Question
Presented below are financial statements (except cash flows) for two not-for-profit organizations. Neither organization has any permanently restricted net assets. ABC Not-for-Profit XYZ Not-for-Profit Statement
Presented below are financial statements (except cash flows) for two not-for-profit organizations. Neither organization has any permanently restricted net assets.
ABC Not-for-Profit | XYZ Not-for-Profit | |||||||||||||||
Statement of Activities | Unrestricted | Temporarily Restricted | Unrestricted | Temporarily Restricted | ||||||||||||
Revenues | ||||||||||||||||
Program service revenue | $ | 7,095,000 | $ | 2,400,000 | ||||||||||||
Contribution revenues | 3,477,500 | $ | 765,000 | 3,350,000 | ||||||||||||
Grant revenue | 111,000 | $ | 1,040,000 | |||||||||||||
Net gains on endowment investments | 19,000 | |||||||||||||||
Net assets released from restriction | ||||||||||||||||
Satisfaction of program restrictions | 480,000 | (480,000 | ) | 827,000 | (827,000 | ) | ||||||||||
Total revenues | 11,071,500 | 396,000 | 6,577,000 | 213,000 | ||||||||||||
Expenses | ||||||||||||||||
Education program expenses | 7,121,000 | 1,574,000 | ||||||||||||||
Research program expense | 1,271,000 | 3,006,000 | ||||||||||||||
Total program service expenses | 8,392,000 | 4,580,000 | ||||||||||||||
Fund-raising | 606,000 | 431,000 | ||||||||||||||
Administration | 665,000 | 1,244,000 | ||||||||||||||
Total supporting service expenses | 1,271,000 | 1,675,000 | ||||||||||||||
Total expenses | 9,663,000 | 6,255,000 | ||||||||||||||
Increase in net assets | 1,408,500 | 396,000 | 322,000 | 213,000 | ||||||||||||
Net assets January 1 | 4,223,000 | 774,000 | 1,052,500 | 335,000 | ||||||||||||
Net assets December 31 | $ | 5,631,500 | $ | 1,170,000 | $ | 1,374,500 | $ | 548,000 | ||||||||
Statement of Net Assets | ABC Not-for-Profit | XYZ Not-for-Profit | ||||||||||
Current assets | ||||||||||||
Cash | $ | 220,000 | $ | 371,000 | ||||||||
Short-term cash equivalents | 280,000 | 100,500 | ||||||||||
Supplies inventories | 47,000 | 165,000 | ||||||||||
Receivables | 454,500 | 203,500 | ||||||||||
Total current assets | 1,001,500 | 840,000 | ||||||||||
Noncurrent assets | ||||||||||||
Noncurrent pledges receivable | 280,000 | |||||||||||
Endowment investments | 2,740,000 | |||||||||||
Land, buildings, and equipment (net) | 3,190,000 | 1,783,000 | ||||||||||
Total noncurrent assets | 6,210,000 | 1,783,000 | ||||||||||
Total assets | $ | 7,211,500 | $ | 2,623,000 | ||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 38,000 | $ | 144,000 | ||||||||
Total current liabilities | 38,000 | 144,000 | ||||||||||
Noncurrent liabilities | ||||||||||||
Notes payable | 193,500 | |||||||||||
Total noncurrent liabilities | 193,500 | |||||||||||
Total liabilities | 231,500 | 144,000 | ||||||||||
Net Assets | ||||||||||||
Unrestricted | 4,040,000 | 2,379,500 | ||||||||||
Donor restricted for purpose | 170,000 | 99,500 | ||||||||||
Donor restricted for endowment | 2,740,000 | 0 | ||||||||||
Total net assets | 6,950,000 | 2,479,000 | ||||||||||
Total liabilities and net assets | $ | 7,181,500 | $ | 2,623,000 | ||||||||
Required: a. Calculate the following ratios (assume depreciation expense is $765,000 for both organizations and is allocated among program and supporting expenses):
- Program expense.
- Fund-raising efficiency.
- Days cash on hand.
- Working capital (expressed in days).
b. For each ratio, which of the two organizations has the stronger ratio. (Assume 365 days in a year. Do not round intermediate calculations. Round "Program expense" answers to 1 decimal place and "Fund-raising efficiency" answers to 3 decimal places and "Days cash on hand", "Working capital" answers to nearest whole number.)
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