Question

Recording and Reporting Transactions [LO 14-3, 14-5] [The following information applies to the questions displayed below.] INVOLVE was incorporated as a not-for-profit organization on January 1,2023 . During the fiscal year ended December 31 , 2023 , the following transactions occurred. 1. A business donated rent-free office space to the organization that would normally rent for $35,000 a year. 2. A fund drive raised $185,000 in cash and $100,000 in pledges that will be paid next year. A state government grant of $150,000 was received for program operating costs related to public health education. 3. Salaries and fringe benefits paid during the year amounted to $208,560. At year-end, an additional $16,000 of salaries and fringe benefits were accrued. 4. A donor pledged $100,000 for construction of a new building, payable over five fiscal years, commencing in 2025 . The discounted value of the pledge is expected to be $94,260. 5. Office equipment was purchased for $12,000. The useful life of the equipment is estimated to be five years. Office furniture with a fair value of $9,600 was donated by a local office supply company. The furniture has an estimated useful life of 10 years. Furniture and equipment are considered net assets without donor restrictions by INVOLVE. 6. Telephone expense for the year was $5,200, printing and postage expense was $12,000 for the year, utilities for the year were $8,300, and supplies expense was $4,300 for the year. At year-end, an immaterial amount of supplies remained on hand and the balance in accounts payable was $3,600. 7. Volunteers contributed $15,000 of time to help with answering the phones, mailing materials, and various other clerical activities. 8. It is estimated that 90 percent of the pledges made for the 2024 year will be collected. Depreciation expense is recorded for the full year on the assets recorded in item 5. 9. All expenses were allocated to program services and support services in the following percentages: public health education, 35 percent; community service, 30 percent; management and general, 20 percent; and fund-raising, 15 percent. 10. Net assets were released to reflect satisfaction of state grant requirements that the grant resources be used for public health education program purposes. 11. All nominal accounts were closed to the appropriate net asset accounts. ∝ Answer is not complete.

Answer 1

To calculate the net worth of a bank, one must subtract the liabilities from the assets. In the given example, the bank has assets totaling $620 and liabilities of $400, which results in a net worth of $220. For non-profits, all contributions and pledges should be accounted for following not-for-profit accounting standards.

Step-by-step explanation:

Recording and Reporting Transactions for Not-for-Profit Organization

The provided scenario involves various financial transactions of a not-for-profit organization that must be recorded and reported accurately. To calculate the net worth of an entity like a bank, as provided in the example, one must consider its assets and liabilities. Let's analyze the bank example to understand the concept:

Assets: Calculate the total assets, which include reserves of $50, government bonds worth $70, and loans made at $500, summing up to $620 in total assets.

Liabilities: The bank's liabilities consist mainly of the deposits made by their customers, amounting to $400.

Net Worth: The net worth is calculated by subtracting the liabilities from the assets, which would be $620 - $400, resulting in a net worth of $220.

If applying a similar procedure to the non-profit organization's transactions, one would also need to account for non-monetary contributions (like the rent-free office space) and pledges when considering the overall financial position of the organization. It's important to ensure all recording and reporting follow the accounting principles relevant to not-for-profit entities.