The Watson Foundation, a private not-for-profit entity, starts 2024 with cash of $100,000; contributions receivable (net) of $200,000; investments of $300,000; and land, buildings, and equipment (net) of $200,000. Net assets without donor restrictions were reported as $400,000, the same figure as the net assets with donor restrictions. Of the restricted net assets, $300,000 was purpose restricted, whereas the other $100,000 had to be held permanently, although the subsequently earned income is without restriction. Fifty percent of the purpose-restricted net assets had to be used to help pay for a new building. The remainder was restricted to the payment of officer salaries. Donors made no stipulations about the eventual reporting of buildings and other long-lived assets when acquired. Watson has one program service (health care) and two supporting services (fundraising and administrative).

During the current year, Watson Foundation has the following transactions:

Computes interest of $20,000 on the unrestricted contribution receivable.

Receives cash of $100,000 from the contributions receivable and wrote off another $4,000 as uncollectible.

Receives unrestricted cash donations of $180,000.

Receives $23,000 in cash that must be spent for a particular type of office machine within the next year or the money must be returned.

Pays salaries of $90,000. Of that amount, $33,000 came from restricted funds. The payment was made to individuals doing health care work.

Spends the $23,000 in (4) for the appropriate office machine.

Receives a cash gift of $12,000 that Watson must convey to another specified charity. However, Watson has the right to give this money to a different organization if officials so choose.

Buys a building for $500,000 by signing a long-term note for $450,000 and using restricted funds for the remainder.

Collects annual membership dues of $30,000. Individuals receive substantial benefits from their memberships. By the end of the year, two-thirds of the time for the average membership has passed.

Receives unrestricted income of $58,000 generated by net assets that must be held permanently.

The board of directors of the Watson Foundation votes to set section $9,000 of its investments for emergency purposes.

Pays rent of $12,000 for the past month, advertising of $15,000, and utilities of $16,000. These were half for the program service and one-fourth each for the two supporting services.

Receives an unrestricted pledge of $200,000. Watson will collect the money in five years and does not expect any part to be uncollectible. Present value at inception is $149,000, but interest for the year to date is $6,000.

Computes depreciation of $40,000, 60 percent for health care, 30 percent for administrative, and 10 percent for fundraising.

Pays $15,000 in interest on the note signed in (8). All of this cost is assumed to be related to health care.

Required:

Prepare a statement of activities for the Watson Foundation for this year.

Note: Deductions should be indicated by a minus sign.

A:

WATSON FOUNDATION

STATEMENT OF ACTIVITIES

For Year Ending December 31, 2024

Net Assets Without Donor Restrictions Net Assets With Donor Restrictions

Contribution revenue:

Donations

Interest

Total 0 0 0

Investment income

Exchange revenues—memberships

Total contributions and revenues $0 $0 $0

Net assets released from restrictions

Total contributions, revenues, and net assets released from restrictions $0 $0 $0

Expenses:

Program services—healthcare

Salary

Rent

Advertising

Utilities

Depreciation

Interest 0

Supporting services—fundraising

Rent

Advertising

Utilities

Depreciation 0

Supporting services—administrative

Rent

Advertising

Utilities

Depreciation 0

Total expenses 0

Excess of total contributions, revenues, and net assets released from restriction over expenses

Net assets at beginning of year

Net assets at end of year $0 $0

Question

The Watson Foundation, a private not-for-profit entity, starts 2024 with cash of $100,000; contributions receivable (net) of $200,000; investments of $300,000; and land, buildings, and equipment (net) of $200,000. Net assets without donor restrictions were reported as $400,000, the same figure as the net assets with donor restrictions. Of the restricted net assets, $300,000 was purpose restricted, whereas the other $100,000 had to be held permanently, although the subsequently earned income is without restriction. Fifty percent of the purpose-restricted net assets had to be used to help pay for a new building. The remainder was restricted to the payment of officer salaries. Donors made no stipulations about the eventual reporting of buildings and other long-lived assets when acquired. Watson has one program service (health care) and two supporting services (fundraising and administrative).

During the current year, Watson Foundation has the following transactions:

Computes interest of $20,000 on the unrestricted contribution receivable.
Receives cash of $100,000 from the contributions receivable and wrote off another $4,000 as uncollectible.
Receives unrestricted cash donations of $180,000.
Receives $23,000 in cash that must be spent for a particular type of office machine within the next year or the money must be returned.
Pays salaries of $90,000. Of that amount, $33,000 came from restricted funds. The payment was made to individuals doing health care work.
Spends the $23,000 in (4) for the appropriate office machine.
Receives a cash gift of $12,000 that Watson must convey to another specified charity. However, Watson has the right to give this money to a different organization if officials so choose.
Buys a building for $500,000 by signing a long-term note for $450,000 and using restricted funds for the remainder.
Collects annual membership dues of $30,000. Individuals receive substantial benefits from their memberships. By the end of the year, two-thirds of the time for the average membership has passed.
Receives unrestricted income of $58,000 generated by net assets that must be held permanently.
The board of directors of the Watson Foundation votes to set section $9,000 of its investments for emergency purposes.
Pays rent of $12,000 for the past month, advertising of $15,000, and utilities of $16,000. These were half for the program service and one-fourth each for the two supporting services.
Receives an unrestricted pledge of $200,000. Watson will collect the money in five years and does not expect any part to be uncollectible. Present value at inception is $149,000, but interest for the year to date is $6,000.
Computes depreciation of $40,000, 60 percent for health care, 30 percent for administrative, and 10 percent for fundraising.
Pays $15,000 in interest on the note signed in (8). All of this cost is assumed to be related to health care.

Required:

Prepare a statement of activities for the Watson Foundation for this year.

Note: Deductions should be indicated by a minus sign.

A:

WATSON FOUNDATION
STATEMENT OF ACTIVITIES
For Year Ending December 31, 2024
	Net Assets Without Donor Restrictions	Net Assets With Donor Restrictions
Contribution revenue:
Donations
Interest
Total	0	0	0
Investment income
Exchange revenues—memberships
Total contributions and revenues	$0	$0	$0
Net assets released from restrictions
Total contributions, revenues, and net assets released from restrictions	$0	$0	$0
Expenses:
Program services—healthcare
Salary
Rent
Advertising
Utilities
Depreciation
Interest	0
Supporting services—fundraising
Rent
Advertising
Utilities
Depreciation	0
Supporting services—administrative
Rent
Advertising
Utilities
Depreciation	0
Total expenses	0
Excess of total contributions, revenues, and net assets released from restriction over expenses
Net assets at beginning of year
Net assets at end of year	$0	$0

Accepted Answer

A statement of activities reports the revenues and expenses of a government entity for a specific…