Question

[The following information applies to the questions displayed below.] INVOLVE was incorporated as a not-for-profit voluntary health and welfare organization on January 1, 2017. During the fiscal year ended December 31, 2017, the following transactions occurred. 1. A business donated rent-free office space to the organization that would normally rent for $36,600 a year. 2. A fund drive raised $193,000 in cash and $116,000 in pledges that will be paid within one year. A state government grant of $166,000 was received for program operating cost related to public health education. 3. Salaries and fringe benefits paid during the year amounted to $210,160. At year-end, an additional $17,600 of salaries and fringe benefits were accrued. 4. A donor pledged $116,000 for construction of a new building, payable over five fiscal years, commencing in 2019. The discounted value of the pledge is expected to be $95,860. 5. Office equipment was purchased for $13,600. The useful life of the equipment is estimated to be 5 years. Office furniture with a fair value of $11,200 was donated by a local office supply company. The furniture has an estimated useful life of 10 years. Furniture and equipment are considered unrestricted net assets by INVOLVE. 6. Telephone expense for the year was $6,800, printing and postage expense was $13,600 for the year, utilities for the year were $9,900 and supplies expense was $5,900 for the year. At year-end, an immaterial amount of supplies remained on hand and the balance in accounts payable was $5,200. 7. Volunteers contributed $16,600 of time to help with answering the phones, mailing materials, and various other clerical activities. 8. It is estimated that 90 percent of the pledges made for the 2018 year will be collected. Depreciation expense is recorded for the full year on the assets recorded in item 5. 9. Salaries and wages, and other expenses (except for the provision for uncollectible accounts which is allocated 100 percent to fund-raising) were allocated to program services and support services in the following percentages: public health education, 35 percent; community service, 30 percent; management and general, 20 percent; and fund-raising, 15 percent. 10. Net assets were released to reflect satisfaction of state grant requirements that the grant resources be used for public health education program purposes. 11. All nominal accounts were closed to the appropriate net asset accounts.

Required

a.

Prepare journal entries to record these transactions. Expense transactions should be initially recorded by object classification; in entry 10 expenses will be allocated to functions b. Prepare a statement of activities for the year ended December 31, 2017. c. Prepare a statement of financial position for the year ended December 31, 2017. d. Prepare a statement of cash flows for the year ended December 31, 2017 e. Prepare a statement of functional expenses for the year ended December 31, 2017.

Answer 1

1. Rent Expense a/c Dr.......................................................... $36,600
    To Contributions- Unrestricted A/c.......................................... $36,600


2. Cash account Dr............................................................. ...$166,000
          To Contributions- Temporarily Restricted A/c.................... $166,000

No journal entry required for raising fund drive.


3. Salaries and Fringe benefits expenses A/c Dr...................................... ..$227,760
         To Cash A/c................................................................................................ $210,160
         To Salaries & Benefits Payable A/c............................................................ $ 17,600



4. Contribution receivable A/c Dr.................................................................. $116,000
              To Contribution- Temporarily restricted A/c ........................................... $95,860
              To Discount on Contribution Receivable A/c ............................................$ 20140

5. Equipment and Furniture A/c Dr........................................................ $ 24800
                 To Cash A/................................................................................ $13,600
                 To Contributions- Unrestricted A/c......................................... $11,200


6.
Telephone A/c Dr............................................................................. $6,800
printing and postage expense Dr. A/c.............................................. $13,600
supplies expense Dr. A/c................................................................... $5,900
                 To Cash.............................................................................. $ 21,100
                To Accounts Payable..........................................................$ 5,200



7.No Journal entry needed.


8.
Depreciation a/c Dr. ........................................................... 3840
          To Office equipment A/c............................................. 2720
           To Office furniture A/c .............................................. 1120

Cash A/c....................................................................................... 20880
Contribution receivable A/c ......................................................... 20880

9.
Public Health Education Program A/c Dr.
Community Service Program A/c Dr.
Management And General A/c Dr.
Fund Raising A/c Dr.
To Salaries and Benefits A/c
To Rent Exp A/c
To Telephone A/c
To Printing and Postage A/c
To Supplied A/c
To Description A/c

10. Net Assets Released- Satisfaction at Purpose restriction-Temporarily Restricted A/c Dr........
           To Net Assets Released- Satisfaction at Purpose restriction-Unrestricted..................