Question

In: Accounting

The Edison Foundation, a not-for-profit organization, begins the fiscal year with $200,000 cash, Net Pledges Receivable...

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.

Expert Solution

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

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