Generally Accepted Accounting Principles and Net Assets

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Jefferson Animal Rescue is a private not-for-profit clinic and shelter for abandoned domesticated animals, chiefly dogs and cats. At the end of 2011, the organization had the following account balances: [pic]

.:.
The following took place during 2012:
1. Additional supplies were purchased on account in the amount of $15,000. 2. Unconditional (and unrestricted) pledges of support were received totaling $95,000. In light of a declining economy, 5 percent is expected to be uncollectible. The remainder is expected to be collected in 2012. 3. Supplies used for animal care amounted to $16,700.

4. Payments made on accounts payable amounted to $18,200.
5. Cash collected from pledges totaled $91,000.
6. Salaries were paid in the amount of $47,000. Included in this amount is the accrued wages payable at the end of 2011. (The portion of wages expense attributable to administrative expense is $15,000 and fund-raising expense is $2,000. The remainder is for animal care.) 7. Jefferson Animal Rescue entered an agreement with KDAC, Channel 7 News, to find more homes for shelter pets. This special adoption program highlights a shelter animal in need of a home on the evening news the first Thursday of each month. The program was initially funded by a restricted gift received in 2011. During 2012, Jefferson Animal Rescue paid $1,800 ($150 per month) for the production of the monthly videos. In December 2012, the original donor unconditionally pledged to support the project for an additional 24 months by promising to pay $3,600 in January 2013 (all of this is expected to be collectible). 8. The shelter’s building was partially financed by a bank note with an annual interest rate of 6 percent. Interest totaling $1,500 was paid during 2012. Interest is displayed as Other Changes in the Statement of Activities. 9. Animal medical equipment was purchased during the year in the amount of $3,000. Funding came from a special capital campaign conducted in 2011. Additional information includes:

10. Depreciation for the year amounted to $7,500. (The portion of depreciation expense attributable to administrative is $2,000, and the remainder is related to animal care.) 11. Unpaid wages relating to the final week of the year totaled $420 (all animal care). Using the information above and the Excel template provided: a. Prepare journal entries and post entries to the T-accounts. b. Prepare closing entries.

c. Prepare a Statement of Activities, Statement of Financial Position, and Statement of Cash Flows for the year ending December 31, 2012.

SOLUTION:

PART A.

|  |Jefferson Animal Rescue | |  |December 31, 2012 | |  |  |  |  | |  |Account Title | Debits | Credits | |1 |Supplies | 15,000 |  | |  | Accounts payable |  | 15,000 | |2 |Pledges Receivable | 95,000 |  | |  | Estimated uncollectible pledges |  | 4,750 | |  | Contribution revenue - unrestricted |  | 90,250 | |3 |Program expense - animal care | 16,700 |  | |  | Supplies...
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