Question

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. Transaction 1: A business donated rent-free office space to the organization that would normally rent for $35,100 a year. Transaction 2: A fund drive raised $185,500 in cash and $101,000 in pledges that will be paid next year. A state government grant of $151,000 was received for program operating costs related to public health education. Transaction 3: Salaries and fringe benefits paid during the year amounted to $208,660. At year-end, an additional $16,100 of salaries and fringe benefits were accrued. Transaction 4: A donor pledged $101,000 for construction of a new building, payable over five fiscal years, commencing in 2025. The discounted value of the pledge is expected to be $94,360. Transaction 5: Office equipment was purchased for $12,100. The useful life of the equipment is estimated to be four years. Office furniture with a fair value of $9,700 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. Transaction 6: Telephone expense for the year was $5,300, printing and postage expense was $12,100 for the year, utilities for the year were $8,400, and supplies expense was $4,400 for the year. At year-end, an immaterial amount of supplies remained on hand, and the balance in accounts payable was $3,700. Transaction 7: Volunteers contributed $15,100 of time to help with answering the phones, mailing materials, and various other clerical activities. Transaction 8: It is estimated that 80 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. Transaction 9: All expenses were allocated to program services and support services in the following percentages: public health education, 40 percent; community service, 30 percent; management and general, 20 percent; and fund-raising, 10 percent. Transaction 10: Net assets were released to reflect satisfaction of state grant requirements that the grant resources be used for public health education program purposes. Transaction 11: All nominal accounts were closed to the appropriate net asset accounts Prepare journal entries to record these transactions. Expense transactions should be initially recorded by object classification; in entry 9, expenses will be allocated to functions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Round the intermediate and final answers to the nearest dollar amou

Answer 1

The bank's T-account balance sheet comprises assets such as reserves, loans, and government bonds, and its liability is the deposits it holds. The net worth is calculated as the difference between the total assets ($620) and total liabilities ($400), resulting in a net worth of $220.

Step-by-step explanation:

To set up a T-account balance sheet for the bank, we list the bank's assets on one side and its liabilities on the other side. The net worth or equity is then calculated as the difference between total assets and total liabilities.

Bank's T-Account Balance Sheet

To calculate the total assets, we add up the reserves, loans, and government bonds:

Total Assets = Reserves + Loans + Government Bonds
= $50 + $500 + $70
= $620

The total liabilities are equal to the deposits:

Total Liabilities = Deposits
= $400

The net worth is calculated by subtracting total liabilities from total assets:

Net Worth = Total Assets – Total Liabilities
= $620 – $400
= $220

Therefore, the bank's net worth is $220.

Answer 2

Journal entries for the given transaction during the fiscal year ended December 31, 2023, as a not for profit organization.

Transaction 1:

Dr. In-Kind Contribution - Rent Expense: 35,100

Cr. Contribution Revenue 35,100

Transaction 2:

Dr. Cash: 185,500

Dr. Pledges Receivable: 101,000

Cr. Contribution Revenue: 185,500

Cr. Unearned Revenue - Pledges: 101,000

Transaction 3:

Dr. Salaries and Fringe Benefits Expense: 208,660

Cr. Cash: 208,660

Dr. Salaries and Fringe Benefits Expense: 16,100

Cr. Salaries and Fringe Benefits Payable: 16,100

Transaction 4:

Dr. Pledges Receivable: 101,000

Cr. Contribution Revenue: 94,360

Cr. Temporarily Restricted Net Assets: 6,640

Transaction 5:

Dr. Office Equipment: 12,100

Cr. Cash: 12,100

Dr. In-Kind Contribution - Office Furniture: 9,700

Cr. Contribution Revenue: 9,700

Transaction 6:

Dr. Telephone Expense: 5,300

Dr. Printing and Postage Expense: 12,100

Dr. Utilities Expense: 8,400

Dr. Supplies Expense: 4,400

Cr. Cash: 30,200

Cr. Accounts Payable: 3,700

Transaction 7:

No Journal Entry Required

Transaction 8:

Dr. Pledges Receivable: 80,800

Cr. Unearned Revenue - Pledges: 80,800

Transaction 9:

Dr. Program Services Expense - Public Health Education (40% of total expenses)

Dr. Program Services Expense - Community Service (30% of total expenses)

Dr. Support Services Expense - Management and General (20% of total expenses)

Dr. Fundraising Expense (10% of total expenses)

Cr. Various Expense Accounts (Total expenses)

Transaction 10:

Dr. Temporarily Restricted Net Assets (Amount released)

Cr. Net Assets Released from Restrictions (Same amount)

Transaction 11:

No Journal Entry Required