The Art League is a not-for-profit organization dedicated to promoting the arts
ID: 2479667 • Letter: T
Question
The Art League is a not-for-profit organization dedicated to promoting the arts within the community. There are two programs conducted by the Art League: (1) exhibition and sales of members’ art (referred to as Exhibition) and (2) Community Art Education. Activities of the Art League are conducted by a part-time administrator, a part-time secretary-bookkeeper, and several part-time volunteers. The volunteers greet visitors, monitor the security of the exhibit hall, and handle the sales of art to the public. Art on exhibit is considered the property of the member artists, not the Art League. The post-closing trial balance for the Art League as of June 30, 2016, is shown here.
ART LEAGUE
Post-closing Trial Balance
June 30, 2016
Debits Credits
DR Cash $ 2,735
DR Short-term Investments 12,911
DR Grants Receivable 5,400
DR Prepaid Expense 1,180
DR Equipment 9,745
DR Long-term Investments—Permanently Restricted 5,847
Cr Allowance for Depreciation—Equipment $ 2,506
Cr Accounts Payable and Accrued Expenses 2,729
Cr Deferred Revenue 3,600
Cr Unrestricted Net Assets 9,091
Cr Temporarily Restricted Net Assets 14,045
Cr Permanently Restricted Net Assets 5,847
Totals Dr$ 37,818 Cr$ 37,818
Following is information summarizing the transactions of the Art League for the year ended June 30, 2017.
1. During the year, unrestricted cash was received from the following sources: grants, $12,400, of which $5,000 had been reported as receivable on June 30, 2016; annual contributions from fund drives and other unrestricted gifts, $13,941; membership dues, $16,685; tuition and fees for educational workshops, $7,054; and sales of members’ art, $12,090, of which 20 percent represents commissions earned by the Art League.
2. Interest earnings were as follows: interest on unrestricted investments totaled $694; interest on temporarily restricted investments totaled $933; interest on permanently restricted investments totaled $352 (these investment earnings are temporarily restricted for program use).
3. Grants receivable as of year-end totaled $5,180, of which $3,200 was earned in the current year (thus unrestricted) and $1,980 was reported as deferred revenue.
4. The Art League receives free rent from the city at an estimated value of $18,800 a year.
5. Expenses incurred during the year were as follows: salaries and fringe benefits, $47,700; utilities $3,160; postage and supplies, $1,390; and miscellaneous, $720. As of year-end, the balances of the following accounts were: Prepaid Expenses, $920; Accounts Payable and Accrued Expenses, $2,866.
6. During the year, $3,300 of short-term investments were sold, with the proceeds used to purchase two computers and printer at a cost of $2,915. The resources used were temporarily restricted for the purchase of equipment. It is the policy of the Art League to record the equipment as temporarily restricted net assets.
7. In accordance with the terms of the Art League endowment, income earned by the endowment for the provision of free art instruction for handicapped children was provided at a cost of $905. This amount was allocated to community art education.
8. Depreciation on equipment in the amount of $1,722 was recorded.
9. Expenses for the year were allocated 30 percent to Exhibition Program, 30 percent to Community Art Education, 25 percent to Management and General Expenses, and 15 percent to Fund-Raising.
10. Proceeds of art sales, net of commissions charged by the Art League, totaled $9,672. This amount was paid to member artists during the year.
11. All nominal accounts were closed at year-end.
Required b)
Prepare journal entries to record these transactions. Expense transactions should be initially recorded by object classification, unless otherwise instructed; 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. Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
Required c)
Prepare a statement of activities for the year ended June 30, 2017. (Negative amounts should be indicated by a minus sign.)
Explanation / Answer
Jounal Entries
1.
Cash Account Dr.
To Grants Received
To Unrestricted Gifts
To Membership Fee
To Tution and Fee
12400
13941
16685
7054
Cash Account Dr.
To Exhibition
To Commission
9672
2418
Unrestricted Investment Account Dr.
Temperorily Restricted Investement Account Dr
Permanentaly Restricted Investment Account Dr.
To Interest Account
694
933
352
1979
Cash Account Dr.
To Grants Account
To Deffered Revenue Outstanding
To Free Rent Account
30200
1980
18800
Salaries and Fringe Benefit Account Dr.
Utilities Account Dr.
Postage and Supplies Account Dr.
Miscellaneous Account dr.
To Cash Account
47700
3160
1390
720
52970
Temporarily Restricted Net Assets Account Dr.
Cash Account Dr.
To Short Term Investement
2915
385
3300
Depreciation Account Dr.
To Temporarily Restricted Net Assets Account
1722
Statement of Activities
Program Services
Exhibition: 52970 X 30%
Cash Account Dr.
To Grants Received
To Unrestricted Gifts
To Membership Fee
To Tution and Fee
5008012400
13941
16685
7054
Cash Account Dr.
To Exhibition
To Commission
120909672
2418
Unrestricted Investment Account Dr.
Temperorily Restricted Investement Account Dr
Permanentaly Restricted Investment Account Dr.
To Interest Account
694
933
352
1979
Cash Account Dr.
To Grants Account
To Deffered Revenue Outstanding
To Free Rent Account
2398030200
1980
18800
Salaries and Fringe Benefit Account Dr.
Utilities Account Dr.
Postage and Supplies Account Dr.
Miscellaneous Account dr.
To Cash Account
47700
3160
1390
720
52970
Temporarily Restricted Net Assets Account Dr.
Cash Account Dr.
To Short Term Investement
2915
385
3300
No Entry RequiredDepreciation Account Dr.
To Temporarily Restricted Net Assets Account
17221722
No Entry RequiredRelated Questions
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