Question

A private not-for-profit entity is working to create a cure for a deadly disease. The charity starts the year with cash of $775,000. Of this amount, unrestricted net assets total $425,000, temporarily restricted net assets total $225,000, and permanently restricted net assets total $125,000. Within the temporarily restricted net assets, the entity must use 80 percent for equipment and the rest for salaries. No implied time restriction has been designated for the equipment when purchased. For the permanently restricted net assets, 70 percent of resulting income must be used to cover the purchase of advertising for fund-raising purposes and the rest is unrestricted.

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

Received unrestricted cash gifts of $235,000.

Paid salaries of $105,000 with $45,000 of that amount coming from restricted funds. Of the total salaries, 50 percent is for administrative personnel and the remainder is evenly divided among individuals working on research to cure the designated disease and individuals employed for fund-raising purposes.

Bought equipment for $350,000 with a long-term note signed for $275,000 and restricted funds used for the remainder. Of this equipment, 80 percent is used in research, 10 percent is used in administration, and the remainder is used for fund-raising.

Collected membership dues of $55,000. The members receive a reasonable amount of value in exchange for these dues including a monthly newsletter describing research activities.

Received $35,000 from a donor that must be conveyed to another charity doing work on a related disease.

Received investment income of $38,000 generated by the permanently restricted net assets. As mentioned above, the donor has stipulated that 70 percent of the income is to be used for advertising, and the remainder may be used at the entity’s discretion.

Paid advertising of $4,500.

Received an unrestricted pledge of $350,000 that will be collected in three years. The entity expects to collect the entire amount. The pledge has a present value of $103,000 and related interest (additional contributed support) of $5,500 in the year.

Computed depreciation on the equipment acquired as $45,000.

Spent $118,000 on research supplies that it utilized during the year.

Owed salaries of $30,000 at the end of the year. Half of this amount is for individuals doing fund-raising and half for individuals doing research.

Received a donated painting that qualifies as a museum piece. It has a value of $1,050,000. Officials do not want to record this gift if possible.

Prepare a statement of activities for this not-for-profit entity for this year.

Prepare a statement of financial position for this not-for-profit entity for this year.

you provide me some of wrong I need the correct answer please as soon as possible

specially all of salaries are wrong , cash, and change in net asset and also unresticted

Answer 1

Answer (a)

Statement of Activities for the not-for-profit entity for the year

Particulars	Unrestricted Net Assets	Temporarily Restricted Net Assets	Permanently Restricted Net Assets
Public support
Contributions	235000	103000
Contribution ­ interest		5500
Revenue
Membership dues	43000
Investment income	11400 (38000*30%)	26600 (38000*70%)
Net assets released from restriction	124500 (45000+(350000-275000)+4500)	(124500)
Total public support and revenue	413900	10600
Expenses
Program service expenses ­ cure disease
Salaries	46500 ((105000*30%)+(30000*50%))
Depreciation	36000 (45000*80%)
Supplies	118000
Total	200500	0	0
Program service expenses ­ cure disease
Salaries	42000 (105000*40%)
Depreciation	4500 (45000*10%)
Total	46500	0	0
Fundraising
Salaries	46500 ((105000*30%)+(30000*50%))
Advertising	4500
Depreciation	4500 (45000*10%)
Total	55500	0	0
Total expenses	302500	0	0
Change in net assets	111400	10600	0
Net assets in the­ Beginning of year	425000	225000	125000
Net assets at the End of year	536400	235600	125000

Answer (b)

Statement of Financial Position for the year

Assets	Amount in $	Amount in $
Cash	(775000+235000-105000-(350000-275000)+43000+35000+38000-4500-118000)	823500
Pledge receivable	(103000+5500)	108500
Equipment	350000
Accumulated depreciation	45000	305000
Total assets		1237000
Liabilities
Salaries payable		30000
Notes payable		275000
Donated amount		35000
Total liabilities		340000
Net assets
Unrestricted		536400
Temporarily restricted		235600
Permanently restricted		125000
Total net assets		897000
Total liabilities and net assets		1237000

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