Answer:
Midwest Heart Association
1. Journal Entries:
1. Debit Pledges Receivable $700,000
Credit Pledges Revenue $700,000
To record unrestricted pledges received.
1. Debit Uncollectible Expense $56,000
Credit Allowance for Uncollectibles $56,000
To record 8% of uncollectible pledges.
2. Debit Temporarily restricted net assets $150,000
Credit Pledges Receivable $150,000
To record receipt of restricted use grants.
3. Debit Unrestricted net assets $520,000
Credit Pledges Receivable $520,000
To record current pledges collected
3. Debit Allowance for Uncollectible $26,000
Credit Uncollectible Expense $26,000
To record the write-off of $30,000 remaining uncollected pledges.
4. Debit Office Equipment $15,000
Credit Unrestricted net assets $15,000
To record the purchase of office equipment
5. Debit Building Mortgage $3,000
Credit Unrestricted net assets $3,000
To record the payment of mortgage on buildings.
6. Debit Unrestricted net assets $27,200
Debit Temporarily restricted net assets $5,400
Credit Interest and dividends Revenue $32,600
To record the receipt of interest and dividends.
6. Debit Permanently restricted net assets $1,000
Debit Unrestricted net assets $5,000
Credit Sale of Endowment Investment $6,000
To record the sale and gain of endowment investments.
7. Debit Depreciation Expense:
Community services $ 12,000
Public health education $7,000
Research $10,000
Fundraising $15,000
General and administrative $9,000
Credit Accumulated Depreciation $53,000
To record depreciation expense for the year.
8. Debit Other expenses:
Community services $ 250,600
Public health education $100,000
Research $81,000
Fundraising $39,000
General and administrative $61,000
Credit Unrestricted net assets $531,600
To record other expenses.
Debit Clerical services expense $2,400
Credit Donated clerical services $2,400
To record the receipt of donated clerical services.
b. Statement of Activities for the year ended December 31, 20X2:
Revenue:
Pledges $700,000
Interest and dividends 32,600
Sale of Endowments 6,000 $738,600
Depreciation expense:
Community services $ 12,000
Public health education $7,000
Research $10,000
Fundraising $15,000
General & administrative $9,000 53,000
Other expenses:
Community services $ 250,600
Public health education $100,000
Research $81,000
Fundraising $39,000
General and administrative $61,000 531,600
Clerical services expense $2,400
Change in net assets $151,600
Explanation:
a) Data and Calculations
1. Unrestricted net assets
Beginning balance $ 281,000
Pledges receivable 520,000
Office equipment (15,000)
Building mortgage (3,000)
Interest and Dividends 27,200
Sale of Endowment 5,000
Other expenses (531,600)
Ending balance $278,600
2. Temporarily restricted net assets
Beginning balance $ 87,000
Restricted use grants $150,000
Interest and Dividends 5,400
Ending balance $242,400
3. Permanently restricted (endowment) net assets
Beginning balance $ 219,000
Gain from Endowment 1,000
Ending balance $220,000
b) Midwest Heart Association's Statement of Activities is the financial statement that shows the revenues and expenses of the association, including the change in net assets during a period. It is like the income statement of a profit-making entity that shows revenue and expenses. While the excess in revenue over expenses is called net income for a profit-making entity, it is called change in net assets for a non-profit-making organization like Midwest Heart Association.
