Problem 18-44 (Algo) (LO 18-1, 18-2, 18-4, 18-5)

The Watson Foundation, a private not-for-profit entity, starts 2020 with cash of $100,000, contributions receivable (net) of $200,000, investments of $300,000, and land, buildings, and equipment (net) of $200,000. Net assets without donor restrictions were reported as $400,000, the same figure as the net assets with donor restrictions. Of the restricted net assets, $300,000 was purpose restricted whereas the other $100,000 had to be held permanently, although the subsequently earned income is without restriction. Fifty percent of the purpose restricted net assets had to be used to help pay for a new building. The remainder was restricted to the payment of officer salaries. Donors made no stipulations about the eventual reporting of buildings and other long-lived assets when acquired. Watson has one program service (health care) and two supporting services (fundraising and administrative).

During the current year, Watson Foundation has the following transactions.

Computed interest of $20,000 on the unrestricted contribution receivable.

Received cash of $100,000 from the contributions receivable and wrote off another $4,000 as uncollectible.

Received unrestricted cash donations of $180,000.

Received $23,000 in cash that must be spent for a particular type of office machine within the next year or the money must be returned.

Paid salaries of $90,000. Of that amount, $22,000 came from restricted funds. The payment was made to individuals doing health care work.

Spent the $23,000 in (4) for the appropriate office machine.

Received a cash gift of $12,000 that Watson must convey to another specified charity. However, Watson has the right to give this money to a different organization if officials so choose.

Bought a building for $500,000 by signing a long-term note for $450,000 and using restricted funds for the remainder.

Collected annual membership dues of $30,000. Individuals receive substantial benefits from their memberships. By the end of the year, two-thirds of the time for the average membership has passed.

Received unrestricted income of $47,000 generated by net assets that must be held permanently.

The board of directors of the Watson Foundation vote to set aside $9,000 of its investments for emergency purposes.

Paid rent of $12,000 for the past month, advertising of $15,000, and utilities of $16,000. These were half for the program service and one-fourth each for the two supporting services.

Received an unrestricted pledge of $200,000. Watson will collect the money in five years and does not expect any part to be uncollectible. Present value at inception is $149,000, but interest for the year to date is $6,000.

Computed depreciation of $40,000, 60 percent for health care, 30 percent for administrative, and 10 percent for fundraising.

Paid $15,000 in interest on the note signed in (8). All of this cost is assumed to be related to health care.

Required:

a. Prepare a statement of activities for the Watson Foundation for this year. (Negative amounts should be indicated by a minus sign.)

WATSON FOUNDATION
STATEMENT OF ACTIVITIES
For Year Ending December 31, 2020
		Net Assets Without Donor Restrictions	Net Assets With Donor Restrictions
Contribution revenue:
Donations
Interest
Total
Investment income
Exchange revenuesmemberships
Total contributions and revenues
Net assets released from restrictions
Total contributions, revenues, and net assets released from restrictions
Expenses:
Program serviceshealthcare
Salary
Rent
Advertising
Utilities
Depreciation
Interest
Supporting servicesfundraising
Rent
Advertising
Utilities
Depreciation
Supporting servicesadministrative
Rent
Advertising
Utilities
Depreciation
Total expenses
Excess of total contributions, revenues, and net assets released from restriction over expenses
Net assets at beginning of year
Net assets at end of year

b. Prepare a statement of financial position for the Watson Foundation at the end of this year. (Negative amounts should be indicated by a minus sign.)

WATSON FOUNDATION
STATEMENT OF FINANCIAL POSITION
December 31, 2020
Assets
Cash
Contributions receivable (net)
Investments
Investmentsinternally restricted
Land, buildings, and equipment (net)
Total assets
Liabilities
Deferred revenues
Notes payable
Total liabilities
Net Assets
Without donor restrictions:
Unrestricted
Board-designated for emergency purposes
With donor restrictions
Total net assets
Total liabilities and net assets