Question

The Watson Foundation, a private not-for-profit entity, starts 2017 with cash of $123,000; contributions receivable (net) of $223,000; investments of $323,000; and land, buildings, and equipment of $223,000. In addition, its unrestricted net assets were $446,000, temporarily restricted net assets were $123,000, and permanently restricted net assets were $323,000. Of the temporarily restricted net assets, 50 percent must be used to help pay for a new building; the remainder is restricted for salaries. No implied time restriction was designated for the building when purchased. For the permanently restricted net assets, all income is unrestricted. During the current year, the entity has the following transactions: Computed interest of $43,000 on the contributions receivable. Received cash of $123,000 on the contributions and wrote off another $6,300 as uncollectible. Received unrestricted cash gifts of $203,000. Paid salaries of $113,000 with $38,000 of that amount coming from restricted funds. Received a cash gift of $35,000 that the entity must convey to another charity. However, Watson has the right to give the money to a different organization if it so chooses. Bought a building for $523,000 by signing a long-term note for $461,500 and using restricted funds for the remainder. Collected membership dues of $53,000. Individuals receive substantial benefits from the memberships. Received income of $53,000 generated by the permanently restricted net assets. Paid rent of $35,000, advertising of $38,000, and utilities of $39,000. Received an unrestricted pledge of $223,000; it will be collected in five years. The organization expects to collect the entire amount. Present value is $172,000. It then recognized interest of $8,300 for the year. Computed depreciation as $63,000. Paid $38,000 in interest on the note signed to acquire the building. Prepare a statement of activities for this entity for this year. Prepare a statement of financial position for this entity at the end of this year.

Answer 1

Part A

WATSON FOUNDATION

STATEMENT OF ACTIVITIES

	Unrestricted Net Assets	Temporarily Restricted Net Assets	Permanently Restricted Net Assets
Contributions revenue	203000	207000 (35000+172000)
Interest revenue	43000	8300
Investment revenue	53000
Membership revenue	53000
Total revenues	352000	215300
Net assets released from restriction	99500 (38000+(523000-461500))	(99500)
Total revenues and net assets released from restriction	451500	115800
Expenses:
General and administrative
Rent	(35000)
salary	(113000)
advertising	(38000)
utilities	(39000)
depreciation	(63000)
interest	(38000)
Total expenses	(326000)
Excess of total revenues and net assets released from restriction over expenses	125500	115800
Net assets at beginning of year	446000	123000	323000
Net assets at end of year	571500	238800	323000

Part B

WATSON FOUNDATION

STATEMENT OF FINANCIAL POSITION

ASSETS
Cash		265500
Pledges receivable (net)		323300
Investments		323000
Land, buildings, and equipment (net)		683000
Total assets		1594800
LIABILITIES
Notes payable		461500
NET ASSETS
Unrestricted	571500
Temporarily restricted	238800
Permanently restricted	323000
Total Net Assets		1133300
Total Liabilities and Net Assets		1594800

Cash = 123000+123000+203000-113000+35000-(523000-461500)+53000+53000-35000-38000-39000-38000 = 265500

Pledges receivable = 223000+43000+172000+8300 = 446300-123000

Land and buildings = 223000+523000-63000