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Journal Entries and Financial Statements

The Southside Counseling Center was established on January 10, 2023 to provide a variety of counseling services to community residents, including marital and family counseling and treatment for alcoholism and drug abuse. The centers initial resources were provided by a private foundation in the form of a $2,500,000 grant. Of this sum, the foundation designated $1,000,000 for building and equipment and $750,000 for the establishment of a special program for counseling parolees. The following transactions occurred during 2023:

1. Unrestricted cash contributions of $1,200,000 were received through the local United Way campaign. An additional $140,000 was received in direct cash contributions, of which $20,000 is restricted to the parolees program and $50,000 was for the building fund. Documented promises of $60,000 were received, collectible within the next year. These promises are unrestricted and expected to be 85% collectible. Bad debt expense is included with administrative expenses.

2. Out-of-pocket operating expenses for the year were $1,400,000. Of the total, $950,000 are program expenses, $350,000 are administrative expenses, and the remainder are fund-raising expenses. $100,000 of the expenses were unpaid at year-end.

3. The special parolees program had not yet begun as of December 31, 2023. All resources dedicated to this program were invested in short-term securities. Investment income for the year, which was reinvested, was $30,000. There are no unrealized gains or losses on the securities.

4. The center obtained a $2,400,000 mortgage to purchase a building, and obtained a $300,000 3-year note to purchase equipment. The center also used the grant to finance these purchases; the total cost of the building and equipment was $3,700,000.

5. Interest of $140,000 was accrued and paid on the mortgage and note, all allocated to administrative expenses.

6. Depreciation on the building and equipment is $190,000, all allocated to program expenses.

Required

a. Prepare journal entries to record the transactions for 2023.

General Journal
Ref.	Description	Debit	Credit
	Restricted cash
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	Contributions revenue - unrestricted
	To record receipt of initial resources provided by a private foundation.
1.	Cash
	Restricted cash
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	Contributions revenue -unrestricted
	Contributions revenue - use restricted
	Contributions revenue - time restricted
2.	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	Administrative expenses
	Fund-raising expenses
	Accounts payable
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
3.	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	Cash
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
4.	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	To record reclassification of net assets.
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	Note payable
	Restricted cash
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	To record purchase of building.
5.	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
6.	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses
	AnswerAccounts payableAdministrative expensesAllowance for uncollectiblesBuilding and equipment, netCashContributions receivableContributions revenue - use restrictedContributions revenue - time restrictedInvestment income-unrestrictedInvestmentsMortgage payableNet assets released from restrictions-restrictedNet assets released from restrictions-unrestrictedProgram expenses

b. Prepare Southsides statement of activities for 2023 and its statement of financial position at December 31, 2023. Prepare Southside's statement of cash flows for 2023, using the direct method for the operating section. Use a negative sign with an answer for net assets released from restrictions and change in net assets, if appropriate. Otherwise, do not use negative signs.

Southside Counseling Center Statement of Activities For the Year Ended December 31, 2023
	Net Assets Without Donor Restrictions	Net Assets With Donor Restrictions
Revenues, gains, and other support:
Contributions-General
Contributions-Grant
Contributions-Parolee program
Contributions-Building fund
Investment income
Net assets released from restrictions
Total revenues, gains and other support
Expenses:
Program expenses
Administrative expenses
Fund-raising expenses
Total expenses
Change in net assets
Net assets, January 1, 2023
Net assets, December 31, 2023

Southside Counseling Center Statement of Financial Position December 31, 2023
Assets
Cash
Contributions receivable, net
Investments
Restricted cash
Building and equipment, net
Total assets
Liabilities and net assets
Liabilities:
Accounts payable
Note payable
Mortgage payable
Net assets:
Without donor restrictions
With donor restrictions
Total liabilities and net assets

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