Geneva Preschool provides free instruction for children from low-income families. Its January 1, 2016, trial balance is as follows:

Debit Credit

Cash................................................................$ 100,000

Equipment & furnishings, net.........................1,500,000

Building, net....................................................3,500,000

Accounts payable...............................................................................................................$ 200,000

Net assetsunrestricted ....................................................................................................3,400,000

Net assetstemporarily restricted.....................................................................................1,500,000

$5,100,000 $5,100,000

Activities for 2016:

a. Unrestricted cash contributions were $4,500,000.

b. On January 1, 2016, a donor made a documented promise of $500,000, to be paid at the end of 2018 (3 years later). Using a 5 percent discount rate, the present value of this promise is $431,918.

c. Each year, Geneva collects donor-restricted contributions to purchase technology for educational programs. During 2016, $200,000 was received and $500,000 was spent. Geneva expenses technology purchases.

d. Out-of-pocket operating expenses for the year were $4,200,000. The year-end accounts payable balance, all related to operating expenses, was $150,000.

e. A licensed CPA did all of Genevas required nancial statements and IRS forms for free. Fair value of these services is $25,000. Parents of students donated their time to lead preschool classes in safety and nutrition. The fair value of their time is $5,000.

f. Depreciation for the year on equipment and furnishings was $250,000. Depreciation on the building was $600,000.

1. How do Genevas 2016 financial statements report the out-of-pocket operating expenses described in item d. above?

Statement of Activities Statement of Cash Flows

a. $4,250,000 reduction in unrestricted net assets $4,250,000 cash for operating activities

b. $4,200,000 reduction in unrestricted net assets $4,250,000 cash for operating activities

c. $4,200,000 reduction in temporarily restricted net assets $4,200,000 cash for operating activities

d. $4,250,000 reduction in temporarily restricted net assets $4,200,000 cash for operating activities

2. On Genevas 2016 statement of cash ows, a reconciliation of the change in net assets to cash from operating activities requires adding which of the following adjustments to change in net assets?

a. $50,000 change in accounts payable

b. $25,000 contribution of services

c. $850,000 depreciation expense

d. $431,918 promises to contribute

3. Genevas 2016 statement of activities reports item e. as follows:

a. $25,000 increase in unrestricted net assets (contributions) and $25,000 decrease in unrestricted net assets (expenses)

b. $30,000 increase in unrestricted net assets (contributions) and $30,000 decrease in unrestricted net assets (expenses)

c. $25,000 increase in temporarily restricted net assets (contributions)

d. Not reported

Genevas 2016 statement of activities reports item b. as follows:

a. $431,918 increase in temporarily restricted net assets

b. $431,918 increase in temporarily restricted net assets and $21,596 increase in unrestricted net assets

c. $453,514 increase in temporarily restricted net assets

d. This promise is not reported until the contribution is received.

5. Item c. affects Genevas net assets in 2016 as follows:

a. $500,000 net decrease in unrestricted net assets, $300,000 net decrease in temporarily restricted net assets

b. $500,000 net decrease in unrestricted net assets, $500,000 net decrease in unrestricted net assets

c. No change in unrestricted net assets, $200,000 net increase in temporarily restricted net assets

d. No change in unrestricted net assets, $300,000 net decrease in temporarily restricted net assets