Help & Save is a private not-for-profit organization that operates in Kansas. Swim For Safety is a private not-for-profit organization that operates in Missouri. The leaders of these two organizations have decided to combine forces on January 1, 2013, in order to have a bigger impact from their work. They are currently discussing ways by which this combination can be created. Statements of financial position for both organizations at that date appear below.
HELP & SAVE
Balance Sheet
January 1, 2013
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,600,000
Pledges Receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
Buildings & Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700,000
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,670,000
Liabilities
Accounts Payable and Accrued Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,000
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,100,000
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,210,000
Net Assets
Unrestricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,100,000
Temporarily Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000
Permanently Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
Total Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,460,000
Total Liabilities and Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $2,670,000
SWIM FOR SAFETY
Balance Sheet
January 1, 2013
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 500,000
Pledges Receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,000
Buildings & Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590,000
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,470,000
Liabilities
Accounts Payable and Accrued Liabilities . . . . . . . . . . . . . . . . . . . . . . . $ 70,000
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620,000
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 690,000
Net Assets
Unrestricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 420,000
Temporarily Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,000
Permanently Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,000
Total Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 780,000
Total Liabilities and Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,470,000
The buildings and equipment reported by Help & Save have a fair value of $900,000. The buildings and equipment reported by Swim For Safety have a fair value of $730,000.
a. Assume Help & Save pays $1 million in cash from its unrestricted net assets to gain complete control over Swim For Safety. It is not assumed that Swim For Safety will be predominantly supported by contributions and investment income in the future. What balances will appear on the combined balance sheet immediately after control is gained?
b. Assume Help & Save pays $990,000 in cash from its unrestricted net assets to gain complete control over Swim For Safety. It is assumed that Swim For Safety will be predominantly supported by contributions and investment income in the future. What balances will appear on the combined balance sheet immediately after control is gained?
c. Assume that these two organizations are combined into a new private not-for-profit organization to be known as Help-Swim-Save. A new governing body will be formed to manage and operate this new organization. What balances will appear on the combined balance sheet immediately after control is gained?
The following information relates to problems 44 through 49:
For a number of years, a private not-for-profit organization has been preparing financial statements that do not necessarily follow generally accepted accounting principles. At the end of the most recent year (Year 2), those financial statements show total assets of $900,000, total liabilities of $100,000, total unrestricted net assets of $400,000, total temporarily restricted net assets of $300,000, and total permanently restricted net assets of $100,000. In addition, total expenses for the year were $500,000 (shown in unrestricted net assets)?