Chapter 13, Problem 21EP

a)

To determine

Prepare all necessary journal entries to record the given transactions.

Explanation of Solution

Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
• Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Prepare all necessary journal entries to record the given transactions:

Date	Accounts title and Explanation	Debit ($)	Credit ($)
1	Rent expense	$35,000
	Contributions - Unrestricted		$35,000
	(To record the rent expenses paid ny the net assets)
2	Cash	$335,000
	Contributions receivable	$100,000
	Contributions - Unrestricted		$185,000
	Contributions - Temporarily restricted		$250,000
	(To record the cash receipt and contribution receivables)
3.	Salaries & benefits expense	$224,560
	Cash		$208,560
	Salaries & benefits payable
	(To record the salaries and benefits expenses)
4	Contributions receivable	$100,000
	Contributions - Temporarily restricted		$94,260
	Discount on contributions receivable		$5,740
	(To record the contribution receivable)
5.	Equipment & furniture	$21,600
	Cash		$12,000
	Contributions - Unrestricted		$9,600
	(To record the purchase of furniture and equipment)
6	Telephone expense	$5,200
	Printing & postage expense	$12,000
	Utilities expense	$8,300
	Supplies expense	$4,300
	Cash		$26,200
	Accounts payable		$3,600
	(To record the expenses partly paid and partly payable)
7	For this transaction no journal entry is required because no specialized skills required doing the jobs in the given transaction.
8	Provision for uncollectible pledges	$10,000
	Allowance for uncollectible pledges -Unrestricted		$10,000
	(To record the provision for uncollectible pledges)
	Depreciation expense $\left[\left(\$12,000/5\text{Years}\right)+\left(\$9,600/10\text{years}\right)\right]$	$3,360
	Allowance for depreciation -  equipment & furniture		$3,360
	(To record the depreciation expense)
9	Public health education program	$105,952
	Community service program	$90,816
	Management & general	$60,544
	Fund-raising	$45,408
	Salaries & benefits expense		$224,560
	Rent expense		$35,000
	Telephone expense		$5,200
	Printing & postage expense		$12,000
	Utilities		$8,300
	Supplies expense		$4,300
	Provision for uncollectible accounts		$10,000
	Depreciation expense		$3,360
	(To record the adjustment entries)
10	Net assets released satisfaction of purpose restriction - Unrestricted	$105,952
	Net assets released-satisfaction of purpose restriction- Unrestricted		$105,952
	(To record the release of net assets)
11	Contributions— Temporarily restricted (transactions 1, 2 and 5)	$229,600
	Net assets-Unrestricted	$73,120
	Public health education		$105,952
	Community service		$90,816
	Management & general		$60,544
	Fund-raising		$45,408
	(To record the closing entry for contributions- Unrestricted)
	Contributions - Temporarily restricted (transactions 2 & 4)	$344,260
	Net assets-Temporarily restricted		$344,260
	(To record the closing entry for the contributions – Temporarily restricted)
	Net assets - Temporarily restricted	$105,952
	Net assets released—satisfaction of purpose restriction - Temporarily restricted		$105,952
	(To record the closing entry for the net assets Temporarily restricted)
	Net assets released—satisfaction of purpose restriction - Unrestricted	$105,952
	Net assets - Unrestricted		$105,952
	(To record the closing entry for the net assets-Unrestricted)

Table (1)

Notes to the above table:

• Compute the resource allocation based on the available information (transaction 9):

Table (2)

b.

To determine

Prepare the statement of activity for the year ended December 31, 2017.

Explanation of Solution

Prepare the statement of activity for the year ended December 31, 2017:

Entity I
Statement of activities
For the year ended December 31, 2017
Particulars	Unrestricted	Temporarily restricted	total
Revenue and other Support:
Contributions-net assets released from restriction	$ 229,600	$ 344,260	$ 573,860
Satisfaction of purpose	$105,952	($105,952)
Total revenue & other support (A)	$335,552	$238,308	$573,860
Expenses:
Public health education	$105,952		105,952
Community services	$90,816		90,816
Management & general	$60,544		60,544
Fund-raising	$45,408		45,408
Total expenses (B)	$302,720		302,720
Increase in net assets (A) – (B)	$32,832	$238,308	$271,140
Beginning net assets	0	0	0
Ending net assets	$ 32,832	$ 238,308	$ 271,140

Table (3)

Therefore, the total ending net assets are $271,140.

c)

To determine

Prepare a statement of financial position for the year ended December 31, 2017.

Explanation of Solution

Statement of financial position: It is an itemized list of total assets and “liabilities and net assets.” The assets are classified into current and noncurrent assets. The liabilities are also classified into current and noncurrent liabilities. The assets should be equal to the liabilities and net assets.

Prepare a statement of financial position for the year ended December 31, 2017:

Entity I
Statement of Financial Positions
For the year ended December 31, 2017
Assets	Amount ($)
Cash	$88,240
Contributions receivable (less allowance for uncollectible accounts of $10,000 and discount on contributions receivable of $5,740)	$184,260
Equipment and furniture (less allowance for accumulated depreciation of $3,360)	$18,240
Total Assets	$290,740
Liabilities:
Accounts payable	$3,600
Salaries & benefits payable	$16,000
Total liabilities	$19,600
Net Assets:
Unrestricted	$32,832
Temporarily restricted	$238,308
Total net assets	$271,140
Total liabilities and net assets	$290,740

Table (4)

d)

To determine

Prepare a statement of cash flow for the year ended December 31, 2017.

Explanation of Solution

Prepare a statement of cash flow for the year ended December 31, 2017:

Table (5)

e)

To determine

Prepare the schedule of expenses by nature and function for the year ended December 31, 2017.

Explanation of Solution

Prepare the schedule of expenses by nature and function for the year ended December 31, 2017:

Table (6)