Assume that this entity charges its members $100,000 each year (Year 1 and Year 2). The members getnothing in return for their dues. The entity has consistently recorded the cash collections as an increase incash and an increase in exchange revenues under net assets without donor restrictions. The board oftrustees has had a policy for several years that 10 percent of the money collected be set aside andinvested with the money held for emergency purposes. Cash is decreased and "investments held foremergencies" are increased with each purchase.Required:a. What was the appropriate amount of net assets without donor restrictions at the end of Year 1?Net assets without donor restrictions at the end of Year 1b. What was the appropriate amount of net assets without donor restrictions at the end of Year 2?Net assets without donor restrictions at the end of Year 2c. What was the appropriate amount of net assets with donor restrictions at the end of Year 2?Net assets with donor restrictions at the end of Year 2 !Required informationProblem 18-45 (Static) (LO 18-1, 18-2, 18-4, 18-5, 18-8)[The following information applies to the questions displayed below.]For a number of years, a private not-for-profit entity has been preparing financialstatements that do not necessarily conform to U.S. generally accepted accountingprinciples. At the end of the most recent year (Year 2), those financial statements showtotal assets of $900,000, total liabilities of $100,000, net assets without donor restrictionof $400,000, and net assets with donor restrictions of $400,000. This last category iscomposed of $300,000 in net assets with purpose restrictions and $100,000 in netassets that must be permanently held. At the end of Year 1, financial statements showtotal assets of $700,000, total liabilities of $60,000, net assets without donor restrictionof $340,000, and net assets with donor restrictions of $300,000. This last category iscomposed of $220,000 in net assets with purpose restrictions and $80,000 in net assetsthat must be permanently held. Total expenses for Year 2 were $500,000 and reportedunder net assets without donor restrictions. Each part that follows should be viewed as anindependent situation.

Private not for profit organization It is the private foundation which is engaged in social or public benefit activities and registered in IRS to derive its revenue from a small group of donors.a. Collection should be recorded as contribution revenue since they are not received anything in exchange for the membership dues. Contribution revenue is an increase in net assets without donor restrictions. In this case, Membership revenue has been recorded. So specific source of the net assets is wrong where as net assets without donor restrictions is correct at $300,000 as of the end of Year One because net assets without donor restrictions are increased same as above Overall totals are not changed by investments held for emergencies. Internally restricted assets are labelled by the entity. So balance of net assets without donor restrictions at end of year 2=$4,00,000 c. In this case , net assets are not subject to donor restrictions and any changes for net assets with donor restrictions are not recorded by the entity. So balance at the end of Year Two =$400,000

Business

Accounting

Assume that this entity charges its members $100,000 each year (Year 1 and Year 2). The members get nothing in return for their dues. The entity has consistently recorded the cash collections as an increase cash and an increase in exchange revenues under net assets without donor restrictions. The board of trustees has had a policy for several years that 10 percent of the money collected be set aside and invested with the money held for emergency purposes. Cash is decreased and "investments held for emergencies" are increased with each purchase. Required: a. What was the appropriate amount of net assets without donor restrictions at the end of Year 1? Net assets without donor restrictions at the end of Year 1 b. What was the appropriate amount of net assets without donor restrictions at the end of Year 2? Net assets without donor restrictions at the end of Year 2 c. What was the appropriate amount of net assets with donor restrictions at the end of Year 2? Net assets with donor restrictions at the end of Year 2

Assume that this entity charges its members $100,000 each year (Year 1 and Year 2). The members get nothing in return for their dues. The entity has consistently recorded the cash collections as an increase cash and an increase in exchange revenues under net assets without donor restrictions. The board of trustees has had a policy for several years that 10 percent of the money collected be set aside and invested with the money held for emergency purposes. Cash is decreased and "investments held for emergencies" are increased with each purchase. Required: a. What was the appropriate amount of net assets without donor restrictions at the end of Year 1? Net assets without donor restrictions at the end of Year 1 b. What was the appropriate amount of net assets without donor restrictions at the end of Year 2? Net assets without donor restrictions at the end of Year 2 c. What was the appropriate amount of net assets with donor restrictions at the end of Year 2? Net assets with donor restrictions at the end of Year 2

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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N2. Account
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