Question

Use Problems 10-15 and 10-16 to prepare an activity statement (operating statement), a comparative statement of financial position (balance sheet), and a statement of cash flows (using the indirect method). What do you learn from these statements, and what questions do they raise?

Problem 10-15: The American Research Council for Humanities (ARCH) had the following financial events during the current year:

1. January 12. Received a $300,000 payment from a pledge made last year.

2. February 4. Placed an order for new cubicle partitions with 5-year useful lives, for $15,000. ARCH uses straight-line depreciation. Payment was not yet made, and the partitions have not yet been delivered.

3. March 1. Paid out a $50,000 grant to the Governmental Archaeological Research Committee for History (GARCH). This was a new grant made in the current fiscal year.

4. May 29. Paid a $5,000 deposit for the partitions ordered on February 4.

5. June 12. Collected $80,000 in new donations.

6. September 1. Bought $60,000 of books ARCH has sponsored in the past to sell in its online bookstore. It paid half now, and still owes the other half, to be paid at the end of the year. ARCH has budgeted to sell the books for $100,000 total.

7. October 15. The partitions ordered on February 4 arrived, and ARCH paid for the balance owed.

8. November 10. Borrowed $75,000 from its bank on a note payable.

9. December 5. Repaid $25,000 on the note payable and also $3,000 in interest expenses.

10. December 28. Paid its employees $75,000 of wages in cash for the year, $70,000 of which was for the current year and $5,000 of which was the outstanding balance owed. Employees earned $90,000 in wages for the year.

11. December 31. Book sales from the Internet bookstore totaled $110,000 and the cost of the books sold was $58,000. ARCH has not collected $12,000 of the sales. The balance owed for the inventory was paid.

12. ARCH expects that of the $12,000 not collected to date, it will collect $10,000.

13. December 31. Depreciation of ARCH's building for the year is $40,000.

Problem 10-16: ARCH began the year with the following balances in their accounts:

Accounts Payable: $27,000

Accounts Receivable, Net: $26,000

Cash: $10,000 Inventory: $25,000

Notes Payable: $270,000

Permanently Restricted Net Assets: $100,000

Pledges Receivable: $350,000

Property, Plant, and Equipment, Net: $350,000

Temporarily Restricted Net Assets: $30,000

Unrestricted Net Assets: $302,000

Wages Payable: $32,000

Answer 1

	Journal Entries
Sl. No.	Date	Particulars		Dr. ($)	Cr.($)
1	Jan 12,	Cash		300,000.00
		Pledge Receivables			300,000.00
2	March 1,	Grant to GARCH		50,000.00
		Cash			50,000.00
3	May 29,	Advance Payments		5,000.00
		Cash			5,000.00
4	June 12,	Cash		80,000.00
		Donations Received			80,000.00
5	Sep 1,	Inventories		60,000.00
		Cash			30,000.00
		Accounts Payable			30,000.00
6	Oct 15,	Cubical Partitions		15,000.00
		Cash			10,000.00
		Advance Payments			5,000.00
7	Nov 10,	Cash		75,000.00
		Notes Payable			75,000.00
8	Dec 5,	Notes Payable		25,000.00
		Interest Expenses		3,000.00
		Cash			28,000.00
9	Dec 28,	Wages		90,000.00
		Wages Payable		5,000.00
		Cash			75,000.00
		Wages Payable			20,000.00
10	Dec 31,	Cash		98,000.00
		Accounts Receivables		12,000.00
		Inventory			58,000.00
		Profits form Book Sales			52,000.00
		Bad Debts		10,000.00
		Accounts Receivables			10,000.00
		Depreciation		40,000.00
		Building			40,000.00
	Total			868,000.00	868,000.00

Trial Balances combining (Problem 11-5) and (Problem 11-15)
Particulars		Dr. ($)	Pariculars		Cr.($)
Accounts Receivables		28,000.00	Accounts Payable		57,000.00
Cash		365,000.00	Notes Payable		320,000.00
Inventory		27,000.00	Wages Payable		47,000.00
Pledge Receivables		50,000.00	Profits from Books Sales		52,000.00
Property, Plant, and Equipment		310,000.00	Donations Received		80,000.00
Depreciation		40,000.00	Permanently Restricted Net Assets		100,000.00
Bed Debts		10,000.00	Temporarily Restricted Net Assets		30,000.00
Wages		90,000.00	Unrestricted Net Assets		302,000.00
Interest Expenses		3,000.00
Cubical Partitions		15,000.00
Grant to GARCH		50,000.00
Total		988,000.00	Total		988,000.00