Here is the question we were given: Use Problems 10-15 and 10-16 (GIVEN BELOW) to prepare an activity statement (operating statement), a comparative statement of financial position (balance sheet), and a statement of cash flows (using the indirect method). What do you learn from these statements, and what questions do they raise?

Problem 10-15: The American Research Council for Humanities (ARCH) had the following financial events during the current year:

1. January 12. Received a $300,000 payment from a pledge made last year.

2. February 4. Placed an order for new cubicle partitions with 5-year useful lives, for $15,000. ARCH uses straight-line depreciation. Payment was not yet made, and the partitions have not yet been delivered.

3. March 1. Paid out a $50,000 grant to the Governmental Archaeological Research Committee for History (GARCH). This was a new grant made in the current fiscal year.

4. May 29. Paid a $5,000 deposit for the partitions ordered on February 4.

5. June 12. Collected $80,000 in new donations.

6. September 1. Bought $60,000 of books ARCH has sponsored in the past to sell in its online bookstore. It paid half now, and still owes the other half, to be paid at the end of the year. ARCH has budgeted to sell the books for $100,000 total.

7. October 15. The partitions ordered on February 4 arrived, and ARCH paid for the balance owed.

8. November 10. Borrowed $75,000 from its bank on a note payable.

9. December 5. Repaid $25,000 on the note payable and also $3,000 in interest expenses.

10. December 28. Paid its employees $75,000 of wages in cash for the year, $70,000 of which was for the current year and $5,000 of which was the outstanding balance owed. Employees earned $90,000 in wages for the year.

11. December 31. Book sales from the Internet bookstore totaled $110,000 and the cost of the books sold was $58,000. ARCH has not collected $12,000 of the sales. The balance owed for the inventory was paid.

12. ARCH expects that of the $12,000 not collected to date, it will collect $10,000.

13. December 31. Depreciation of ARCH's building for the year is $40,000.

Problem 10-16: ARCH began the year with the following balances in their accounts:

Accounts Payable: $27,000

Accounts Receivable, Net: $26,000

Cash: $10,000

Inventory: $25,000

Notes Payable: $270,000

Permanently Restricted Net Assets: $100,000

Pledges Receivable: $350,000

Property, Plant, and Equipment, Net: $350,000

Temporarily Restricted Net Assets: $30,000

Unrestricted Net Assets: $302,000

Wages Payable: $32,000

These are the 3 templates that we were provided with to create the operating statement, balance sheet, and a statement of cash flows:

ARCH Activity Statement for the Year Ending December 31, Year 2 Revenues and support Donation revenue Sales revenue $0 Total revenues and support Expenses: Grant Expense Cost of goods sold Wage expense Interest expense Bad debts Depreciation Total expenses $0 Increase/(Decrease) in net assets ARCH Statement of Financial Position as of December 31, Year 2 and Year 1 Liabilities& Net Assets Assets Year 2 Year 2 Year 1 Year 1 Liabilities Current liabilities Accounts payable Current assets Cash Accounts receivable, net of estimated uncollectibles of Wages payable $2,000 in Year 2 Total current liab Pledges receivable Long-term liabilities Notes payable Inventory Total current assets Total long-term liab $0 Long-term assets Fixed assets Total liabilities Buildings & Equip., net $0 Net assets Total long-term assets Unrestricted Temp. restricted Perm. restricted $0 Total net assets Total equities Total assets SO ARCH Statement of Cash Flows for the Year Ending December 31, Year 2 Cash flows from operating activities Decrease in unrestricted net assets Add expenses not requiring cash Depreciation Bad Debts Other adjustments: Subtract the increase in accounts receivables Add the decrease in pledges receivable Subtract the increase in inventory Add the increase in wages payable $0 Net cash from operating activities Cash flows from investing activities Purchase of PPE $0 Net cash used in investing activities Cash flows from financing activities Borrowing with notes $0 Net cash from financing activities Net increase/(decrease) in cash Cash, beginning of year Cash, end of year $0 ARCH Activity Statement for the Year Ending December 31, Year 2 Revenues and support Donation revenue Sales revenue $0 Total revenues and support Expenses: Grant Expense Cost of goods sold Wage expense Interest expense Bad debts Depreciation Total expenses $0 Increase/(Decrease) in net assets ARCH Statement of Financial Position as of December 31, Year 2 and Year 1 Liabilities& Net Assets Assets Year 2 Year 2 Year 1 Year 1 Liabilities Current liabilities Accounts payable Current assets Cash Accounts receivable, net of estimated uncollectibles of Wages payable $2,000 in Year 2 Total current liab Pledges receivable Long-term liabilities Notes payable Inventory Total current assets Total long-term liab $0 Long-term assets Fixed assets Total liabilities Buildings & Equip., net $0 Net assets Total long-term assets Unrestricted Temp. restricted Perm. restricted $0 Total net assets Total equities Total assets SO ARCH Statement of Cash Flows for the Year Ending December 31, Year 2 Cash flows from operating activities Decrease in unrestricted net assets Add expenses not requiring cash Depreciation Bad Debts Other adjustments: Subtract the increase in accounts receivables Add the decrease in pledges receivable Subtract the increase in inventory Add the increase in wages payable $0 Net cash from operating activities Cash flows from investing activities Purchase of PPE $0 Net cash used in investing activities Cash flows from financing activities Borrowing with notes $0 Net cash from financing activities Net increase/(decrease) in cash Cash, beginning of year Cash, end of year $0