WPR Public Radio:
On January 1, 2005, Joe Hanna started a new nonprofit radio station called WPR Public Radio, which offers local news coverage and cultural programming. At the end of the first year of operations, WPR had the following ending balances (in no particular order):
Account 2005 Ending Balance
Accounts Payable $ 500
Cash 1,000
Equipment, net 14,000
Inventory 200
Notes Payable 12,000
Pledges Receivable, net 1,500
Prepaid Rent 1,000
Unrestricted Net Assets 4,400
Wages Payable 800
During fiscal year 2006, WPR raised $50,000 in grants from foundations. Of this amount, one grant award for $10,000 was received in cash. The other grant award is a two-year $40,000 grant; the first half was received in cash in 2006 and the remaining half will be received in 2007. WPR also raised $25,000 in donor pledges in 2006. By the end of the year, $20,000 of these pledges had been collected in cash. After speaking to other public radio managers, Joe learned that he should expect that 15% of the remaining $5,000 will never be collected. In the previous year (2005), WPR had taken out a bank loan of $12,000 at an annual interest rate of 10%. WPR made its second annual interest payment to the bank in 2006. The bank does not require any repayment of principal until 2008.
The rent for WPR’s studio and office space is $1,000 per month. WPR’s landlord requires payment one month in advance (i.e., in December 2006 WPR had to pay rent for January 2007). WPR ordered and received $600 worth of inventory on each of four occasions during the year - January, May, September, and December - and in each case paid its supplier one month later. WPR also paid its supply bill of $500 from the previous year. WPR ended the year with an inventory balance of $50. In January of last year (2005), WPR acquired $15,000 worth of recording studio equipment that is expected to last a total of 15 years. In January 2006, the radio station ordered, received, and paid $5,000 cash for additional equipment that is expected to last a total of 10 years. WPR uses straight-line depreciation. WPR’s employees earned $1,200 per month in 2006. Wages are paid with a one-month lag. WPR paid its employees $800 in January 2006 for work completed in December 2005.
Joe has asked you to record the financial activities listed above and create financial statements (balance sheet, activity statement, and cash flow statement) for fiscal year 2006. Joe has not provided you with my templates for this assignment, so you will need to create the financial statements from scratch.