The Science Learning Institute (SLI), a not-for-profit educational center that p
ID: 2647622 • Letter: T
Question
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 2013 with the following balances in its accounts: (CHART ATTACHED)
The SLI recorded the following transactions during FY 2014, which ended on August 31, 2014. 1. SLI took out an $850,000 bank loan on September 1, 2010. 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 2011. 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, 2010. 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 2014, 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 2014. 4. During FY 2014, 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. 5. SLI
Explanation / Answer
Transactions Recorded as on 31st August 2014 Loan Repayment 118,239 Depreciation 31,000 2,250 9,000 42,250 Donor Pledge in Cash 60,000 Write down of pledge 300 Salary 210,000 Classroon Supplies 40,000 Vendor Payment 7,000 Utilities 10,800
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