The Heritage Art Museum, a not-for-profit entity specializing in art items creat

Question

The Heritage Art Museum, a not-for-profit entity specializing in art items created by natives of the Pacific Northwest, has a December 31 fiscal year-end. The museum has a policy of NOT capitalizing collection items. Your entries should clearly indicate the fund in which the entry is made or to which class of net assets the account would be closed. If no entry is required, write “No entry required.”

a.   During the current year the museum received admissions fees of $500,000 in cash.

b.   Citizens of the local community are encouraged to participate in a program called “Friends of the Museum.” For a yearly contribution of $25 per family, a family is entitled to free admission to the museum during the calendar year. A “friend of the museum” also receives a monthly one-page newsletter announcing upcoming events. At year-end, there were 1,000 members in “Friends of the Museum.”

c.   During the current year the museum incurred salaries expense of $1 million of which $40,000 remains unpaid at year-end.

d.   During the year the museum incurred operating expenses of $450,000 of which $30,000 remains unpaid at year-end. Of the $450,000, $50,000 was used to buy supplies and $20,000 of supplies remain on hand at year-end.

e.   Office equipment owned by the museum has a historical cost of $140,000 and a salvage value of $20,000 and is being depreciated over 8 years on the straight-line basis.

f.    During the year the museum conducted a fund-raising drive to raise money to acquire new art items for the museum. The museum received pledges of $200,000 of which the museum had collected $160,000 by year-end and expected to ultimately collect another $20,000.

g.   The museum had a small portfolio of investments in equity securities.. At the beginning of the year the portfolio had a fair value of $60,000. During the year the Museum collected $3,000 in dividends on the securities. At year-end the portfolio had a market value of $62,000.

h.   During the year a citizen died and willed his wonderful collection of native art to the museum. The appraised value of the collection was $600,000.

i.    To balance its collection, the museum sold two of its collection items for $250,000, which approximates fair value. These items had a historical cost to the museum of $10,000.

j.    The proceeds of the sale and additional cash were used to acquire two new items at a cost of $310,000.

Im running late and I have few project working on can you help me to answer the above questions with the right accounting entries - Thanks

Explanation / Answer

The journal entries are as follows in the sequential order from a to j:

Account Titles Debit Credit a) UNRESTRICTED FUND Cash $500,000 Revenue $500,000 b) UNRESTRICTED FUND Cash (25*1,000) $25,000 Revenue $25,000 c) UNRESTRICTED FUND Salary Expense $1,000,000 Cash (1000,000 – 40,000) $960,000 Wages Payable $40,000 d) UNRESTRICTED FUND Operating Expense $430,000 Supplies $20,000 Cash (450,000 – 30,000) $420,000 Accounts Payable $30,000 e) UNRESTRICTED FUND Depreciation Expense $15,000 Accumulated Depreciation $15,000 f) TEMPORARILY RESTRICTED FUND Cash $160,000 Pledges Receivable (200,000 – 160,000) $40,000 Allowance for Uncollectible Accounts $20,000 Revenue (200,000 – 20,000) $180,000 g) UNRESTRICTED FUND Cash $3,000 Investments (62,000 – 60,000) $2,000 Investment Revenue $5,000 h) No entry required. i) UNRESTRICTED FUND Cash $250,000 Revenue $250,000 j) UNRESTRICTED FUND Acquisition Expense $310,000 Cash $310,000

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