Question

The Association of Women in Government established an Educational Foundation to raise money to support scholarship and other education initiatives. The Educational Foundation is a private not-for-profit. Members of the Association of Women in Government periodically make donations to the Educational Foundation. With the exception of the gift described below, these are unrestricted. In December 2016, a donor established a permanent endowment with an initial payment of $100,000 and a pledge to provide $10,000 per year for 3 years, beginning in December 2017. At the time, the pledge was recorded at the present value ($27,232), discounted at 5 percent. Earnings of the endowment interest and investment gains) are derived from investment in AAA- rated corporate bonds and are restricted for the payment of scholarships At the end of 2016, the organization had the following account balances: Debits Credits Cash $ 22.900 Interest receivable 700 Investments in bonds 100,000 Pledges receivable 27,232 Supplies inventory 400 Scholarships payable $ 5.000 Permanently restricted net assets 127,232 Net assets-temporarily restricted: for scholarships 2,600 Unrestricted net assets 16,400 Total $151,232 $151,232

Answer 1

ANSWER

Journal entries for 2017 Credit Debit POstage and photocopying expenses 2050 2050 Cash (recording of postage and photocopying expenses) 1900 Supplies inventory Accounts payable 1900 (purchase of supplies on account) Accounts payable 1700 Cash 1700 (payment to Accounts payable) Supplies consumed Supplies Inventory supplies consumed during the year 400+1900-420) 1880 1880 9600 Cash Unrestricted Donations (Unrestricted donations received during the year) 9600 Cash 7500 Interest receivable 700 6800 Interest Income (Interest income received including interest receivable of 700) Interest receivable 600 Interest Income 600 (Accrued Interest receivable as at end Dec 31 2017) 2100 Investment in bonds income from Investments 2100 (Increase in Fair vaue of bonds) Please refer note Pledge Receivable Permanently restricted net assets (recording of increase in present value of pledge) 1362 1362 Cash 10000 Pleadge Receivable (scheduled payment received from donor) 10000 Scholarship awards Scholarship payable 17000 17000 (Scholarships awarded during the year) Scholarship payable 19500 19500 Cash (Scholarship paid during the year) Notes: Present value of pledge receivable 10000/(1.05) 2+10000/1.05+10000-28594 Opening pledge receivable 272325 Hence increase in plege receivable 1362 Closing entries Debit Credit Postage and photocopying expenses Supplies consumed 2050 1880 Unrestricted Donations 9600 interest Income 7400 Income from investments 2100 Income from Endowment pledge Scholarship awards 1362 17000 468 Statement of activities

Amount Statement of Activities Unrestricted Income Unrestricted donations 9600 () Postage and photocopying expense () Supplies consumed -2050 -1880 (-) Balance Scholarship awards after utilisation of restricted income -4900 Net Unrestrictd Income 770 (+) Beginning unrestricted assets Ending balance of unrestricted assets 16400 17170 Restricted Income interest Income 7400 Income from investments 2100 Total Restricted income 9500 (+) Beginning temporary restricted net assets Total Restricted income available for scholarship awsrds () Scholarship awards during the year Shortfall in restricted income available for scholarship 2600 12100 -17000 -4900 Transferred to Unrestricted Income 4900 0 Statement of Financial Position as on Dec 31 2017 Liabilities Assets Cash 26750 Interest Receivable 600 Investment in bonds 102100 Pledges Receivable 18594 Supplies Inventory Accounts payab;e Scholarship payable Permanently restricted net assets 420 200 2500 128594 Net assets-temporarily restricted for scholarships 0 Unrestricted net assets 17170 Total 148464 148464

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