Allocation of expenses, journal entries. The Caring Clinic, a VHWO, conducts two programs: Alcohol and Drug Abuse and Outreach to Teens. It has the typical supporting services of management and fund raising. Expense accounts from the preallocation trial balances as of December 31, 20X7, are as follows:
|
Funded by |
Funded by |
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|
Unrestricted |
Donor-Restricted |
|
|
|
Resources |
Resources |
Total |
|
|
Salaries and Payroll Taxes |
63,000 |
23,000 |
86,000 |
|
Telephone and Miscellaneous Expenses |
10,000 |
2,000 |
12,000 |
|
Nursing and Medical Fees |
70,000 |
50,000 |
120,000 |
|
Educational Seminars Expense |
46,000 |
20,000 |
66,000 |
|
Research Expense |
137,000 |
16,000 |
153,000 |
|
Medical Supplies Expense |
65,000 |
22,000 |
87,000 |
|
Rent Expense |
|
10,000 |
10,000 |
|
Interest Expense on Equipment Mortgage |
4,000 |
4,000 |
|
|
Depreciation Expense |
|
20,000 |
20,000 |
|
Provision for Uncollectible Pledges |
26,000 |
26,000 |
|
|
Totals |
421,000 |
163,000 |
584,000 |
In preparation for the allocation of expenses to programs and supporting services, a study was conducted to determine an equitable manner for assigning each expense. The study resulted in the following table for percentage allocations.
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Percentage of Allocations |
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|
Programs |
Supporting Services |
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Expenses to Be Allocated |
|
Outreach |
Management |
Fund |
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All expenses (other than depreciation) financed by |
|
|
|
|
|
donor-restricted contributions |
60% |
40% |
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|
Expenses financed by unrestricted resources: |
|
|
|
|
|
Salaries and payroll taxes |
30 |
20 |
30% |
20% |
|
Telephone and miscellaneous |
20 |
20 |
15 |
45 |
|
Nursing and medical fees |
70 |
30 |
||
|
Educational seminars |
30 |
60 |
10 |
|
|
Research |
60 |
40 |
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|
Medical supplies |
90 |
10 |
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|
Equipment-related expenses: |
|
|||
|
Interest |
50 |
10 |
30 |
10 |
|
Depreciation |
50 |
10 |
30 |
10 |
1. Using a total of allocable expenses financed by donor-restricted resources, prepare a journal entry to assign those expenses to the programs.
2. With the following format, prepare a schedule to show the assignment of the allocable expenses financed by unrestricted resources to the various programs and supporting services, using the percentages provided by the problem.
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Caring Clinic Allocation of Expenses |
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|
Programs |
Supporting Services |
|
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|
Expense |
Total |
Alcohol and |
Outreach |
|
Fund |
|
|
Allocated |
Amount |
Drug Abuse |
to Teens |
Management |
Raising |
|
3. Using the schedule from requirement 2, prepare a journal entry to record the allocation and closing of expenses financed by unrestricted resources.
4. Prepare a journal entry to assign plant-related expenses to programs and support services.