Question 1/ A private not-for-profit entity is working to create a cure for a deadly disease. The charity starts the year with cash of $775,000. Of this amount, unrestricted net assets total $425,000, temporarily restricted net assets total $225,000, and permanently restricted net assets total $125,000. Within the temporarily restricted net assets, the entity must use 80 percent for equipment and the rest for salaries. No implied time restriction has been designated for the equipment when purchased. For the permanently restricted net assets, 70 percent of resulting income must be used to cover the purchase of advertising for fund-raising purposes and the rest is unrestricted. During the current year, the organization has the following transactions: Received unrestricted cash gifts of $235,000. Paid salaries of $105,000 with $45,000 of that amount coming from restricted funds. Of the total salaries, 50 percent is for administrative personnel and the remainder is evenly divided among individuals working on research to cure the designated disease and individuals employed for fund-raising purposes. Bought equipment for $350,000 with a long-term note signed for $275,000 and restricted funds used for the remainder. Of this equipment, 80 percent is used in research, 10 percent is used in administration, and the remainder is used for fund-raising. Collected membership dues of $55,000. The members receive a reasonable amount of value in exchange for these dues including a monthly newsletter describing research activities. Received $35,000 from a donor that must be conveyed to another charity doing work on a related disease. Received investment income of $38,000 generated by the permanently restricted net assets. As mentioned above, the donor has stipulated that 70 percent of the income is to be used for advertising, and the remainder may be used at the entitys discretion. Paid advertising of $4,500. Received an unrestricted pledge of $350,000 that will be collected in three years. The entity expects to collect the entire amount. The pledge has a present value of $103,000 and related interest (additional contributed support) of $5,500 in the year. Computed depreciation on the equipment acquired as $45,000. Spent $118,000 on research supplies that it utilized during the year. Owed salaries of $30,000 at the end of the year. Half of this amount is for individuals doing fund-raising and half for individuals doing research. Received a donated painting that qualifies as a museum piece. It has a value of $1,050,000. Officials do not want to record this gift if possible. Prepare a statement of activities for this not-for-profit entity for this year. Prepare a statement of financial position for this not-for-profit entity for this year. Question 2/The University of Danville is a private not-for-profit university that starts the current year with $720,000 in net assets: $400,000 unrestricted, $210,000 temporarily restricted, and $110,000 permanently restricted. The following transactions occur during the year. Charged students $1.50 million in tuition. Received a donation of investments that had cost the owner $105,000 but was worth $315,000 at the time of the gift. According to the gifts terms, the university must hold the investments forever but can spend the dividends for any purpose. Any changes in the value of these securities must be held forever and cannot be spent. Received a cash donation of $738,000 that must be used to acquire laboratory equipment. Gave scholarships in the amount of $108,000 to students. Paid salary expenses of $339,000 in cash. Learned that a tenured faculty member is contributing his services in teaching for this year and will not accept his $87,000 salary. Spent $239,000 of the money in (c) on laboratory equipment (no time restriction is assumed on this equipment). Learned that at the end of the year, the investments in (b) are worth $374,000. Received dividends of $8,000 cash on the investments in (b). Computed depreciation expense for the period of $30,000. The schools board of trustees decides to set aside $115,000 of previously unrestricted cash for the future purchase of library books. Received an unconditional promise of $15,000, which the school fully expects to collect in three years although its present value is only $11,000. The school assumes that the money cannot be used until the school receives it. Received an art object as a gift that is worth $82,000 and that qualifies as a work of art. The school prefers not to record this gift. Paid utilities and other general expenses of $211,000. Received free services from alumni who come to campus each week and put books on the shelves in the library. Over the course of the year, the school would have paid $136,000 to have this work done. Prepare journal entries for each transaction. Determine the end-of-year balances for unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets by completing the following statement of activities.