Question

What are GAAP requirements for preparing financial statements? Use the following adjusted trial balance for Decatur Health Clinic to Create a statement of financial position, statement of functional expenses, statement of activities, and statement of cash flows:

Decatur Health Clinic Adjusted Trial Balance As of June 30, 20X7

Cash 150,500

Pledges Receivable-Unrestricted 36,000

Estimated Uncollectible Pledges 2,300

Inventory 2,800

Investment 178,000

Furniture and Equipment 210,000

Accumulated Depreciation-Furniture and Equipment 125,000

Accounts payable 20,520

Unrestricted Net Assets 206,500

Temporarily Restricted Net Assets 61,300

Permanently Restricted Net Assets 140,000

Contributions-Unrestricted 348,820

Contributions-Temporarily Restricted 38,100

Investment Income-Unrestricted 9,200

Net Assets Released from Restrictions- Temporarily Restricted 22,000

Net Assets released from Restrictions- Unrestricted 22,000

Salaries and Fringe Benefit Expense 288,410

Occupancy and Utility Expense 38,400

Supplies Expense 6,940

Printing and Publishing Expenses 4,190

Telephone and Postage Expense 3,500

Unrealized Gain or Investments 2,000

Depreciation Expense 35,000

Totals 975,740 975,740 .

Prepare all financial statements as of June 30, 20X7 including the following transactions. There were five functional expense categories, which salaries and fringe benefits totaling $288,410 were allocated to with the following percentages: counseling services, 30%; professional training, 25%; community service, 15%; management and general, 20%; and fund-raising, 10%.

Occupancy and utility, supplies, printing and publishing, and telephone and postage expense were allocated to the programs using the same allocation procedures.

The five expense categories received equal amounts of depreciation expense.

Decatur Health Clinic had $162,150 of cash on hand at the beginning of the year and received cash from contributors of $305,200, which was unrestricted. $38,100 was restricted for the purchase of a machine for the clinic.

Income earned and received on long- term investments was $9,200.

The purchase of the machine for the clinic was $22,000 and $82,500 for operating expenses.

Net pledges receivable increased $6,000, inventory decreased $1,000, accounts payable decreased $102,500, and there were no salaries payable at the beginning of the year.

Answer 1

GAAP REQUIREMENTS FOR PREPARING THE FINANCIAL STATEMENTS ARE AS FOLLOWS
1	INCOME STATEMENT
	THIS STATEMENT SHOWS THE PROFITABILITY OF A CONCERN FOR THE GIVEN PERIOD
	TAKING ALL THE REVENUES FROM OPERATING AND NON-OPERATING ACTIVITIES ALONG
	WITH THE EXPENSES TO EVALUATE THE PROFITABILITY
	IT SOMETIMES REFERRED AS PROFIT & LOSS STATEMENT
2	BALANCE SHEET
	IT SUMMERIZES ALL THE ASSETS WHICH SHALL BE EQUAL TO ALL THE LIABILITIES AND
	OWNER'S OR SHAREHOLDERS' EQUITY.
3	CASH FLOW STATEMENT
	THIS STATEMENT SHOWS ALL THE INFLOWS AND OUTFLOWS OF CASH OF THE CONCERN.
	THIS STATEMENT IS REQUIRED BECAUSE NEITHER THE INCOME STATEMENT NOR THE
	BALANCE SHEET REVEALS THE REAL FLOW OF CASH AS THE OTHER 2 STATEMENTS
	WORK ON THE PRINCIPLE OF MERCANTILE SYSTEM.
PARTICULARS	DEBIT	CREDIT
CASH	1,50,500.00
PLEDGES RECEIVABLE - UNRESTRICTED	36,000.00
ESTIMATED UNCOLLECTIBLE PLEDGES		2,300.00
INVENTORY	2,800.00
INVESTMENTS	1,78,000.00
FURNITURE AND EQUIPMENT	2,10,000.00
ACCUMULATED DEPRECIATION - FURNITURE AND EQUIPMENT		1,25,000.00
ACCOUNTS PAYABLE		20,520.00
UNRESTRICTED NET ASSETS		2,06,500.00
TEMPORARILY RESTRICTED NET ASSETS		61,300.00
PERMANENTLY RESTRICTED NET ASSETS		1,40,000.00
CONTRIBUTIONS - UNRESTRICTED		3,48,820.00
CONTRIBUTIONS - TEMPORARILY RESTRICTED		38,100.00
INVESTMENT INCOME - UNRESTRICTED		9,200.00
NET ASSETS RELEASED FROM RESTRICTIONS - TEMPORARILY RESTRICTED		22,000.00
NET ASSETS RELEASED FROM RESTRICTIONS - UNRESTRICTED	22,000.00
SALARIES AND FRINGE BENEFIT EXPENSES	2,88,410.00
OCCUPANCY AND UTILITY EXPENSES	38,400.00
SUPPLIES EXPENSES	6,940.00
PRINTING AND PUBLISHING EXPENSES	4,190.00
TELEPHONE AND POSTAGE EXPENSES	3,500.00
UNREALIZED GAIN ON INVESTMENTS		2,000.00
DEPRECIATION EXPENSE	35,000.00
	9,75,740.00	9,75,740.00
INCOME STATEMENT OF DECATUR HEALTH CLINIC FOR THE PERIOD ENDED 31-12-20X7
EXPENSE		AMOUNT		INCOME		AMOUNT
		$				$
SALARIES AND FRINGE BENEFIT EXPENSES	2,88,410.00			CONTRIBUTIONS - UNRESTRICTED		3,48,820.00
COUNCELLING SERVICES - 30%	86,523.00			CONTRIBUTIONS - TEMPORARILY RESTRICTED		38,100.00
PROFESSIONAL TRAINING - 25%	72,102.50			INVESTMENT INCOME - UNRESTRICTED		9,200.00
COMMUNITY SERVICE - 15%	43,261.50			UNREALIZED GAIN ON INVESTMENTS		2,000.00
MANAGEMENT & GENERAL - 20%	57,682.00
FUND RAISING - 10%	28,841.00	2,88,410.00
OCCUPANCY AND UTILITY EXPENSES	38,400.00
COUNCELLING SERVICES - 30%	11,520.00
PROFESSIONAL TRAINING - 25%	9,600.00
COMMUNITY SERVICE - 15%	5,760.00
MANAGEMENT & GENERAL - 20%	7,680.00
FUND RAISING - 10%	3,840.00	38,400.00
SUPPLIES EXPENSES	6,940.00
COUNCELLING SERVICES - 30%	2,082.00
PROFESSIONAL TRAINING - 25%	1,735.00
COMMUNITY SERVICE - 15%	1,041.00
MANAGEMENT & GENERAL - 20%	1,388.00
FUND RAISING - 10%	694.00	6,940.00
PRINTING AND PUBLISHING EXPENSES	4,190.00
COUNCELLING SERVICES - 30%	1,257.00
PROFESSIONAL TRAINING - 25%	1,047.50
COMMUNITY SERVICE - 15%	628.50
MANAGEMENT & GENERAL - 20%	838.00
FUND RAISING - 10%	419.00	4,190.00
TELEPHONE AND POSTAGE EXPENSES	3,500.00
COUNCELLING SERVICES - 30%	1,050.00
PROFESSIONAL TRAINING - 25%	875.00
COMMUNITY SERVICE - 15%	525.00
MANAGEMENT & GENERAL - 20%	700.00
FUND RAISING - 10%	350.00	3,500.00
DEPRECIATION EXPENSE	35,000.00
COUNCELLING SERVICES - 30%	10,500.00
PROFESSIONAL TRAINING - 25%	8,750.00
COMMUNITY SERVICE - 15%	5,250.00
MANAGEMENT & GENERAL - 20%	7,000.00
FUND RAISING - 10%	3,500.00	35,000.00
NET INCOME		21,680.00
		3,98,120.00				3,98,120.00
BALANCE SHEET OF DECATUR HEALTH CLINIC FOR THE PERIOD ENDED 31-12-20X7
LIABILITIES	AMOUNT	AMOUNT		ASSETS	AMOUNT	AMOUNT
ACCUMULATED DEPRECIATION - FURNITURE AND EQUIPMENT		1,25,000.00		CASH		1,50,500.00
ACCOUNTS PAYABLE		20,520.00		PLEDGES RECEIVABLE - UNRESTRICTED		36,000.00
UNRESTRICTED NET ASSETS		2,06,500.00		INVENTORY		2,800.00
TEMPORARILY RESTRICTED NET ASSETS		61,300.00		INVESTMENTS		1,78,000.00
PERMANENTLY RESTRICTED NET ASSETS		1,40,000.00		FURNITURE AND EQUIPMENT		2,10,000.00
ESTIMATED UNCOLLECTIBLE PLEDGES		2,300.00		NET ASSETS RELEASED FROM RESTRICTIONS - UNRESTRICTED - FOR CLINIC		22,000.00
NET INCOME - FROM OPERATIONS		21,680.00
NET ASSETS RELEASED FROM RESTRICTIONS - TEMPORARILY RESTRICTED		22,000.00
		5,99,300.00				5,99,300.00
CASH FLOW STATEMENT
BALANCE AT THE BEGINNING OF THE YEAR		1,62,150.00
ADD:
RECEIVED FROM CONTRIBUTORS - UNRESTRICTED	3,05,200.00
RECEIVED FROM CONTRIBUTORS - TEMPORARILY RESTRICTED	38,100.00
INVESTMENT INCOME	9,200.00
DECREASE IN INVENTORY	1,000.00	3,53,500.00
		6,58,700.00
LESS:
PURCHASE OF MACHINE - CLINIC	22,000.00
PURCHASE OF MACHINE - OPERATING EXPENSES	82,500.00
NET PLEDGE RECEIVABLE	6,000.00
ACCOUNTS PAYABLE DECREASED	1,02,500.00
OTHER OPERATIONAL PAYMENTS	2,95,200.00	5,08,200.00
CASH AT THE END OF THE YEAR		1,50,500.00