Preparation of Financial Statements (38 points): One World Not Three (OWNT) Relief Fund is an international nonprofit relief agency based in the United State OWNT recently celebrated its tenth anniversary and is in the middle of trying to expand its operations and funding sources. OWNT uses accrual accounting and follows all US GAAP and FASB accounting rules when reporting its financial situation. During its 2006 fiscal year (July 1, 2005 June 30, 2006), OWNT recorded the following financial events:

1.Earned $250,000 by providing disaster readiness training program Received $235,000 in cash.

2.Took out a $500,000 bank loan. OWNT is hoping to buy the building next door for$500,000 in order to double its office space.

3.Received $200,000 in contribution pledge $150,000 of which was received in cash.OWNT expects that 10% of the pledges not immediately collected in cash will not be collected.

4.Received a final payment of $350,000 from a three-year grant made three years ago.

5.Purchased the building next door for $560,00 OWNT expects that its current building will last another 20 years and that the new building has a life of 35 years. OWNT uses straight-line depreciation.

6.Purchased $175,000 in first aid kit inventory. Paid 80% of the inventory in cash. The 20% balance will be paid in August 2006.

7.OWNT paid its employees $580,000 in wage Wage expense for the year was $600,000. The payment included the wages payable balance outstanding from fiscal year 2005.

8.First aid kits inventory equals $12,000 at the end of the year.

9.Complied with the terms of the bank loan, which require OWNT to repay $28,000 of the loan at the end of fiscal year 2006 plus pay 7% interest on the outstanding principal balance carried during the year.