Question

The Art League is a not-for-profit organization dedicated to promoting the arts within the community. There are two programs conducted by the Art League: (1) exhibition and sales of members’ art (referred to as Exhibition) and (2) Community Art Education. Activities of the Art League are conducted by a part-time administrator, a part-time secretary-bookkeeper, and several part-time volunteers. The volunteers greet visitors, monitor the security of the exhibit hall, and handle the sales of art to the public. Art on exhibit is considered the property of the member artists, not the Art League.

The post-closing trial balance for the Art League as of June 30, 2019, is shown here.

ART LEAGUE
Post-closing Trial Balance
June 30, 2019
	Debits				Credits
Cash	$	2,945
Short-term Investments		12,311
Grants Receivable		4,800
Prepaid Expense		1,090
Equipment		9,445
Allowance for Depreciation—Equipment					$	2,446
Long-Term Investments—With Donor Restrictions		5,787
Accounts Payable and Accrued Expenses						2,669
Deferred Revenue						3,000
Net Assets Without Donor Restrictions						9,031
Net Assets With Donor Restrictions—Programs						13,445
Net Assets With Donor Restrictions—Permanent Endowment						5,787
Totals	$	36,378			$	36,378

Following is information summarizing the transactions of the Art League for the year ended June 30, 2020.

1. During the year, unrestricted cash was received from the following sources: grants, $11,800, of which $4,700 had been reported as receivable on June 30, 2019; annual contributions from fund drives and other unrestricted gifts, $13,881; membership dues, $16,385; tuition and fees for educational workshops, $6,994; and sales of members’ art, $12,030, of which 20 percent represents commissions earned by the Art League.
2. Interest earnings were as follows: interest on investments without donor restrictions totaled $688; interest on investments restricted for programs totaled $927; interest on investments in the permanent endowment totaled $346 (these investment earnings are restricted for program use).
3. Grants receivable of $5,060 were recorded at year-end on a grant to complete and deliver a survey of art programs conducted in its county (the grant was determined to be an exchange transaction). Of the $5,060 the Art League had invoiced, $3,140 related to work done this year with the remaining $1,920 to be completed the first part of the new year and thus was reported as deferred revenue at year end.
4. The Art League receives free rent from the city at an estimated value of $18,200 a year.
5. Expenses incurred during the year were as follows: salaries and fringe benefits, $47,100; utilities $3,100; printing and postage, $1,330; and miscellaneous, $660. As of year-end, the balances of the following accounts were Prepaid Expenses, $860, and Accounts Payable and Accrued Expenses, $2,776.
6. During the year, $3,000 of short-term investments were sold, with the proceeds used to purchase two computers and a printer at a cost of $2,855. The resources used were restricted for the purchase of equipment.
7. In accordance with the terms of the Art League endowment, income earned by the endowment for the provision of free art instruction for children with disabilities was provided at a cost of $845. This amount was allocated to community art education.
8. Depreciation on equipment in the amount of $1,662 was recorded.
9. Expenses for the year were allocated 30 percent to Exhibition Program, 30 percent to Community Art Education, 25 percent to Management and General Expenses, and 15 percent to Fund-Raising.
10. Proceeds of art sales, net of commissions charged by the Art League, totaled $9,624. This amount was paid to member artists during the year.
11. All nominal accounts were closed at year-end.

Answer 1

ART LEAGUE JOURNAL ENTRIES DR CR 1 CASH 61,090 20,981 (11800 - 4700 13881 CONTRIBUTIONS-UNRESTRICTED GRANTS RECEIVABLE 4,700 MEMBERSHIP DUES 16,385 TUITION & FEES REVENUE 6,994 2,406 ($12,030 * 20%) 9,624 12030 2406 MEMBER ARTISTS PAYABLE PAYABLE TO ARTISTS 2 CASH 1,961 INVESTMENT INCOME - UNRESTRICTED 688 1,273 (S927+$346) INVESTMENT INCOME TEMP RESTRICTED 3 GRANT RECEIVABLE 5,060 3,140 CONTRIBUTION UNRESTRICTED 1,920 DEFERRED REVENUE 4 RENT EXPENSE 18,200 CONTRIBUTIONS - UNRESTRICTED 18,200 5 SALARY EXPENSE 47,100 3,100 UTILITY EXPENSE POSTAGE & SUPPLIES EXPENSE 1,330 MISCELLANEOUS EXPENSE 660 51,613 CASH 230 ($1,090-$860) 107 ($2,776-$2,669) PREPAID EXPENSES ACCOUNTS PAYABLE & ACCRUED EXPENSES 3,000 6 CASH SHORT-TERM INVESTMENT 3,000 EQUIPMENT 2,855 CASH 2,855 7 COMMUNITY ART EDUCATION 845 CASH 845 NET ASSETS RELEASED SATISFACTION OF PURPOSE RESTRICTION TEMP RESTRICTED 845 NET ASSETS RELEASED - SATISFACTION OF PURPOSE RESTRICTION - UNRESTRICTED 845

8 DEPRECIATION EXPENSE 1,662 ALLOWANCE FOR DEPRECIATION - EQUIPMENT 1,662 NET ASSETS RELEASED - SATISFACTION OF PURPOSE RESTRICTION TEMPORARILY RESTRICTED 1,662 NET ASSETS RELEASED SATISFACTION OF PURPOSE RESTRICTION 1,662 9 EXHIBITION PROGRAM EXPENSE 21,616 COMMUNITY ART EDUCATION PROGRAM EXPENSE 21,616 MANAGEMENT & GENERAL EXPENSE 18,013 FUND-RAISING 10,808 RENT EXPENSE 18,200 SALARY EXPENSE 47,100 3,100 UTILITY EXPENSE POSTAGE & SUPPLIES EXPENSE 1,330 MISCELLANEOUS EXPENSE 660 DEPRECIATION EXPENSE 1,662 10 MEMBER ARTISTS PAYABLE 9,624 CASH 9,624 11 CONTRIBUTIONS- UNRESTRICTED (TRANS 1,3 &4) 42,321 MEMBERSHIP DUES 16,385 TUITION AND FEES 6,994 COMMISSION REVENUE 2,406 INVESTMENT INCOME UNRESTRICTED 688 UNRESTRICTED NET ASSETS 4,103 21,616 EXHIBITION PROGRAM COMMUNITY ART EDUCATION (TRANS 7&9) 22,461 MANAGEMENT AND GENERAL 18,013 FUND-RAISING 10,808

STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2019 Tempora Permane Unrestricted ntly Total Revenues ri Revenues and other support $42,321 $42,321 Contributions Tuition and fees 6994 6,994 Commission revenue 2,406 2406 Membership dues 16,385 16385 688 1,273 Investment Income 1961 2507 -(2501 71301 1.234) Net assets released from restrictions Total revenues and other support 70,067 Expenses: Exhibition Progranm 21,616 21,616 Community Art Education 22,461 22,461 Management & General 18,013 18,013 Fund-Raising 10,808 10,808 Total expenses 897 Increase (decrease) in net assets 1,596-1,2340 -2,830 Beginning net assets 9,031 13,445 5,787 28,263 $7,435 $12,211$5,787 Ending net assets $25,433