Question
Wings is a not-for-profit organization dedicated to the promotion of flying in youths. It owns a number of airplanes at various airports which it uses
Wings is a not-for-profit organization dedicated to the promotion of flying in youths. It owns a number of airplanes at various airports which it uses to provide introductory flights in order to encourage young adults to pursue flight training lessons and possible careers as commercial airline pilots. At the end of last year, Wings reported the following trial balance:
debit | Credit | |
Cash | $216,000 | |
Investments | $2,880,000 | |
Contributions Receivable | $624,000 | |
Property, plant and equipment net | $1,440,000 | |
Payables | $480,000 | |
Long-term Liabilities | 960,000 | |
Net assets-without donor restrictions | 1,920,000 | |
Net assets-with donor restrictions | $1,800,000 | |
$5,160,000 | $5,160,000 |
At year-end, the investments are allocated as follows:
Investment-Without Donor Restrictions | 40% |
Investment - With Donor Restrictions | 60% |
These investments earn a 5% cash return during the following year.
During the following year, Wings received $3,360,000 of unrestricted donations and $390,000 of donations whose use is restricted by donors as to use. All contributions are on account when made.
Program and support expenses for the current year are $3,120,000 and $444,000, respectively, both on account. Of the program expenses, $240,000 are funded from restricted funds as they are used for approved expenditures. During the year, Wings purchased an airplane for a cash purchase price of $348,000 and recorded depreciation expense on existing depreciable assets of $108,000 (90% of which is allocated to program expenses and 10% of which is allocated to support expenses). The organization purchased additional investments with excess cash in the amount of $144,000 and also repaid $138,000 principal amount of long-term debt. Finally, during the year, the organization collected $3,600,000 of contributions receivable and paid $3,480,000 of accounts payable.
a. Prepare journal entries for the organizations financial activities during the year.
General Journal
Description | Debit | Credit |
Cash | ||
Contributions receivable | ||
Support-contributions (without donor restrictions) | ||
Support-contributions (with donor restrictions) | ||
Revenues-investment (without donor restrictions) | ||
Revenues-investment (with donor restrictions) | ||
To record recognition of support and revenues. | ||
Net assets released from restrictions-with donor restrictions | ||
Net assets released from restrictions - without donor restrictions | ||
To release net assets from restrictions. | ||
Expenses program | ||
Expenses support | ||
To release net assets from restrictions. | ||
Property plant and equipment net | ||
Expenses Program | ||
Expenses Support | ||
Cash | ||
To record purchase of long-term assets and recognize depreciation | ||
Investments | ||
Cash | ||
To record purchase of investments. | ||
Long-term debt | ||
Cash | ||
To record payment on debt | ||
Cash | ||
Payables | ||
To record collection of receivables. | ||
Contributions receivable | ||
Cash | ||
To record payment on account payables. |
b. Prepare the year-end statement of activities and statement of financial position.
Note: Use a negative sign with your answer to indicate a decrease in net assets or release of net assets from restriction.
Statement of Activities
Without donor Restrictions | With Donor Restrictions | Total | |
Support-Contributions | $ | $ | $ |
Revenues-investment | |||
Net assets released from restristions | |||
Total support and revenue | |||
Expenses-program | |||
Expenses -support | |||
Total Expenses | |||
Change in net assets | |||
Net assets beginning of year | |||
Net assets end of year |
Statement of Financial Position
Investments | |
Contributions receivable | |
Total current assets | |
Property plant and equipment net | |
Total assets | $ |
Cash overdraft | $ |
Payables | $ |
Total current liabilities | |
Long-term liabilities | |
Total Liabilities | |
Net assets-without donor restrictions | |
Net assets-with donor restrictions | |
Total net assets | |
Total Liabilities and net assets | $ |
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