NFP Journal Entry Project Requirement: A: Prepare journal entries to record each of the following transactions occurring during the fiscal year ending June 30, 2020 assuming the organization follows the guidance of (A) FASB standards for NFP organizations, FASB ASC 958. and (B) GASB Standards for Governmental NFP. For those organizations following FASB guidance, you should prepare entries under the assumption that property, plant, and equipment is considered to be unrestricted resources. B. Assume the organizations had equity balances as follows at the beginning of the year. Calculate the balance in each equity account for each NFP at the end fiscal year 2020. after all adjustments and closing entries have been made. NFP (GASB) NP-ICA NFP (FASB ASC 958) NA-with donor restrictions $10.000.000 $5,000,000 4.000.000 NP-Rest (NonExpendable) NP-Rest (Expendable) NP-UR Total Equity 4,500,000 7,500,000 21,000,000 NA-without donor Total Equity 8,000,000 18,000,000 Cash contributions were received as follows: (a) $1,000,000 for any purposes desired by the school. (b) $600.000 restricted by donors for research purposes. (c) 100.000 to be used during the next fiscal year in any manner the NFP sees fit. (d) 800.000 restricted by donors for the purchase of new equipment, and (e) $2,000,000 to be kept in perpetuity with half of all earnings to be spent for providing free meals to the elderly and half available for the NFP to spend as it sees fit. GASB FASB-ASC 958 Hint: we covered this in chapter 7, this is what you would do for an enterprise fund. Governmental NFP is treated as an enterprise fund. Contribution is a revenue, we can name it Contribution. Please be more specific, such as contribution-unrestricted. Hint: we covered this in chapter 14, this is what you would do for a nongovernmental NFP entity. This is Contribution-Restricted-expendable under GASB This is Contribution-with donor restrictions under FASB. GASB treats time restriction as deferred inflow of resources FASB treats time restriction as with donor restrictions. (d) This is Contribution-Restricted-expendable under GASB This is Contribution-with donor restrictions under FASB. This is Contribution-with donor restrictions under FASB. 2 This is Contribution-Restricted-NonExpendable under GASB The NFP spent $500,000 for the purchase of new equipment. Purchasing of equipment will increase your NP-ICA, and decrease NP-R since this is from the restricted contribution in (d) 3 The NFP spent $350,000 for research Under FASB, you will first need to release the restriction before you can purchase the equipment. Under FASB, you will first need to release the restriction before you can spend it. This research expense reduced your NP-Restricted since it is from (b). 4 The $2,000,000 to be kept in perpetuity was invested in marketable securities. 5 Earnings of $40,000 were received on the $2,000,000 endowment. Half of the revenue is with donor restrictions for elderly meals Half of the revenue is Restricted-Expendable for elderly meals and half is unrestricted. and half is without donor restrictions. 6 The $2,000,000 in marketable securities was sold at a gain of $100,000 Half of the gain is with donor restrictions for elderly meals and Half of the gain is Restricted-Expendable for elderly meals and half is unrestricted. half is without donor restrictions. 7 The governing board of the NFP set aside $150,000 to be used for future land expansion restriction. Thus this designation changed NA-without donor The entity cannot restrict itself, it has to be a third party restriction. Thus this restrictions-Undesignated to NA-without donor restrictions- designation changed NP-UR-Undesignated to NP-UR-designated. designated. A payment of $120.000 ($100.000 for principal reduction and $20,000 in interest) was made on a mortgage that had been signed five years ago when the 8 NFP purchased its current office building. 9 Depreciation of $15,000 was recorded for the year. Ending balance Beginning balance NA-with donor restrictions $10,000,000 10 Calculate the ending balance for each category Beginning balance Ending balance NP-ICA $5,000,000 NP-Rest 4.000.000 (NonExpendable) NP-Rest (Expendable) 4,500,000 NP-UR 7,500,000 Total Equity 21,000,000 NA-without donor Total Equity 8.000.000 18,000,000 NFP Journal Entry Project Requirement: A: Prepare journal entries to record each of the following transactions occurring during the fiscal year ending June 30, 2020 assuming the organization follows the guidance of (A) FASB standards for NFP organizations, FASB ASC 958. and (B) GASB Standards for Governmental NFP. For those organizations following FASB guidance, you should prepare entries under the assumption that property, plant, and equipment is considered to be unrestricted resources. B. Assume the organizations had equity balances as follows at the beginning of the year. Calculate the balance in each equity account for each NFP at the end fiscal year 2020. after all adjustments and closing entries have been made. NFP (GASB) NP-ICA NFP (FASB ASC 958) NA-with donor restrictions $10.000.000 $5,000,000 4.000.000 NP-Rest (NonExpendable) NP-Rest (Expendable) NP-UR Total Equity 4,500,000 7,500,000 21,000,000 NA-without donor Total Equity 8,000,000 18,000,000 Cash contributions were received as follows: (a) $1,000,000 for any purposes desired by the school. (b) $600.000 restricted by donors for research purposes. (c) 100.000 to be used during the next fiscal year in any manner the NFP sees fit. (d) 800.000 restricted by donors for the purchase of new equipment, and (e) $2,000,000 to be kept in perpetuity with half of all earnings to be spent for providing free meals to the elderly and half available for the NFP to spend as it sees fit. GASB FASB-ASC 958 Hint: we covered this in chapter 7, this is what you would do for an enterprise fund. Governmental NFP is treated as an enterprise fund. Contribution is a revenue, we can name it Contribution. Please be more specific, such as contribution-unrestricted. Hint: we covered this in chapter 14, this is what you would do for a nongovernmental NFP entity. This is Contribution-Restricted-expendable under GASB This is Contribution-with donor restrictions under FASB. GASB treats time restriction as deferred inflow of resources FASB treats time restriction as with donor restrictions. (d) This is Contribution-Restricted-expendable under GASB This is Contribution-with donor restrictions under FASB. This is Contribution-with donor restrictions under FASB. 2 This is Contribution-Restricted-NonExpendable under GASB The NFP spent $500,000 for the purchase of new equipment. Purchasing of equipment will increase your NP-ICA, and decrease NP-R since this is from the restricted contribution in (d) 3 The NFP spent $350,000 for research Under FASB, you will first need to release the restriction before you can purchase the equipment. Under FASB, you will first need to release the restriction before you can spend it. This research expense reduced your NP-Restricted since it is from (b). 4 The $2,000,000 to be kept in perpetuity was invested in marketable securities. 5 Earnings of $40,000 were received on the $2,000,000 endowment. Half of the revenue is with donor restrictions for elderly meals Half of the revenue is Restricted-Expendable for elderly meals and half is unrestricted. and half is without donor restrictions. 6 The $2,000,000 in marketable securities was sold at a gain of $100,000 Half of the gain is with donor restrictions for elderly meals and Half of the gain is Restricted-Expendable for elderly meals and half is unrestricted. half is without donor restrictions. 7 The governing board of the NFP set aside $150,000 to be used for future land expansion restriction. Thus this designation changed NA-without donor The entity cannot restrict itself, it has to be a third party restriction. Thus this restrictions-Undesignated to NA-without donor restrictions- designation changed NP-UR-Undesignated to NP-UR-designated. designated. A payment of $120.000 ($100.000 for principal reduction and $20,000 in interest) was made on a mortgage that had been signed five years ago when the 8 NFP purchased its current office building. 9 Depreciation of $15,000 was recorded for the year. Ending balance Beginning balance NA-with donor restrictions $10,000,000 10 Calculate the ending balance for each category Beginning balance Ending balance NP-ICA $5,000,000 NP-Rest 4.000.000 (NonExpendable) NP-Rest (Expendable) 4,500,000 NP-UR 7,500,000 Total Equity 21,000,000 NA-without donor Total Equity 8.000.000 18,000,000