MUSEUM was incorporated as a not-for-profit organization on January 1, 1985. Dur

Question

MUSEUM was incorporated as a not-for-profit organization on January 1, 1985. During the fiscal year ended December 31, 2017, the following summary transactions occurred.

The Museum paid wages and salaries of $1,039,000. Department employees earned the following: programs $865,000, fundraising $50,000, and administration $130,000. The remaining amount was accrued at year-end.

The Museum paid operating expenses of $230,000 for programs, $10,000 for fundraising, and $33,000 for administration. In addition, the Museum paid $3,000 of outstanding accounts payable and $5,000 to obtain inventory. Administrative expenses of $7,000 that were recognized as prepaid expenses in the prior year were consumed.

Property, plant, and equipment was acquired with a note for $20,000.

Depreciation was recognized in the following departments: $175,000 for programs, $5,000 for fundraising, and $30,000 for administration.

Museum admission fees of $505,000 were collected.

A perpetual endowment earned and received interest and dividends of $280,000. The endowment also increased in value $100,000 as of year-end. The donor did not place any time or purpose restrictions of the endowment earnings and the Museum uses historical dollar value to measure the corpus.

A special event that is considered incidental generated $470,000 in gross revenues and had direct costs of $350,000 resulting in net cash of $120,000 received.

A fundraising campaign generated $338,000 in cash gifts and $180,000 in pledges. No purpose restrictions are present, however the pledges will not be collected until next year. $20,000 of the pledges are estimated to be uncollectible.

Pledges made in previous years of $145,000 (with time restrictions due to being a pledge) were collected.

A donor gave $90,000 and required the gift be used on community outreach programs.

The Museum used restricted gifts given in prior years on a program, spending $710,000.

Required

Make all necessary journal entries to record these transactions.

Prepare a statement of activities for the year ended December 31, 2017. Beginning balances of net assets are: Unrestricted $2,002,000; Temporarily Restricted $850,000; and Permanently Restricted $3,000,000.

Explanation / Answer

JOURNAL ENTRIES

DEBIT AMOUNT IN $

CREDIT AMOUNT IN $

Wages/Salary A/c

1045000

                   To Cash A/c

1039000

                    To Outstanding Salary A/c

6000

(865000 + 50000 + 130000)

Operating Expense A/c

230000

Fund raising Expense A/c

10000

Administration Expense A/c

33000

Accounts Payable A/c

3000

Inventory A/c

5000

                   To Cash A/c

281000

Administrative Expense

7000

                 To Prepaid Expense

7000

Property, plant, and equipment A/c

20000

                 To Note A/c

20000

Depreciation A/c

210000

                   To Accumulated Depreciation A/c

210000

(175000 + 5000 + 30000)

Cash A/c

505000

                  To Museum admission fees

505000

Cash A/c

280000

                To Interest/Dividend A/c

280000

Cash A/c

120000

                To Event A/c

120000

Cash A/c

338000

                To Cash Gift A/c

338000

(Fundraising department)

Accrued pledges A/c

160000

Doubtful pledges A/c

20000

                To Pledges A/c

180000

Cash A/c

145000

              To Accrued Pledges A/c

145000

Cash A/c

90000

             To Donation received for Community outreach programmes A/c

90000

Community outreach program

710000

            To Cash A/c

710000

(Community outreach program department)

JOURNAL ENTRIES

DEBIT AMOUNT IN $

CREDIT AMOUNT IN $

Wages/Salary A/c

1045000

                   To Cash A/c

1039000

                    To Outstanding Salary A/c

6000

(865000 + 50000 + 130000)

Operating Expense A/c

230000

Fund raising Expense A/c

10000

Administration Expense A/c

33000

Accounts Payable A/c

3000

Inventory A/c

5000

                   To Cash A/c

281000

Administrative Expense

7000

                 To Prepaid Expense

7000

Property, plant, and equipment A/c

20000

                 To Note A/c

20000

Depreciation A/c

210000

                   To Accumulated Depreciation A/c

210000

(175000 + 5000 + 30000)

Cash A/c

505000

                  To Museum admission fees

505000

Cash A/c

280000

                To Interest/Dividend A/c

280000

Cash A/c

120000

                To Event A/c

120000

Cash A/c

338000

                To Cash Gift A/c

338000

(Fundraising department)

Accrued pledges A/c

160000

Doubtful pledges A/c

20000

                To Pledges A/c

180000

Cash A/c

145000

              To Accrued Pledges A/c

145000

Cash A/c

90000

             To Donation received for Community outreach programmes A/c

90000

Community outreach program

710000

            To Cash A/c

710000

(Community outreach program department)

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