Question

In: Accounting

You are preparing a statement of activities for the University of Richland, a private not-for-profit entity....

You are preparing a statement of activities for the University of Richland, a private not-for-profit entity. The following questions should be viewed as independent of each other.

Part 1

During the current year, a donor gives $386,000 in cash to the school and stipulates that it must hold this money forever. However, any investment income earned on this money must be used for faculty salaries. During the current year, the investment earned $42,000 and, of that amount, the school has expended $29,000 appropriately to date. As a result of these events, what was the overall change in each of the following for the current year?

Unrestricted net assets.

Temporarily restricted net assets.

Permanently restricted net assets.

Part 2

A donor gives a large machine to the school on January 1 of the current year. It has a value of $201,000, no salvage value, and a 10-year life. The donor requires that the school keep the machine and use it for all 10 years, and the school agrees. It cannot sell or retire the machine in the interim. As a result of these events, what was the overall change in each of the following for the current year?

Unrestricted net assets.

Temporarily restricted net assets.

Operating expenses.

Part 3

Several years ago, a donor gave the school $430,000 in cash to help fund its financial aid program. This year, the school charged $2.40 million in tuition but granted $740,000 in financial aid. Collections to date from the students have totaled $1.50 million. The donor’s gift has offset $310,000 of the financial aid. As a result of these events, what was the overall change in each of the following for the current year?

Unrestricted net assets.

Operating expenses.

Temporarily restricted net assets.

Show your steps.

Solutions

Expert Solution

Unrestricted net assets are assetsdonated to nonprofit organizations that are not subject to use restrictions. When taken in, donations are classified as unrestricted, temporarily restricted or permanently restricted net assets. Restricted assets must be used for specific purposes as designated by donors.

Answer to part A

Since there is a restriction on assets by the donor there will not be any change in the unrestricted net assets

The temporarily restricted net assets will be increased by $42000 as in interest against investment

Permanently restricted net assets increases by $386000 as restrictions are imposed for full time on these funds.

Answer to B part

There is no change in the unrestricted net assets as the machine is restricted to its use.

Temporarily restricted net assets will increase by $201000 as the asset is restricted for a period of 10 years

Depreciation on the assets will increase the operating expenses.

Answer to C part

Unrestricted assets increases as follows $430000+$740000-$310000+$1.50million=$15860000

There is no increase in temporarily restricted assets

Operating expenses increases by $310000

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

You are preparing a statement of activities for the University of Richland, a private not-for-profit entity....
You are preparing a statement of activities for the University of Richland, a private not-for-profit entity. The following questions should be viewed as independent of each other. 1.  During the current year, a donor gives $429,000 in cash to the school and stipulates that it must hold this money forever. However, any investment income earned on this money must be used for faculty salaries. During the current year, the investment earned $41,000 and, of that amount, the school has expended $26,000...
For a number of years, a private not-for-profit entity has been preparing financial statements that do...
For a number of years, a private not-for-profit entity has been preparing financial statements that do not necessarily follow generally accepted accounting principles. At the end of the most recent year (Year 2), those financial statements show total assets of $1,100,000, total liabilities of $140,000, total unrestricted net assets of $480,000, total temporarily restricted net assets of $340,000, and total permanently restricted net assets of $140,000. In addition, total expenses for the year were $580,000 (shown in unrestricted net assets)....
For a number of years, a private not-for-profit entity has been preparing financial statements that do...
For a number of years, a private not-for-profit entity has been preparing financial statements that do not necessarily follow generally accepted accounting principles. At the end of the most recent year (Year 2), those financial statements show total assets of $950,000, total liabilities of $110,000, total unrestricted net assets of $420,000, total temporarily restricted net assets of $310,000, and total permanently restricted net assets of $110,000. In addition, total expenses for the year were $520,000 (shown in unrestricted net assets)....
The University of Danville is a private not-for-profit university that starts the current year with $700,000...
The University of Danville is a private not-for-profit university that starts the current year with $700,000 in net assets: $400,000 without donor restrictions and $300,000 with donor restrictions. The $300,000 is composed of $200,000 with purpose restrictions and $100,000 that must be held permanently. The following transactions occurred during the year. Charged students $1.2 million for tuition and fees. Received a donation of equity investments that had cost the owner $100,000 but is worth $300,000 currently. According to the terms...
A private not-for-profit entity is working to create a cure for a deadly disease. The charity...
A private not-for-profit entity is working to create a cure for a deadly disease. The charity starts the year with cash of $739,000. Of this amount, unrestricted net assets total $413,000, temporarily restricted net assets total $213,000, and permanently restricted net assets total $113,000. 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...
A private not-for-profit entity is working to create a cure for a deadly disease. The charity...
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...
A private not-for-profit entity is working to create a cure for a deadly disease. The charity...
A private not-for-profit entity is working to create a cure for a deadly disease. The charity starts the year with cash of $718,000. Of this amount, unrestricted net assets total $406,000, temporarily restricted net assets total $206,000, and permanently restricted net assets total $106,000. 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...
A private not-for-profit entity is working to create a cure for a deadly disease. The charity...
A private not-for-profit entity is working to create a cure for a deadly disease. The charity starts the year with cash of $751,000. Of this amount, unrestricted net assets total $417,000, temporarily restricted net assets total $217,000, and permanently restricted net assets total $117,000. Within the temporarily restricted net assets, the entity must use 90 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...
5. In Year 6, a donor gives $112.000 to a private not-for-profit entity to enable it...
5. In Year 6, a donor gives $112.000 to a private not-for-profit entity to enable it to buy a new bus for transportation purposes. Near the end of Year 7. this money is used for the stipulated purpose. The donor made no provisions about the accounting for this acquisition. Which of the following is true about the statement of activities for Year 7? a. Net assets without donor restrictions increased by $112,000. b. Net assets with donor restrictions did not...
The Watson Foundation, a private not-for-profit entity, starts 2020 with cash of $100,000, contributions receivable (net)...
The Watson Foundation, a private not-for-profit entity, starts 2020 with cash of $100,000, contributions receivable (net) of $200,000, investments of $300,000, and land, buildings, and equipment (net) of $200,000. Net assets without donor restrictions were reported as $400,000, the same figure as the net assets with donor restrictions. Of the restricted net assets, $300,000 was purpose restricted whereas the other $100,000 had to be held permanently, although the subsequently earned income is without restriction. Fifty percent of the purpose restricted...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT