1. At the beginning of the year, the non-profit Prime Cardiac Pump (PCP) shows the following balances in the balance sheet:

Prime Cardiac Pump

Balance Sheet

Assets Liabilities + Net Assets

Cash 57,000 Wages Payable 23,000

Securities 417,000 Accounts Payable 17,000

Receivables 43,000 Notes Payable 460,000

PP&E 2,930,000 Mortgage 1,570,000

Goodwill 23,000 Total Liabilities 2,070,000

Patents 374,000 Net Assets (NA) 1,774,000

Total Assets 3,844,000 Liabilities + NA 3,844,000

Over the following year the agency records the following transactions:

1. Pays wages of 23,000

2. Receives 20,000 owed to it for past goods delivered

3. Depreciates its facility by 100,000

4. Sells off the patent rights of a new pump for 600,000, half paid in cash, and half to be paid in two years. It had originally purchased the patent for 374,000.

5. Borrows 500,000 to upgrade the factory.

6. Pays 17,000 to vendors to whom it owed money.

7. Invests 300,000 in upgrading HVAC systems in the factory.

8. Signs a contract to sell 300,000 of pumps, to be delivered next year. Receives no money up-front for the sale.

9. Sells 300,000 of securities in its portfolio, for which it had paid 100,000.

10. Pays off 200,000 on the mortgage.

Record these transactions and make a new balance sheet reflecting end-of-the year balances. Then, calculate profit/loss and develop a cash flow statement.

2. At the beginning of the next year, the board of trustees decides to sell PCP to a large, multinational medical device holding company, and to use the proceeds to start a foundation. The holding company pays 10,000,000 for PCP, which is now reincorporated as a for-profit company. What does its balance sheet look like now?

3. See the following balance sheet for the Museum of Medical Oddities and make the entries as directed. What does the balance sheet look like at the end of the period?

Museum of Medical Oddities

Balance Sheet

Assets Liabilities + Net Assets

Cash 27,000 Wages Payable 8,000

Securities 140,000 Accounts Payable 98,000

Receivables 14,000 Notes Payable 420,000

Artifacts 560,000 Mortgage Payable 670,000

Building 2,700,000 Total Liabilities 1,196,000

Real Estate 54,000 Net Assets 2,299,000

Goodwill 0 Total L+ NA 3,495,000

Total Assets 3,495,000

You receive $14,000 owed to you by a donor.

You sell a shrunken skull that had been donated for $160,000.

You pay off the annual mortgage payment of $32,000.

Your building is re-assessed by the town and downgraded by $200,000.

A consulting firm evaluates the museums brand and declares that it is worth at least $1,000,000.

You pay back wages of $8,000.

After a storm damages your roof, you spend $12,000 to repair the damage.

A donor makes a pledge of $500,000 to the capital campaign.

Later in the year the donor pays off $100,000 of his pledge.

You depreciate your building by $200,000 as per schedule

You sell off a piece of land which had been gifted to you to a real estate developer for $400,000, which you use to purchase new artifacts for your exhibits.

You have work done on your HVAC system which you are billed $20,000 for.

You pay off $15,000 of the HVAC bill, but contest the remaining $5,000

Record these transaction and produce a new balance sheet which reflects them. Then, create a side-by-side balance sheet of balances at the beginning and end of the year, with a calculation of changes in each of the accounts, and calculate a profit/loss statement.

4. A freakish earthquake causes $15 million in damage to Presbyterian Hospital, which is not covered by insurance due to an Act-of-God clause in the hospitals insurance policy.

a. If the hospital chooses to simply do some patchwork repair work to hold up the roof costing $1 million, what happens to its net assets column?

b. If the hospital raises $15 million through an emergency fundraising campaign, and uses the money to repair the damage in total, what happens to its net assets?

c. If the hospital raises the $15 million but then chooses not to repair the damage, what happens to its net assets column?