Question

The Watson Foundation, a private not-for-profit entity, starts 2017 with cash of $121,000; contributions receivable (net) of $221,000; investments of $321,000; and land, buildings, and equipment of $221,000. In addition, its unrestricted net assets were $442,000, temporarily restricted net assets were $121,000, and permanently restricted net assets were $321,000. Of the temporarily restricted net assets, 50 percent must be used to help pay for a new building; the remainder is restricted for salaries. No implied time restriction was designated for the building when purchased. For the permanently restricted net assets, all income is unrestricted.

During the current year, the entity has the following transactions:

• Computed interest of $41,000 on the contributions receivable.
• Received cash of $121,000 on the contributions and wrote off another $6,100 as uncollectible.
• Received unrestricted cash gifts of $201,000.
• Paid salaries of $111,000 with $36,000 of that amount coming from restricted funds.
• Received a cash gift of $33,000 that the entity must convey to another charity. However, Watson has the right to give the money to a different organization if it so chooses.
• Bought a building for $521,000 by signing a long-term note for $460,500 and using restricted funds for the remainder.
• Collected membership dues of $51,000. Individuals receive substantial benefits from the memberships.
• Received income of $51,000 generated by the permanently restricted net assets.
• Paid rent of $33,000, advertising of $36,000, and utilities of $37,000.
• Received an unrestricted pledge of $221,000; it will be collected in five years. The organization expects to collect the entire amount. Present value is $170,000. It then recognized interest of $8,100 for the year.
• Computed depreciation as $61,000.
• Paid $36,000 in interest on the note signed to acquire the building.

1. Prepare a statement of activities for this entity for this year.

2. Prepare a statement of financial position for this entity at the end of this year.

Answer 1

Answer a

Particulars	Unrestricted Net Assets	Temporarily Restricted Net Assets	Permanently Restricted Net Assets
Support
Contributions	201,000	203,000 (170,000+33,000)
Revenue
Membership dues	51,000
Investment income	51,000
Interest income	41,000	8,100
Total Support and Revenue	344,000	211100
Net assets released from restriction	96500(36000+(521000-460500))	(96500)
Total revenues and net assets released from restriction	440,500	114,600
Expenses
General and administrative
Rent	33,000
Salary	111,000
Advertising	36,000
utilities	37,000
Depreciation	61,000
Interest	36,000
Total expenses	314,000
Excess of total revenues and net assets released from restriction over expenses	126,500	114,600
Net assets at beginning of year	442,000	121,000	321,000
Net assets at end of year	568,500	235,600	321,000

STATEMENT OF FINANCIAL POSITION

	Amount $	Total Amount $
ASSETS
Cash		264,500
Pledges receivable (net)		319,100
Investments		321,000
Land, buildings, and equipment	742,000
Depreciation	61,000	681000
Total assets		1585600
LIABILITIES
Notes Payable		460500
NET ASSETS
Unrestricted	568,500
Temporarily Restricted	235,600
Permanently Restricted	321,000	1,125,100
TOTAL LIABILITIES AND NET ASSETS		1585600

Cash = 121000+121000+201000-111000+33,000-(521000-460500)+51000+51000-33000-36000-37000-36000 = 264500

Pledges receivable = 221000+41000+170000+8100 = 440100-121000=319,100

Land and buildings = 221000+521000=742000