Question

Here is the question we were given: Use Problems 10-15 and 10-16 (GIVEN BELOW) to prepare an activity statement (operating statement), a comparative statement of financial position (balance sheet), and a statement of cash flows (using the indirect method). What do you learn from these statements, and what questions do they raise?

Problem 10-15: The American Research Council for Humanities (ARCH) had the following financial events during the current year:

1. January 12. Received a $300,000 payment from a pledge made last year.

2. February 4. Placed an order for new cubicle partitions with 5-year useful lives, for $15,000. ARCH uses straight-line depreciation. Payment was not yet made, and the partitions have not yet been delivered.

3. March 1. Paid out a $50,000 grant to the Governmental Archaeological Research Committee for History (GARCH). This was a new grant made in the current fiscal year.

4. May 29. Paid a $5,000 deposit for the partitions ordered on February 4.

5. June 12. Collected $80,000 in new donations.

6. September 1. Bought $60,000 of books ARCH has sponsored in the past to sell in its online bookstore. It paid half now, and still owes the other half, to be paid at the end of the year. ARCH has budgeted to sell the books for $100,000 total.

7. October 15. The partitions ordered on February 4 arrived, and ARCH paid for the balance owed.

8. November 10. Borrowed $75,000 from its bank on a note payable.

9. December 5. Repaid $25,000 on the note payable and also $3,000 in interest expenses.

10. December 28. Paid its employees $75,000 of wages in cash for the year, $70,000 of which was for the current year and $5,000 of which was the outstanding balance owed. Employees earned $90,000 in wages for the year.

11. December 31. Book sales from the Internet bookstore totaled $110,000 and the cost of the books sold was $58,000. ARCH has not collected $12,000 of the sales. The balance owed for the inventory was paid.

12. ARCH expects that of the $12,000 not collected to date, it will collect $10,000.

13. December 31. Depreciation of ARCH's building for the year is $40,000.

Problem 10-16: ARCH began the year with the following balances in their accounts:

Accounts Payable: $27,000

Accounts Receivable, Net: $26,000

Cash: $10,000

Inventory: $25,000

Notes Payable: $270,000

Permanently Restricted Net Assets: $100,000

Pledges Receivable: $350,000

Property, Plant, and Equipment, Net: $350,000

Temporarily Restricted Net Assets: $30,000

Unrestricted Net Assets: $302,000

Wages Payable: $32,000

(000's omitted) Assets Liabilities and Net Assets Net Assets PPE Pledges Cash | Receivable Acc. Rec. Net Accounts | Wages Notes Payable Payable Payable | Unrestricted Tempo- rarily Restricted Perma- nently Restricted Inventory Deposits net Beginning Balance Transaction #1 Transaction #2 Transaction #3 Transaction #4 Transaction #5 Transaction #6 Transaction #7 Transaction #8 Transaction #9 Transaction #10 Transaction #11 Transaction #11 |(con't) Transaction #11 licon't) Transaction #12 Transaction #13 Ending Balance SOSOSO SOSO SO

Answer 1

Step 1:- We will put the opening balances/ beginning balances in the table

Step 2:- We will pass the Journal entries on the basis of the data provided:

Journal entries
Date	Account	Type	Particulars	Debit	Credit
12-Jan	Bank Account	Balance Sheet	Payment received from Pledges receivable	$ 3,00,000
12-Jan	Pledges receivable	Balance Sheet	Payment received from Pledges receivable		$ 3,00,000
04-Feb	PPE Account	Balance Sheet	Cubicle partitions order - 5 Years (SLM)	$ 15,000
04-Feb	Accounts Payable	Balance Sheet	Cubicle partitions order - 5 Years (SLM)		$ 15,000
01-Mar	Unrestricted	Balance Sheet	Grant to Governmental Archaeological Research Committee for History (GARCH)	$ 50,000
01-Mar	Bank Account	Balance Sheet	Grant to Governmental Archaeological Research Committee for History (GARCH)		$ 50,000
29-May	Deposits	Balance Sheet	Deposit paid for Partitions	$ 5,000
29-May	Bank Account	Balance Sheet	Deposit paid for Partitions		$ 5,000
12-Jun	Bank Account	Balance Sheet	Donation received	$ 80,000
12-Jun	Unrestricted	Balance Sheet	Donation received		$ 80,000
01-Sep	Inventory	Balance Sheet	Books purchased (ARCH)	$ 60,000
01-Sep	Bank Account	Balance Sheet	Books purchased (ARCH)		$ 30,000
01-Sep	Accounts Payable	Balance Sheet	Books purchased (ARCH)		$ 30,000
15-Oct	Accounts Payable	Balance Sheet	Cubicle partitions order - 5 Years (SLM)	$ 15,000
15-Oct	Bank Account	Balance Sheet	Cubicle partitions order - 5 Years (SLM)		$ 15,000
10-Nov	Bank Account	Balance Sheet	Amount borrowed on its Notes payable	$ 75,000
10-Nov	Notes Payable	Balance Sheet	Amount borrowed on its Notes payable		$ 75,000
05-Dec	Interest Expenses	Income statement	Repaid notes payable with interest	$ 3,000
05-Dec	Notes Payable	Balance Sheet	Repaid notes payable with interest	$ 25,000
05-Dec	Bank Account	Balance Sheet	Repaid notes payable with interest		$ 28,000
28-Dec	Wages Payable	Balance Sheet	Wages paid to the employees - Current year	$ 70,000
28-Dec	Wages Payable	Balance Sheet	Wages paid to the employees - Last year	$ 5,000
28-Dec	Bank Account	Balance Sheet	Wages paid to the employees - Current and Last year		$ 75,000
28-Dec	Salary Expenses	Income statement	Wages paid to the employees - Current year	$ 90,000
28-Dec	Wages Payable	Balance Sheet	Wages paid to the employees - Current year		$ 90,000
31-Dec	Accounts Payable	Balance Sheet	Books purchased (ARCH)- say rebate of $2,000	$ 2,000
31-Dec	Discount received	Income statement	Books purchased (ARCH)- say rebate of $2,000		$ 2,000
31-Dec	Accounts Payable	Balance Sheet	Books purchased (ARCH)- Balance amount paid	$ 28,000
31-Dec	Bank Account	Balance Sheet	Books purchased (ARCH)- Balance amount paid		$ 28,000
31-Dec	Bank Account	Balance Sheet	Books Sold	$ 98,000
31-Dec	Cash Sales	Income statement	Books Sold		$ 98,000
31-Dec	Accounts receivables	Balance Sheet	Books Sold	$ 12,000
31-Dec	Credit sales	Income statement	Books Sold		$ 12,000
31-Dec	Discount given	Income statement	Books purchased (ARCH)- say rebate of $2,000	$ 2,000
31-Dec	Accounts receivables	Balance Sheet	Books purchased (ARCH)- say rebate of $2,000		$ 2,000
31-Dec	Depreciation	Income statement	Depreciation on Building	$ 40,000
31-Dec	PPE Account	Balance Sheet	Depreciation on Building		$ 40,000
31-Dec	Depreciation	Income statement	Depreciation on Cubicle purchased from 16th Oct to 31st Dec	$ 625
31-Dec	PPE Account	Balance Sheet	Depreciation on Cubicle purchased from 16th Oct to 31st Dec		$ 625
				$ 9,75,625	$ 9,75,625

Step 3:- Prepare Income Statement

Income Statement (Dec 31)
Particulars	Amount ($)
Income
Sales	1,10,000
COGS	58,000
Gross profit	52,000
Expenses
Salary and wages	90,000
Interest	3,000
Depreciation	40,625
Discount received	-2,000
Discount given	2,000
Total Expenses	1,33,625
PBT	-81,625

Step 4:- Fill the above table shown:

(000's Omitted)	Assets						=	Liabilities and Net Assets
	Cash	Pledges receivable	Acc. Rev. Net	Inventory	Deposits	PPE Net		Accounts Payable	Wages Payable	Notes Payable	Proft and Loss	Unrestricted	Temporarily Restricted	Permanently Restricted
Beginning Balance	10,000	3,50,000	26,000	25,000		3,50,000		27,000	32,000	2,70,000		3,02,000	30,000	1,00,000
Transaction#1	3,00,000	-3,00,000
Transaction#2						15,000		15,000
Transaction#3	-50,000											-50,000
Transaction#4	-5,000				5,000
Transaction#5	80,000											80,000
Transaction#6	-30,000			60,000				30,000
Transaction#7	-15,000							-15,000
Transaction#8	75,000									75,000
Transaction#9	-28,000									-25,000
Transaction#10	-75,000								15,000
Transaction#11	-28,000							-30,000
Transaction#12	98,000		10,000	-58,000
Transaction#13						-40,625
											-81,625
Ending Balance	3,32,000	50,000	36,000	27,000	5,000	3,24,375		27,000	47,000	3,20,000	-81,625	3,32,000	30,000	1,00,000