Chapter 11, Problem 30P

a.

To determine

Prepare the required journal entries to record the financial activities of the organization

Y C during the year.

Explanation of Solution

The required journal entries are as follows:

Date	Account title and Explanation	Post Ref	Debit ($)	Credit ($)
i.	Contributions receivable		$\$11,396,000$
	Cash		$266,400$
	Support—contributions (without donor restrictions)			$\$10,360,000$
	Support—contributions (with donor restrictions)			$1,036,000$
	Revenues—investment (without donor restrictions)			$111,888$
	Revenues—investment (with donor restrictions)			$154,512$
	(To recognize support and revenues)
ii.	Net assets released from restrictions - with donor restrictions		$\$740,000$
	Net assets released from restrictions - without donor restrictions			$\$740,000$
iii.	Expenses—program		$\$9,620,000$
	Expenses—support		$1,369,000$
	Payables			$\$10,989,000$
	(To record expenses)
iv.	Property, plant and equipment, net		$\$148,000$
	Program expense		$293,040$
	Support expense		$39,960$
	Cash			$\$481,000$
	(To record the net increase in long-term assets and depreciation expense)
v.	Cash		$\$370,000$
	Payables		$10,730,000$
	Contributions receivable			$\$11,100,000$
	(Paid for accounts payables and record contributions received)

b.

To determine

Prepare the statement of activities and the statement of financial position for the organization Y C.

Explanation of Solution

A non-profit organization issues a slightly different set of financial statements than those issued by a profit entity. The financial statements published by the non-profit organization are as follows:

• Statement of financial position: This is similar to the balance sheet of a for-profit entity, except that the net assets segment assumes the place of the equity portion used by a for profit entity. The net assets segment breaks down into unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.
• Statement of activities: The statement measures non-profit income and expenditures for the reporting period. Both sales and expenditures are broken down into the unrestricted temporary and permanently restricted classifications related to above for the statement of financial position.
• Statement of cash flows: This statement comprises information about cash flows into and out of a non-profit organization; in fact, it displays the degree of those non-profit operations that produce and use funds.
• Statement of functional expenses: The statement shows how the expenses are accumulated for each functional area of the company. Functional areas usually involve procurement and accounting, raising funds and services.

The statement of activities of the organization Y C is as follows:

Statement of Activities		Without DonorRestrictions		With DonorRestrictions		Total
Support—contributions		$10,360,000		$1,036,000		$11,396,000
Revenues—investment		111,888		154,512		266,400
Net assets released from restrictions		740,000		(740,000)		0
Total revenue and gains		11,211,888		450,512		11,662,400
Expenses ­program		9,913,040				9,913,040
Expenses ­support		1,408,960				1,408,960
Total operating expenses		11,332,000				11,322,000
Change in net assets		(110,112)		450,512		340,400
Net assets, beginning of year		5,920,000		5,550,000		11,470,000
Net assets, end of year		$5,809,888		$6,000,512		$11,810,400

The statement of financial position of the organization Y C is as follows:

Statement of Financial Position		Amount ($)
Cash		$821,400
Investments		8,880,000
Contributions receivable		2,220,000
Total current assets		11,921,000
Property, plant and equipment, net		4,588,000
Total assets		$16,509,400
Payables		$1,739,000
Total current liabilities		1,739,000
Long term liabilities		2,960,000
Total liabilities		4,699,000
Net assets-without donor restrictions		5,809,888
Net assets-with donor restrictions		6,000,512
Total net assets		$11,810,400
Total liabilities and net assets		$16,509,400