A not-for-profit residential assisted-living center engaged in the following transactions during the year. Prepare appropriate journal entries.
a. The center billed residents for $4,100,000. Of this amount it estimates that $2,000,000 will be paid by third-party providers at a rate of only 80 percent. Of the remaining balance, it estimates that 2 percent will be uncollectible.
b. The center collected $3,400,000.
c. The center received a cash contribution of $70,000 to be used exclusively for residents' educational and cultural programs. Of this amount, the center spent $55,000 on qualified activities during the year.
d. The center earned interest and dividends of $25,000 (cash) on its endowment of $500,000. Income from the endowment is nonrestricted. However, it is the policy of the center's board of trustees that only income greater than 2 percent of the principal balance will be available for expenditures. The balance will be retained in the endowment to compensate for inflation. Thus, only $15,000 of the income was made available for expenditure.
e. The market value of the endowment's investments increased by $10,000.
f. The center recognized $170,000 of depreciation on the building and $55,000 on equipment.
g. The center incurred other operating expenses of $3,500,000, of which $3,300,000 was paid in cash.
h. At year-end the center received a pledge of $4,200,000 toward the center's new building campaign. It will be paid at the rate of $1,400,000 at the end of each of the following three years. The center uses a discount rate of 3 percent to value noncurrent pledges. Based on that rate, the present value of the annuity is $3,960,040.

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The Answer of A not-for-profit residential assisted-living center engaged in the following transactions during the year. Prepare appropriate journal entries.
a. The center billed residents for $4,100,000. Of this amount it estimates that $2,000,000 will be paid by third-party providers at a rate of only 80 percent. Of the remaining balance, it estimates that 2 percent will be uncollectible.
b. The center collected $3,400,000.
c. The center received a cash contribution of $70,000 to be used exclusively for residents' educational and cultural programs. Of this amount, the center spent $55,000 on qualified activities during the year.
d. The center earned interest and dividends of $25,000 (cash) on its endowment of $500,000. Income from the endowment is nonrestricted. However, it is the policy of the center's board of trustees that only income greater than 2 percent of the principal balance will be available for expenditures. The balance will be retained in the endowment to compensate for inflation. Thus, only $15,000 of the income was made available for expenditure.
e. The market value of the endowment's investments increased by $10,000.
f. The center recognized $170,000 of depreciation on the building and $55,000 on equipment.
g. The center incurred other operating expenses of $3,500,000, of which $3,300,000 was paid in cash.
h. At year-end the center received a pledge of $4,200,000 toward the center's new building campaign. It will be paid at the rate of $1,400,000 at the end of each of the following three years. The center uses a discount rate of 3 percent to value noncurrent pledges. Based on that rate, the present value of the annuity is $3,960,040.

A Not-For-Profit Residential Assisted-Living Center Engaged in the Following Transactions