Question

This problem summarizes typical transactions engaged in by not-for-profit organizations. The American Association for Freedom, a political think tank, was recently established. During its first year of operations it engaged in the following transactions and was affected by the following events (in summary form):

1. It received a $10,000,000 endowment contribution, all in stocks and bonds.

2. It received $3,000,000 in additional contributions, all restricted for its educational programs and $2,300,000 in unrestricted contributions.
3. It acquired $800,000 in furniture, fixtures, and equipment, all of which have an expected useful life of 10 years.
4. It recognized depreciation on the furniture, fixtures, and equipment, purchased earlier in the year.

5. It spent $2,400,000 on educational programs.

6. It earned $300,000 in interest and dividends on its endowment investments.

7. By year-end the value of its investments had appreciated by $600,000.

8. It incurred $1,300,000 in administrative expenses.

9. Near year-end it received a pledge of $4,500,000, to be fulfilled in three annual installments of $1,500,000 beginning in one year. The Association determined that a discount rate of 6 percent was appropriate.

a. Prepare journal entries to record these events and transactions. Be sure to indicate the fund-type in which the entry would be made.
b. Prepare a year-end statement of financial position and statement of activities.

Answer 1

Particular and explanation	Debit $	Credit
1. Received amount	$10,000,000
Endowment contribution		$10,000,000
2.Education amount		$3,000,000
Reserve amount		$2,300,000
Cash (Education amount + Reserve amount)$3,000,000 +$2,300,000. Temporarily restricted/ unrestricted		$5,300,000
3.  Furniture, fixtures, and equipment	$800,000
Total cash		$800,000
Temporarily restricted/ unrestricted
4.Depreciation	$80,000
furniture, fixtures, and equipment,		$80,000
Explanation : Furniture, fixtures, and equipment /  10 years $800,000/ 10 = $80,000 for certian time(Temporarily) restricted
5.Educational programs	$2,400,000
total amount		$2,400,000
for certian time(Temporarily) restricted
6.interest and dividends	$300,000
endowment investments		$300,000
Unrestricted
7, Cant be entry data
8. Incurred Administrative expenses	$1,300,000
Administrative expenses cash		$1,300,000
fund type
Unrestricted
Journal entries to record these events and transactions
Indicating the fund-type in which the entry