Question
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
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, $23,000 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 $48,000 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.)
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 ACTIVITIES For Year Ending December 31, 2020 Net Assets Without Donor Restrictions Net Assets With Donor Restrictions Contribution revenue: Donations Interest Total 0 0 0 S 0 S Investment income Exchange revenues-memberships Total contributions and revenues Net assets released from restrictions Total contributions, revenues, and net assets released from restrictions 0 S 0 $ 0 S 0 S 0 S 90,000 Expenses: Program services-healthcare Salary Rent Advertising Utilities Depreciation Interest 15,000 105,000 0 Supporting servicesfundraising Rent Advertising Utilities Depreciation Supporting services-administrative Rent Advertising Utilities Depreciation 0 Total expenses 105,000 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 S 0 S 0 WATSON FOUNDATION STATEMENT OF FINANCIAL POSITION December 31, 2020 Assets Cash Contributions receivable (net) Investments Investmentsinternally restricted Land, buildings, and equipment (net) Total assets 275,000 S 275,000 Liabilities Deferred revenues Notes payable Total liabilities 450,000 450,000 S Net Assets Without donor restrictions: Unrestricted Board-designated for emergency purposes With donor restrictions Total net assets Total liabilities and net assets 0 0 S 450,000
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