2 accounting questions 2

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Option #1: UBIT

The Modern Art Museum is an exempt organization that operates a gift shop. The museum’s annual operations budget is $3.2 million. Gift shop sales generate a profit of $900,000. Another $600,000 of investment income is generated by the museum’s endowment fund.

Both the income from the gift shop and the endowment income are used to support the exempt purpose of the museum. The balance of $1.7 million required for annual operations is provided through admission fees.

Clay Marshall, a new board member, does not understand why the museum is subject to tax at all, particularly because all of the entity’s profits are used in carrying out the mission of the museum.

  1. Calculate the amount of unrelated business income.
  2. Assume, instead, that the endowment income is reinvested in the endowment fund, rather than being used to support annual operations. Calculate the amount of unrelated business income.
  3. As the museum treasurer, write a letter to Clay Marshall explaining the reason for the tax consequences.

Submission Requirements

  • Your well-written answer should be three to five pages in length not including the required cover and references pages. Include an explanation of calculations.
  • Support your letter with at least four to six tax, scholarly, legislative, or court references
  • Format your answer according to APA
  • Reach out to your instructor if you have questions about the assignment.

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Option #1: Case: Colorado & Utah Canyons Tour Company (Presentation)

Read the Colorado & Utah Canyons Tour Company case study (see link below). This case addresses the compilation and preparation of a set of financial statements for a first-year company’s operations. In addition to the financial statements listed, prepare a cash flows statement and a compilation report addressed to the owner by the accountant per AICPA standards.

Prepare a 10- to 12-slide presentation that includes:

  • an income statement, a statement of owner’s equity, a balance sheet, and a cash flows statement per U.S. GAAP, and
  • a compilation report addressed to the owner per AICPA standards.

Include speaker notes describing both your approach to preparing the financial statements for the accounts and the balances of each account for each statement.

Your presentation should meet the following requirements:

  • Be 10-12 slides in length
  • Include 75- to 100-word speaker notes per slide
  • Cite a minimum of three references
  • Be formatted APA
  • You may use PowerPoint or another slide presentation software of your choice.

Link: Colorado & Utah Canyons Tour Company (Links to an external site.)Links to an external site.

 
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