This problem summarizes typical transactions engaged in by not-for-profit organizations. The American Association for Freedom, a political think tank, was recently established. During its first year of operations it engaged in the following transactions and was affected by the following events (in summary form): It received a $10,000,000 endowment contribution from a donor, all in stocks and bonds. It received $3,000,000 in additional contributions, all restricted for its educational programs and $2,300,000 in contributions without donor restrictions. It acquired $800,000 in
This problem summarizes typical transactions engaged in by not-for-profit organizations. The American Association for Freedom, a political think tank, was recently established. During its first year of operations it engaged in the following transactions and was affected by the following events (in summary form):
It received a $10,000,000 endowment contribution from a donor, all in stocks and bonds.
It received $3,000,000 in additional contributions, all restricted for its educational programs and $2,300,000 in contributions without donor restrictions.
It acquired $800,000 in furniture, fixtures, and equipment, all of which have an expected useful life of 10 years.
It recognized
It spent $2,400,000 on educational programs.
It earned $300,000 in interest and dividends on its endowment investments.
By year-end the value of its investments had appreciated by $600,000.
It incurred $1,300,000 in administrative expenses.
Near year-end it received a pledge of $4,500,000, to be fulfilled in three annual installments of $1,500,000 beginning in one year. The Association determined that a discount rate of 6 percent was appropriate.
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