The Folpe Museum Association, a nonprofit organization, had the following transactions for the year ended December 31, 2012.
1. Cash contributions to the Association for the year included
(a) Unrestricted, $1,100,000;
(b) Restricted for traveling displays, $350,000;
(c) Restricted by the donor for endowment purposes, $1,400,000; and
(d) Restricted by the donor for equipment, $500,000.
2. Additional unrestricted cash receipts included
(a) Admission charges, $300,000;
(b) Interest income, $210,000; and
(c) Tuition for museum school, $50,000.
3. Donors made pledges in 2012 in a pledge drive specifically for funds to be used in 2013. The amount was $400,000.
4. A multiyear pledge (temporarily restricted) was made at the end of the year by a private foundation. The foundation pledged $50,000 per year for the next five years (at the end of each year). The present value (rounded) of those future payments is $211,000, using a 6 percent discount rate.
5. $195,000 in funds restricted for traveling displays was expended during 2012.
6. The Museum Association had $150,000 in pledges in 2011 that was intended by the donors to be expended in 2012. The cash was received in 2012. (Expenses are included in transaction 8.)
7. $575,000 in cash previously restricted for equipment purchases was expended in 2012. The Museum Association records all equipment in the unrestricted class of net assets.
8. In addition to the amount expended in transaction 5, expenses (paid in cash) amounted to
(a) Museum displays, $1,300,000;
(b) Museum school, $90,000;
(c) Management and general, $350,000;
(d) Fundraising, $250,000; and
(e) Membership development, $200,000.
9. Depreciation on museum fixed assets amounted to:
(a) $40,000 for museum displays,
(b) $7,000 for museum school,
(c) $12,000 for management and general,
(d) $4,000 for fund-raising, and
(e) $4,000 for membership development.
Required:
a. Prepare journal entries to record these transactions, including closing entries. Prepare a Statement of Activities for the Folpe Museum Association for the year ended December 31, 2012. Use the format in the text. The beginning net asset balances were unrestricted, $400,000; temporarily (time) restricted, $150,000; and permanently restricted, $3,500,000.
b. The Museum School program expenses are substantially larger than its revenues. Do you recommend that the program be discontinued?