Preparation of journal entries and financial statement for not-for-profit
Tomorrows World is a not -for- profit organization. At the end of last year, the organization
reported the following trail balance.
Long term liabilities
The investments are allocated as follows: 45% are unrestricted, 40% are temporarily restricted
(use of thses funds is stipulated by the donors) and 15% are permanently restricted (only the
interest income may be used to fund operating expenses if so directed by the organization’s
Board of Trustees, and no such designation was made for this year). Investment income (paid in
cash) is 5% for the current year.
During the year, the organization received $5,600,000 in unrestricted donation and $ 560,000 in
donations whose use is temporarily restricted as to use by donors. All of these donation are
account .In addition, it recognized program expenses of $ 400,000 is spent using temporarily
restricted funds for approved purposes, thus receiving the appropriate release from the donors
Tomorrows World collected $6,000,000of contributions receivable, paid $ 5,800,000 of payable
and purchased additional land in the amount of $ 260,000 (depreciation expense of $180,000 is
recognized related to the depreciable assets). Interest expense on the long term debt is
included in the expenses referenced above, and no repayment of the principal is recognized
during the year.
a. Prepare journal entries for the organization financial activities during the year.
b. Prepare the year end statement of activities and statement of financial position.