Asked by Kayla Harrington on May 03, 2024
Verified
XYZ is a local charity that commenced operations on January 1, 2020. XYZ uses the restricted fund method of accounting for contributions. XYZ has a general fund, a capital fund and an endowment fund.
For the following partial data provided, prepare the journal entry to record that transaction. Specify which fund or funds must be used to record the entry.
a) Revenue deferred earlier in the year in the amount of $5,000 was recognized.
b) Pledges receivable in the amount of $10,000 were collected in full.
c) Accounts payable and wages payable amounting to $10,000 and $5,000 were paid.
d) Government grants amounted to $50,000, half of which was received. The balance is expected by late 2021. The grants may be applied to any of the organization's programs.
e) Total Wage costs amounted to $60,000 which breaks down as follows:
Program A $40,000 Program B $10,000 Administration $10,000\begin{array} { | l | l | } \hline \text { Program A } & \$ 40,000 \\\hline \text { Program B } & \$ 10,000 \\\hline \text { Administration } & \$ 10,000\\\hline\end{array} Program A Program B Administration $40,000$10,000$10,000 25% of these expenses are still payable at the end of 2020.
f) A wealthy local businessman donated $100,000 to be held in endowment, with the interest earned to be unrestricted.
g) The investments in an endowment fund earned interest in the amount $3,000.
h) Amortization expense for the year amounted to $10,000.
Restricted Fund Method
An accounting principle that mandates funds designated for a specific purpose by a donor must be tracked and reported separately from general funds.
Deferred Revenue
Revenue received by a company for goods or services to be delivered in the future, recognized as a liability until the service or product is provided.
Pledges Receivable
Amounts promised to an organization by donors that are recognized as assets before the cash is actually received.
- Understand the approaches (deferred contribution and restricted fund method) employed for recognizing contributions and investment income within not-for-profit entities.
- Implement accounting practices in practical situations related to not-for-profit financial activities and reporting.
- Elucidate the principle of fund accounting and how it is utilized within organizations that do not seek profit.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
a) General Fund Deferred Revenue $5,000 Revenue $5,000\begin{array}{|c|r|r|}\hline \text { General Fund } & & \\\hline \text { Deferred Revenue } & \$ 5,000 & \\\hline \text { Revenue } & & \$ 5,000 \\\hline\end{array} General Fund Deferred Revenue Revenue $5,000$5,000
b)
General Fund Cash $10,000 Pledges Receivable $10,000\begin{array}{|l|r|r|}\hline \text { General Fund } & & \\\hline \text { Cash } & \$ 10,000 & \\\hline \text { Pledges Receivable } & & \$ 10,000 \\\hline\end{array} General Fund Cash Pledges Receivable $10,000$10,000
c)
General Fund Accounts Payable $10,000 Wages Payable $5,000 Cash $15,000\begin{array}{|l|r|l|}\hline \text { General Fund } & & \\\hline \text { Accounts Payable } & \$ 10,000 & \\\hline \text { Wages Payable } & \$ 5,000 & \\\hline \text { Cash } & &\$ 15,000 \\\hline\end{array} General Fund Accounts Payable Wages Payable Cash $10,000$5,000$15,000
d)
General Fund Cash $25,000 Government Grants Receivable $25,000 Revenue-Government Grant $50,000\begin{array}{|l|r|r|}\hline \text { General Fund } & & \\\hline \text { Cash } & \$ 25,000 & \\\hline \text { Government Grants Receivable } & \$ 25,000 & \\\hline \text { Revenue-Government Grant } & & \$ 50,000 \\\hline\end{array} General Fund Cash Government Grants Receivable Revenue-Government Grant $25,000$25,000$50,000
e)
General Fund Expenses-Program A $40,000 Expenses-Program B $10,000 Expenses-Administration $10,000 Cash $45,000 Wages Payable $15,000\begin{array}{|l|l|l|}\hline \text { General Fund } & \\\hline \text { Expenses-Program A } & \$ 40,000 \\\hline \text { Expenses-Program B } & \$ 10,000 \\\hline \text { Expenses-Administration } & \$ 10,000 \\\hline \text { Cash } & & \$ 45,000 \\\hline \text { Wages Payable } & & \$ 15,000 \\\hline\end{array} General Fund Expenses-Program A Expenses-Program B Expenses-Administration Cash Wages Payable $40,000$10,000$10,000$45,000$15,000
f)
Endowment Fund Cash $100,000 Revenue-Contribution $100,000\begin{array}{|l|r|r|}\hline \text { Endowment Fund } & & \\\hline \text { Cash } & \$ 100,000 & \\\hline \text { Revenue-Contribution } & & \$ 100,000 \\\hline\end{array} Endowment Fund Cash Revenue-Contribution $100,000$100,000
g)
General Fund Cash $3,000 Revenue-Investment Income $3,000\begin{array}{|l|r|r|}\hline \text { General Fund } & & \\\hline \text { Cash } & \$ 3,000 & \\\hline \text { Revenue-Investment Income } & & \$ 3,000 \\\hline\end{array} General Fund Cash Revenue-Investment Income $3,000$3,000
h)
Capital Fund Amortization Expense $10,000 Accumulated Amortization $10,000\begin{array}{|c|r|r|}\hline \text { Capital Fund } & & \\\hline \text { Amortization Expense } & \$ 10,000 & \\\hline \text { Accumulated Amortization } & & \$ 10,000 \\\hline\end{array} Capital Fund Amortization Expense Accumulated Amortization $10,000$10,000
b)
General Fund Cash $10,000 Pledges Receivable $10,000\begin{array}{|l|r|r|}\hline \text { General Fund } & & \\\hline \text { Cash } & \$ 10,000 & \\\hline \text { Pledges Receivable } & & \$ 10,000 \\\hline\end{array} General Fund Cash Pledges Receivable $10,000$10,000
c)
General Fund Accounts Payable $10,000 Wages Payable $5,000 Cash $15,000\begin{array}{|l|r|l|}\hline \text { General Fund } & & \\\hline \text { Accounts Payable } & \$ 10,000 & \\\hline \text { Wages Payable } & \$ 5,000 & \\\hline \text { Cash } & &\$ 15,000 \\\hline\end{array} General Fund Accounts Payable Wages Payable Cash $10,000$5,000$15,000
d)
General Fund Cash $25,000 Government Grants Receivable $25,000 Revenue-Government Grant $50,000\begin{array}{|l|r|r|}\hline \text { General Fund } & & \\\hline \text { Cash } & \$ 25,000 & \\\hline \text { Government Grants Receivable } & \$ 25,000 & \\\hline \text { Revenue-Government Grant } & & \$ 50,000 \\\hline\end{array} General Fund Cash Government Grants Receivable Revenue-Government Grant $25,000$25,000$50,000
e)
General Fund Expenses-Program A $40,000 Expenses-Program B $10,000 Expenses-Administration $10,000 Cash $45,000 Wages Payable $15,000\begin{array}{|l|l|l|}\hline \text { General Fund } & \\\hline \text { Expenses-Program A } & \$ 40,000 \\\hline \text { Expenses-Program B } & \$ 10,000 \\\hline \text { Expenses-Administration } & \$ 10,000 \\\hline \text { Cash } & & \$ 45,000 \\\hline \text { Wages Payable } & & \$ 15,000 \\\hline\end{array} General Fund Expenses-Program A Expenses-Program B Expenses-Administration Cash Wages Payable $40,000$10,000$10,000$45,000$15,000
f)
Endowment Fund Cash $100,000 Revenue-Contribution $100,000\begin{array}{|l|r|r|}\hline \text { Endowment Fund } & & \\\hline \text { Cash } & \$ 100,000 & \\\hline \text { Revenue-Contribution } & & \$ 100,000 \\\hline\end{array} Endowment Fund Cash Revenue-Contribution $100,000$100,000
g)
General Fund Cash $3,000 Revenue-Investment Income $3,000\begin{array}{|l|r|r|}\hline \text { General Fund } & & \\\hline \text { Cash } & \$ 3,000 & \\\hline \text { Revenue-Investment Income } & & \$ 3,000 \\\hline\end{array} General Fund Cash Revenue-Investment Income $3,000$3,000
h)
Capital Fund Amortization Expense $10,000 Accumulated Amortization $10,000\begin{array}{|c|r|r|}\hline \text { Capital Fund } & & \\\hline \text { Amortization Expense } & \$ 10,000 & \\\hline \text { Accumulated Amortization } & & \$ 10,000 \\\hline\end{array} Capital Fund Amortization Expense Accumulated Amortization $10,000$10,000
Learning Objectives
- Understand the approaches (deferred contribution and restricted fund method) employed for recognizing contributions and investment income within not-for-profit entities.
- Implement accounting practices in practical situations related to not-for-profit financial activities and reporting.
- Elucidate the principle of fund accounting and how it is utilized within organizations that do not seek profit.
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