ADVANCED ACCOUNTING
ADVANCED ACCOUNTING
4th Edition
ISBN: 9781618533678
Author: HOPKINS
Question
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Chapter 11, Problem 30P

a.

To determine

Prepare the required journal entries to record the financial activities of the organization

Y C during the year.

a.

Expert Solution
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Explanation of Solution

The required journal entries are as follows:

DateAccount title and ExplanationPost RefDebit ($)Credit ($)
i.Contributions receivable $11,396,000 
 Cash 266,400 
 Support—contributions (without donor restrictions)  $10,360,000
 Support—contributions (with donor restrictions)  1,036,000
 Revenues—investment (without donor restrictions)  111,888
 Revenues—investment (with donor restrictions)  154,512
 (To recognize support and revenues)   
     
ii.Net assets released from restrictions - with donor restrictions $740,000 
 Net assets released from restrictions - without donor restrictions  $740,000
     
iii.Expenses—program $9,620,000 
 Expenses—support 1,369,000 
         Payables  $10,989,000
 (To record expenses)   
     
iv.Property, plant and equipment, net $148,000 
 Program expense 293,040 
 Support expense 39,960 
       Cash  $481,000
 (To record the net increase in long-term assets and depreciation expense)   
     
v.Cash $370,000 
 Payables 10,730,000 
       Contributions receivable  $11,100,000
 (Paid for accounts payables and record contributions received)   

b.

To determine

Prepare the statement of activities and the statement of financial position for the organization Y C.

b.

Expert Solution
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Explanation of Solution

A non-profit organization issues a slightly different set of financial statements than those issued by a profit entity. The financial statements published by the non-profit organization are as follows:

  • Statement of financial position: This is similar to the balance sheet of a for-profit entity, except that the net assets segment assumes the place of the equity portion used by a for profit entity. The net assets segment breaks down into unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.
  • Statement of activities: The statement measures non-profit income and expenditures for the reporting period. Both sales and expenditures are broken down into the unrestricted temporary and permanently restricted classifications related to above for the statement of financial position.
  • Statement of cash flows: This statement comprises information about cash flows into and out of a non-profit organization; in fact, it displays the degree of those non-profit operations that produce and use funds.
  • Statement of functional expenses: The statement shows how the expenses are accumulated for each functional area of the company. Functional areas usually involve procurement and accounting, raising funds and services.

The statement of activities of the organization Y C is as follows:

Statement of Activities Without DonorRestrictions With DonorRestrictions Total
Support—contributions$10,360,000$1,036,000$11,396,000
Revenues—investment111,888154,512266,400
Net assets released from restrictions740,000(740,000)0
Total revenue and gains11,211,888450,51211,662,400
  
Expenses ­program9,913,0409,913,040
Expenses ­support1,408,9601,408,960
  
Total operating expenses11,332,00011,322,000
  
Change in net assets(110,112)450,512340,400
Net assets, beginning of year5,920,0005,550,00011,470,000
Net assets, end of year$5,809,888$6,000,512$11,810,400
       

The statement of financial position of the organization Y C is as follows:

Statement of Financial Position Amount ($)
Cash $821,400
Investments8,880,000
Contributions receivable2,220,000
Total current assets11,921,000
  
Property, plant and equipment, net4,588,000
Total assets$16,509,400
  
Payables$1,739,000
Total current liabilities1,739,000
  
Long term liabilities2,960,000
Total liabilities4,699,000
  
Net assets-without donor restrictions5,809,888
Net assets-with donor restrictions6,000,512
  
Total net assets$11,810,400
  
Total liabilities and net assets$16,509,400
   

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