In: Accounting
The Edison Foundation, a not-for-profit organization, begins the fiscal year with $200,000 cash, Net Pledges Receivable of $200,000, Investments of $300,000 and PPE of $200,000. 80% of the net assets are Without donor restrictions (all Undesignated). All net assets with donor restrictions are Purpose restricted.
During the year the foundation had the following transactions:
a. Received cash of $100,000 on the pledges and wrote off another $4,000 as uncollectible.
b. Received $200,000 in cash gifts that are unconditional and not donor-restricted.
c. Paid rent of $12,000 and utilities of $16,000
d. Computed depreciation of $40,000
e. Spent $30,000 for new office furniture. The cash had been received in the previous year from a donor who had requested the funds to be used in this manner.
requirements:
a) Prepare the journal entries to record these transactions.
b) What is the Change in Net Assets due to these transactions? Show separate computations for Net Assets without Donor Restrictions and Net Assets with Donor Restrictions.
1. Journal Entries
a) Cash A/c Dr. $ 1,00,000
Contribution $ 1,00,000
(Being cash received during the year)
Bad Debt A/c Dr. $ 4,000
Net Pledges Receivable $ 4,000
(Being Amount Write off)
b) Cash A/c Dr. $ 2,00,000
Contribution $ 2,00,000
(Being gifts in cash received during the year)
c) Rent A/c Dr. $ 12,000
Cash $ 12,000
(Being Rent Paid)
Utilities A/c Dr. $ 16,000
Cash $ 16,000
(Being Utilities Paid)
d) Depreciation A/c Dr $ 40,000
PPE $ 40,000
(Being depreciation charged)
e) Office furniture A/c Dr. $ 30,000
Cash $ 30,000
(Being Office furniture purchased from proceeds of Restricted Donations)
2. Computation for Net Assets without Donor Restrictions
Cash $ 4,32,000
(2,00,000*80% = 1,60,000+1,00,000+200,000-12000-16000)
Net Pledges Receivables $ 4,56,000
(2,00,000*80% = 1,60,000+1,00,000+200,000-4000)
Investments $ 2,40,000
(3,00,000*80% = 2,40,000)
PPE $ 1,50,000
(2,00,000*80% = 1,60,000+30,000-40,000)
Computation for Net Assets with Donor Restrictions
Cash $ 140,000
Net Pledges Receivables $ 10,000