Journal Entries and Financial Statements The Southside Counseling Center was established on January 10, 2023, to provide a variety of counseling services to community residents, including marital and family counseling and treatment for alcoholism and drug abuse. The center's initial resources were provided by a private foundation in the form of a $2,500,000 grant. Of this sum, the foundation designated $1,000,000 for building and equipment and $750,000 for the establishment of a special program for counseling parolees. The following transactions occurred during 2023: 1. Unrestricted cash contributions of $1,200,000 were received through the local United Way campaign. An additional $140,000 was received in direct cash contributions, of which $20,000 is restricted to the parolees' program and $50,000 was for the building fund. Documented promises of $60,000 were received, collectible within the next year. These promises are unrestricted and expected to be 85 percent collectible. Bad debt expense is included with administrative expenses. 2. Out-of-pocket operating expenses for the year were $1,400,000. Of the total, $950,000 are program expenses, $350,000 are administrative expenses, and the remainder are fund-raising expenses. $100,000 of the expenses were unpaid at year-end. 3. The special parolees' program had not yet begun as of December 31, 2023. All resources dedicated to this program were invested in short-term securities. Investment income for the year, which was reinvested, was $30,000. There are no unrealized gains or losses on the securities. 4. The center obtained a $2,400,000 mortgage to purchase a building, and obtained a $300,000 three-year note to purchase equipment. The center also used the grant to finance these purchases; the total cost of the building and equipment was $3,700,000. 5. Interest of $140,000 was accrued and paid on the mortgage and note, all allocated to administrative expenses. 6. Depreciation on the building and equipment is $190,000, all allocated to program expenses. a. Prepare journal entries to record the transactions for 2023. Ref. Restricted cash Cash General Journal Description Contributions revenue-restricted Contributions revenue - unrestricted To record receipt of initial resources provided by a private foundation. 1 Cash Restricted cash Administrative expense Contributions receivable Allowance for uncollectibles Contributions revenue -unrestricted Contributions revenue-restricted To record contributions and promises. 2 Program expenses Administrative expenses Fund-raising expenses Accounts payable Cash To record out-of-pocket operating expenses. 3 Investments Cash Investment income-unrestricted To record the investment income. 4 Net assets released from restrictions-restricted Debit 1,000,000 Credit 1,500,000 0 1,750,000 0 750,000 0 % 0 50,000 0 0 x 0 60,000 0 0 0 x 0 0 x 0 0 % 950,000 0 350,000 0 100,000 0 0 100,000 0 1,300,000 0 x 0 0 30,000 1,000,000 0 Net assets released from restrictions-unrestricted 0 1,000,000 To record reclassification of net assets. Building and equipment, net Note payable Restricted cash 3,700,000 0 0 0 300,000 1,000,000 2,400,000 Mortgage payable To record purchase of building. 5 Administrative expenses Cash To record payment of accrued interest on mortgage and note. 6 Program expenses Building and equipment, net To record depreciation on building and equipment. 140,000 0 140,000 190,000 0 0 190,000