Chapter 14 – Accounting for Not-for-Profit Organizations
14-32
Ch. 14, Solutions, Exercise 14-25, b. (Cont’d)
ART LEAGUE
GENERAL JOURNAL
Debits Credits
11. CONTRIBUTIONS—WITHOUT DONOR RESTRICTIONS 38,861
(trans. 1 and 4)
MEMBERSHIP DUES 16,285
INVESTMENT INCOME—WITHOUT DONOR
RESTRICTIONS 686
NET ASSETS WITHOUT DONOR RESTRICTIONS 2,169
EXHIBITION PROGRAM 21,472
COMMUNITY ART EDUCATION (trans. 7 and 9) 22,297
INVESTMENT INCOME—WITH DONOR RESTRICTIONS—
PROGRAMS 1,269
NET ASSETS WITH DONOR RESTRICTIONS—
PROGRAMS 1,269
NET ASSETS WITH DONOR RESTRICTIONS—
PROGRAMS 3,660
NET ASSETS RELEASED—SATISFACTION OF PURPOSE
RESTRICTION—WITHOUT DONOR RESTRICTIONS 3,660
NET ASSETS WITHOUT DONOR RESTRICTIONS 3,660
Chapter 14 – Accounting for Not-for-Profit Organizations
14-33
Ch. 14, Solutions, Exercise 14-25 (Cont’d)
c. ART LEAGUE
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2023
Without Donor With Donor
Restrictions Restrictions Total
REVENUE & OTHER
SUPPORT:
CONTRIBUTIONS $ 38,861 $ 38,861
COMMISSION REVENUE 2,402 2,402
INVESTMENT INCOME 686 $ 1,269 1,955
NET ASSETS RELEASED
SUPPORT 73,888 (2,391) 71,497
EXPENSES:
EXHIBITION PROGRAM 21,472 21,472
COMMUNITY ART EDUCATION 22,297 22,297
MANAGEMENT & GENERAL 17,893 17,893
FUND-RAISING 10,735 _______ 10,735
TOTAL EXPENSES 72,397 _______ 72,397
Chapter 14 – Accounting for Not-for-Profit Organizations
14-34
Ch. 14, Solutions, Exercise 14-25 (Cont’d)
d. ART LEAGUE
STATEMENT OF FINANCIAL POSITION
JUNE 30, 2023
ASSETS:
CASH (beginning balance, trans. 1, 2, 5, 6, 7, and 10) $ 3,719
SHORT-TERM INVESTEMENTS (beginning balance and trans. 6) 9,211
ASSETS RESTRICTED:
FOR ENDOWMENT:
INVESTMENTS 5,767
TOTAL ASSETS $32,669
LIABILITIES:
ACCOUNTS PAYABLE & ACCRUED EXPENSES (trans. 5) 2,746
TOTAL LIABILITIES 2,746
NET ASSETS:
WITHOUT DONOR RESTRICTIONS 13,302
Chapter 14 – Accounting for Not-for-Profit Organizations
14-35
Ch. 14, Solutions, Exercise 14-25 (Cont’d)
General Problem Information: Recording and reporting transactions
Learning Objective: 14-3
Learning Objective: 14-5
Topic: Accounting for NFP Organizations; Preparing Journal Entries and Financial
14-26. Some of the corrections or modifications that should be made to the Learning Institute’s
statement of financial position include:
• Short- and long-term investments should be separated since the FASB indicates
that assets should be reported in terms of nearness to cash or by classifying as
current/noncurrent. Long-term investments are generally reported in a separate
• The FASB indicates that, at a minimum, the statement of financial position should
report the total for assets, liabilities, and net assets. Totals have not been reported
for liabilities or net assets.
• The liabilities are not reported by current/noncurrent, nor are they reported in
homogenous groups. The mortgage is reported between two current liabilities. At
a minimum, the center would want to report the two current liabilities next to each
other; doing so increases the homogeneity and separates the liabilities into current
and noncurrent.
Based on the reporting of the net assets, it appears that there is a missing
classification in the assets section. There are at least $1,225,000 in net assets
restricted for permanent endowment that should be classified in the asset section
as Assets with Restrictions on Use. These are assets provided by donors, which
have a long-term purpose.
Chapter 14 – Accounting for Not-for-Profit Organizations
Ch. 14, Solutions, Exercise 14-26 (Cont’d)
General Problem Information: Identify departures from GAAP
Learning Objective: 14-5
Topic: Preparing Journal Entries and Financial Statements
14-37
14-27.
a. KARE COUNSELING CENTER
STATEMENT OF FINANCIAL POSITION
JUNE 30, 2023
ASSETS LIABILITIES AND NET ASSETS
CASH $ 126,500 ACCOUNTS PAYABLE $ 20,520
PLEDGES RECEIVABLE
($41,000 less uncollectible
pledges of $4,100) 36,900
($210,000 net of Accumulated WITHOUT DONOR
Depreciation of $120,000) 90,000 RESTRICTIONS 207,080
WITH DONOR RESTRICTIONS—
PROGRAMS 66,600
WITH DONOR RESTRICTIONS—
PERMANENT ENDOWMENT 140,000
TOTAL NET ASSETS 413,680
Chapter 14 – Accounting for Not-for-Profit Organizations
14-38
Ch. 14, Solutions, Exercise 14-27 (Cont’d)
KARE COUNSELING CENTER
STATEMENT OF EXPENSES BY NATURE AND FUNCTION
YEAR ENDED JUNE 30, 2023
b.
PROGRAM SERVICES
SUPPORTING SERVICES
ALL
SERVICES
Counsel-
ing
Services
Community
Services
Mgmt &
General
Fund-
Raising
TOTAL
Salaries and Fringe
$115,364
$28,841
$57,682
$28,841
$288,410
Occupancy and Utility
15,360
3,840
7,680
3,840
38,400
Supplies
1,388
4,858
1,388
694
2,082
Printing and Publishing
838
2,933
838
419
1,257
Telephone and Postage
700
2,450
350
1,050
Depreciation
6,000
6,000
6,000
18,000
6,000
6,000
12,000
30,000
Chapter 14 – Accounting for Not-for-Profit Organizations
14-39
Ch. 14, Solutions, Exercise 14-27 (Cont’d)
c.
KARE COUNSELING CENTER
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2023
Without Donor
Restrictions
With Donor
Restrictions
Total
REVENUES, GAINS, & OTHER
SUPPORT:
CONTRIBUTIONS
$348,820
$38,100
$386,920
INVESTMENT INCOME
9,200
9,200
UNREALIZED GAIN ON
INVESTMENTS
2,000
2,000
NET ASSETS WITH DONOR
RESTRICTIONS RELEASED
FROM RESTRICTIONS
22,000
(22,000)
0
TOTAL REVENUES, GAINS &
OTHER SUPPORT
382,020
16,100
398,120
EXPENSES AND LOSSES:
PROGRAM SERVICES:
COUNSELING SERVICES
142,576
COMMUNITY SERVICE
40,144
_ _____
40,144
TOTAL PROGRAM
EXPENSES
257,008
SUPPORT EXPENSES:
MGMT & GENERAL
74,288
74,288
FUND-RAISING
40,144
40,144
TOTAL SUPPORT
EXPENSES
114,432
______
114,432
TOTAL EXPENSES & LOSSES
371,440
0
371,440
NET ASSETS, BEGINNING OF
YEAR
Chapter 14 – Accounting for Not-for-Profit Organizations
14-40
Ch. 14, Solutions, Exercise 14-27 (Cont’d)
d.
KARE COUNSELING CENTER
STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
CASH RECEIVED FROM CONTRIBUTORS $ 310,800
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF FURNITURE AND EQUIPMENT (22,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM CONTRIBUTIONS RESTRICTED FOR:
INVESTMENT IN CAPITAL ASSETS 38,100
RECONCILIATION OF CHANGES IN NET ASSETS TO NET CASH
USED FOR OPERATING ACTIVITIES:
CHANGE IN NET ASSETS $ 26,680
ADJUSTMENTS TO RECONCILE CHANGE IN NET ASSETS
TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION 30,000
Chapter 14 – Accounting for Not-for-Profit Organizations
14-41
Ch. 14, Solutions, Exercise 14-27 (Cont’d)
General Problem Information: Prepare financial statements
Learning Objective: 14-5
Topic: Preparing Journal Entries and Financial Statements