Town levies a special property tax amounting to $550,000 to pay debt service on its long-term general obligation debt. The tax must be accounted for in the Debt Service Fund. All the property taxes levied for debt service purposes are collected. The Town invests $250,000 in a six-month certificate of deposit. Debt service (interest of $150,000 and principal of $150,000) becomes due and payable. The debt service liabilities from 4. are paid. The certificate of deposit in 3. matures and the Town receives a total of $261,000.arrow_forwardThe government has imposed a fine on JJ’s Place. The fine calls for annual payments of $60,000 one year from now, $70,000 two years from now, $75,000 three years from now, and $50,000 four years from now. The government plans to invest the funds until the final payment is collected and then donate the entire amount, including the investment earnings, to help the local community shelter. The government will earn 7.5 percent on the funds held. How much will the community shelter receive four years from today? Group of answer choices $328,572 $236,875 $277,491 $286,057 $281,748arrow_forward
- Safe Haven, a voluntary welfare organization funded by contributions from the general public, received unrestricted pledges of $400,000 during 2018. It was estimated that 12% of these pledges would be uncollectible. By the end of 2018, $300,000 of the pledges had been collected, and it was expected that $40,000 more would be collected in 2019, with the balance of $60,000 to be written off as uncollectible. Donors did not specify any periods during which the donations were to be used. What amount should Safe Haven include under public support in 2018 for contributions?a. $400,000b. $352,000c. $340,000d. $300,000arrow_forwardHello, I need help solving this accounting problem.arrow_forwardMary T. Lincoln works for the City of Columbus. She volunteered to work over the 2013 Christmas break to earn a short vacation during the first week of January 2014. She earns three vacation days and will be paid $400 per day. She takes her vacation in January and is paid for those days. a. Prepare the journal entries on the government-wide financial statements for 2013 and 2014 because of these events. b. Assume that Lincoln works in an activity reported within the General Fund. Prepare journal entries for the fund financial statements for 2013 and 2014 because of these events. c. Assume that Lincoln works in an activity reported within the General Fund but that she does not plan to take her three vacation days until near the end of 2014. What journal entries should be made for the fund financial statements in 2013 and 2014? (Note: Assume that the vacation is taken late in 2014 as planned.)arrow_forward
- Dr. Superhook, a private towing contractor, has an opportunity for a towing contract with the city over the next 5 years. The contract calls for the city to pay Dr. Superhook $4,000,000 at the start of the contract and nothing for the remainder of the contract. Dr. Superhook estimates that its expenses will be $1,200,000 at the end of each of the 5 years If Dr. Superhook uses IRR to evaluate its opportunities, under what values of the discount rate would the company accept the contract? Briefly explain why.arrow_forwardVivian plans to replace all four air-conditioners in her home. The total cost is $70,000. The loan instalment plan offered by the shop requires her to pay $10,000 cash as down payment and borrow the remaining balance. The loan will be repaid in 2 years, at a monthly flat rate of 0.8%. Vivian is required to pay $250 as administration fee for loan application. The administration fee is paid at the time of application with no refund. a. Required: i. Calculate the total interest cost and fee on Vivian's instalment plan. ii. Calculate the monthly repayment amount of the instalment plan. iii. Calculate the approximate annual percentage rate (APR).arrow_forwardA county builds a new road for residents in a previously undeveloped section of the county, financing the project with $15,000,000 in 2.5% bonds issued on July 1, 2019. The bond principal will be repaid in ten equal installments over the next ten years, on June 30 of each year, starting on June 30, 2020. Affected residents will be assessed over the next ten years to retire the bonds and pay interest on outstanding bonds. The county has no liability for the bonds, and records transactions related to assessment of the residents and payment of the bond principal and interest using a custodial fund. Assume uncollectible amounts are negligible. The county’s year ends on June 30. Using the attached T-account template or a spreadsheet with proper classifications and account names, prepare the journal entries in the custodial fund to: Record the levy for fiscal 2020. Record collection of the fiscal 2020 assessment. Record payment of principal and interest for fiscal 2020. Record the levy…arrow_forward
- 10-15. Jefferson Animal Rescue is a private not-for-profit clinic and shelter for abandoned domesticated animals, chiefly dogs and cats. At the end of 2019, the organization had the following account balances: [See attached image] The following took place during 2020: 1. Additional supplies were purchased on account in the amount of $16,050.2. Unconditional (and unrestricted) pledges of support were received totaling $95,000. In light of a declining economy, 4 percent is expected to be uncollectible. The remainder is expected to be collected in the current year.3. Supplies used for animal care amounted to $17,200.4. Payments made on accounts payable amounted to $17,100.5. Cash collected from pledges totaled $90,500.6. Salaries were paid in the amount $47,500. Included in this amount is the accrued wages payable at the end of 2019. (The portion of wages expense attributable to administrative expense is $15,000 and fund-raising expense is $2,000. The remainder is for animal care.)7.…arrow_forwardthe kerwins are selling their home in order to assist in providing their input for a house they have decided to purchase for $16,000,000. the sale agreement on the house being purchased requires a deposit of 20 percent plus closing costs of $800,000 to be paid on signing on August 31,2018. the balance of the purchase price (second deposit) that is not being financed by mortgage loan is due on September 30,2018, the date on which the sale is to be closed. currently, the kerwins have a mortgage balance of @2,000,000 on their old home, which has appraised at $8,000,000. a purchaser has been identified but the proceeds from the sale of this property will not be received until december 30,2018. the kerwins have been pre-approved by local building society to qualify for a 25-year mortgage of $11,000,000 on the new house. this will attract an interest of 5.50% per annum with monthly compounding. in the mean time rbnc bank ltd, a commercial bank, is offering a bridging loan at a rate of 8.50%…arrow_forwardthe Shannon Township Debt Service Fund accumulates resources to pay its $2 million general obligation debt. The debt is payable in equal annual installments of principal over 10 years with 5% interest on the unpaid principal. Prepare journal entries to record the following transactions in the Debt Service Fund. 1. The Township levies a special property tax amounting to $500,000 to pay debt service on its long-term general obligation debt. 2. All the property taxes levied for debt service purposes are collected. 3. The Township invests $150,000 in a six-month certificate of deposit. 4. Debt service (interest of $100,000 and principal of $200,000) becomes due to bondholders. 5. The certificate of deposit in c. matures and the Township receives a total of $153,000, which includes $3,000 of interest.arrow_forward