[The following information applies to the questions displayed below.] For a number of years, a private not-for-profit entity has been preparing financial statements that do not necessarily conform to U.S. generally accepted accounting principles. At the end of the most recent year (Year 2), those financial statements show total assets of $900,000, total liabilities of $100,000, net assets without donor restriction of $400,000, and net assets with donor restrictions of $400,000. This last category is composed of $300,000 in net assets with purpose restrictions and $100,000 in net assets that must be permanently held. At the end of Year 1, financial statements show total assets of $700,000, total liabilities of $60,000, net assets without donor restriction of $340,000, and net assets with donor restrictions of $300,000. This last category is composed of $220,000 in net assets with purpose restrictions and $80,000 in net assets that must be permanently held. Total expenses for Year 2 were $500,000 and reported under net assets without donor restrictions. Each part that follows should be viewed as an independent situation. 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 consistently records the cash collections as an increase in cash and an increase in exchange revenues under net assets without donor restrictions. The board of trustees approved a policy several years ago that 10 percent of the money collected from membership fees 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 is the appropriate amount of net assets without donor restrictions at the end of Year 1? b. What is the appropriate amount of net assets without donor restrictions at the end of Year 2? c. What is the appropriate amount of net assets with donor restrictions at the end of Year 2? Answer is complete but not entirely correct. a. Net assets without donor restrictions at the end of Year 1 b. Net assets without donor restrictions at the end of Year 2 c. Net assets with donor restrictions at the end of Year 2 $ $ $ 640,000 400,000 400,000

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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[The following information applies to the questions displayed below.]
For a number of years, a private not-for-profit entity has been preparing financial statements that do not necessarily
conform to U.S. generally accepted accounting principles. At the end of the most recent year (Year 2), those financial
statements show total assets of $900,000, total liabilities of $100,000, net assets without donor restriction of $400,000,
and net assets with donor restrictions of $400,000. This last category is composed of $300,000 in net assets with
purpose restrictions and $100,000 in net assets that must be permanently held. At the end of Year 1, financial statements
show total assets of $700,000, total liabilities of $60,000, net assets without donor restriction of $340,000, and net assets
with donor restrictions of $300,000. This last category is composed of $220,000 in net assets with purpose restrictions
and $80,000 in net assets that must be permanently held. Total expenses for Year 2 were $500,000 and reported under
net assets without donor restrictions. Each part that follows should be viewed as an independent situation.
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 consistently records the cash collections as an increase in cash and an increase in exchange revenues under net assets
without donor restrictions. The board of trustees approved a policy several years ago that 10 percent of the money collected from
membership fees 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 is the appropriate amount of net assets without donor restrictions at the end of Year 1?
b. What is the appropriate amount of net assets without donor restrictions at the end of Year 2?
c. What is the appropriate amount of net assets with donor restrictions at the end of Year 2?
Answer is complete but not entirely correct.
a. Net assets without donor restrictions at the end of Year 1
b. Net assets without donor restrictions at the end of Year 2
c. Net assets with donor restrictions at the end of Year 2
$
$
640,000 x
400,000
400,000
Transcribed Image Text:[The following information applies to the questions displayed below.] For a number of years, a private not-for-profit entity has been preparing financial statements that do not necessarily conform to U.S. generally accepted accounting principles. At the end of the most recent year (Year 2), those financial statements show total assets of $900,000, total liabilities of $100,000, net assets without donor restriction of $400,000, and net assets with donor restrictions of $400,000. This last category is composed of $300,000 in net assets with purpose restrictions and $100,000 in net assets that must be permanently held. At the end of Year 1, financial statements show total assets of $700,000, total liabilities of $60,000, net assets without donor restriction of $340,000, and net assets with donor restrictions of $300,000. This last category is composed of $220,000 in net assets with purpose restrictions and $80,000 in net assets that must be permanently held. Total expenses for Year 2 were $500,000 and reported under net assets without donor restrictions. Each part that follows should be viewed as an independent situation. 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 consistently records the cash collections as an increase in cash and an increase in exchange revenues under net assets without donor restrictions. The board of trustees approved a policy several years ago that 10 percent of the money collected from membership fees 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 is the appropriate amount of net assets without donor restrictions at the end of Year 1? b. What is the appropriate amount of net assets without donor restrictions at the end of Year 2? c. What is the appropriate amount of net assets with donor restrictions at the end of Year 2? Answer is complete but not entirely correct. a. Net assets without donor restrictions at the end of Year 1 b. Net assets without donor restrictions at the end of Year 2 c. Net assets with donor restrictions at the end of Year 2 $ $ 640,000 x 400,000 400,000
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