chapter 21 accounting for non profit organizations
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advanced accounting beamsTRANSCRIPT
Exam Item 19-1 (True or False)
Chapter 21 Test Bank
ACCOUNTING FOR NOT-FOR-PROFIT ORGANIZATIONS
Multiple Choice Questions
LO11.A not-for-profit entity has all of the following characteristics except that it will
a.operate for purposes other than to provide goods or service at a profit.
b.have a positive fund balance.
c.not possess ownership interests like a corporation.
d.receive significant contributions from providers who do not expect returns.
LO22.A governmental not-for-profit entity has which of the following characteristics?
a.It must have a positive fund balance.
b.It must only operate on US soil.
c.A government can void tax regulations for the entity.
d.A government can unilaterally dissolve the entity.
LO2
3.A non-governmental not-for-profit unit is subject toI. GASB.II. FASB.
a.I. only.
b.II. only.
c.A combination of I and II depending on the entitys purpose.
d.Neither I or II
LO3
4.In accounting for private, not-for-profit organizations, revenues and expenses are reported at _________ amounts and most gains and losses are reported at ___________ amounts.
a.net, gross
b.gross, net
c.gross, gross
d.net, net
LO35.When the temporary-use restriction on a charitable donation is satisfied, which of the following is not reported?
a.Net assets released from restrictions in changes in temporarily restricted net assets.
b.Net assets released from restrictions on the statement of cash flows.
c.Expenses as changes in unrestricted net assets.
d.Net assets released from restrictions in changes in unrestricted net assets.
LO36.Under FASB not-for-profit accounting guidance, an unconditional
transfer of cash or other assets to an entity, or a settlement or cancellation of its liabilities in a voluntary, non-reciprocal transfer, is called a(n)
a.unconditional promise to give.
b.contribution.
c.conditional promise to give.
d.residual equity transfer.
LO37.Unconditional promises to give that include promises of payments due in future periods (next year or later) are reported as
a.unrestricted revenues.
b.a memorandum, until the year of the promised payment.
c.deferred revenues until payment is received.
d.restricted revenues.
LO38.A gift-in-kind, for which there is little or no discretion on disposition, should be accounted for by a not-for-profit entity as
a.a special purpose contribution.
b.an exchange transaction.
c.an agency transaction.
d.a conditional promise to give.
LO49.Voluntary health and welfare organizations must report expenses classified by
a.Restriction.
b.function and natural classification.
c.restriction and natural classification.
d.restriction, function and natural classification.
LO4
10.Which one of the following statements is not required for voluntary health and welfare organizations?
a.A statement of financial position.
b.A statement of activities.
c.A statement of functional expenses.
d.A statement of changes in net assets.
LO411.Voluntary health and welfare organizations classify fund-raising costs as
a.costs of services sold.
b.program services.
c.functional expenses.
d.supporting services.
LO412.Voluntary health and welfare organizations
a.may report fund accounts as supplementary according to FASB Statement No. 117 specifications.
b.are required to report unrestricted and restricted net assets according to fund accounting principles.
c.must report fund accounts if management uses them for internal reporting.
d.are restricted from reporting fund accounting.
LO413.A law firm develops the service contracts for a voluntary health and welfare organization. How will this action be recorded by the voluntary health and welfare organization?
a.As a restricted revenue.
b.As an unrestricted contribution.
c.As both an unrestricted revenue and as an expense.
d.As a pro bono activity.
LO514.Hospital premium fees are
a.charity care services.
b.only earned to the extent of the services provided.
c.refundable to the subscriber if services are unused.
d.revenues earned even if the standard charge is above or below the fee.
LO515.Hospital courtesy allowances are
a.charity care services.
b.revenue deductions.
c.Expenses.
d.revenues earned even if the standard charge is above or below the allowance.
LO516.Activities treated as deductions from gross revenues (contra- revenue accounts) in not-for-profit hospitals and other health care organizations include(s)
a.charity care services.
b.courtesy allowances.
c.estimated bad debts.
d.all of the above.
LO617.Which of the following is (are) treated as expense(s) by not-for-profit colleges and universities?
a.tuition waivers and student aid.
b.tuition waivers and estimated bad debts.
c.estimated bad debts and student aid.
d.tuition waivers, student aid and estimated bad debts.
LO618.Not-for-profit college and university student unions, dormitories, and residence halls are considered
a.educational and general services.
b.auxiliary enterprises.
c.independent operations.
d.restricted enterprises.
LO619.An alumnus made a donation of adjoining land to a university. The university would record the gift as
a.an endowment asset.
b.a restricted revenue.
c.an unrestricted revenue.
d.an exchange transaction.
LO620.In a not-for-profit university, the federal grant funds given directly to students are an example of
a.a bequest.
b.an agency transaction.
c.unrestricted revenue.
d.a restricted contribution.
LO3
Exercise 1The following information was taken from the accounts and records of the Astronomy Foundation, a private, not-for-profit organization. All balances are as of December 31, 2005, unless otherwise noted.
Unrestricted Support - Contributions
$5,000,000
Unrestricted Support - Membership Dues
600,000
Unrestricted Revenues - Investment Income
96,000
Temporarily restricted gain on sale of investments
9,000
Expenses - Research
3,200,000
Expenses - Fund Raising
700,000
Expenses - Management and General
300,000
Restricted Support - Contributions
600,000
Restricted Revenues - Investment Income
50,000
Permanently Restricted Support - Contributions
60,000
Unrestricted Net Assets, January 1, 2005
500,000
Temporarily Restricted Net Assets, January 1, 2005
6,000,000
Permanently Restricted Net Assets, January 1, 2005
50,000
The unrestricted support from contributions was received in cash during the year. The expenses included $1,300,000 payable from donor -restricted resources.
Required:
Prepare Astronomy's statement of activities for the year ended December 31, 2005.LO3
Exercise 2The following information was taken from the accounts and records of the Archive Foundation, a private, not-for-profit organization. All balances are as of June 30, 2006, unless otherwise noted.
Unrestricted Support - Contributions
$3,000,000
Unrestricted Support - Membership Dues
700,000
Unrestricted Revenues - Investment Income
76,000
Temporarily restricted gain on sale of investments
19,000
Expenses - Research
2,200,000
Expenses - Fund Raising
400,000
Expenses - Management and General
500,000
Restricted Support - Contributions
600,000
Restricted Revenues - Investment Income
40,000
Permanently Restricted Support - Contributions
70,000
Unrestricted Net Assets, July 1, 2005
450,000
Temporarily Restricted Net Assets, July 1, 2005
2,100,000
Permanently Restricted Net Assets, July 1, 2005 60,000
The unrestricted support from contributions was received in cash during the year. The expenses included $800,000 payable from donor - restricted resources.
Required:
Prepare Archive's statement of activities for the fiscal year ended June 30, 2006.
LO4
Exercise 3Food for the Golden Years is a private, not-for-profit organization that provides free meals for the post-65 age group in the suburbs of a large city. Record the following transactions in the accounts of Food for the Golden Years. The following transactions affected the accounts of Food for the Golden Years.1. Unrestricted cash gifts that were received last year, but designated for use in the current year, totaled $20,000.
2. Unrestricted pledges of $40,000 were received. Five percent of the pledges typically prove uncollectible. Additional cash contributions during the year totaled $25,000.
3. Donations of food totaled $100,000. The inventory of food on hand decreased by $1,500 during the year.
4. The following expenses were incurred: Salary of director, $15,000; facility rental for the meals program, $2,500; and purchases of food, $45,000.
5. Pledges of $250,000 were received during the year. The pledges were restricted for use in purchasing new delivery vans. All of these pledges are expected to be collected in the next fiscal year.
Required:
Make journal entries for the aforementioned transactions.
LO4
Exercise 4The Rehabilitation Clinic is a private, not-for-profit organization that provides free rehabilitation health services for the uninsured. The following transactions occurred for the Rehabilitation Clinic.
1. Unrestricted cash gifts that were received last year, but designated for use in the current year, totaled $40,000.
2. Unrestricted pledges of $400,000 were received. Two percent of the pledges typically prove uncollectible. Additional cash contributions during the year totaled $200,000.
3. Gifts in kind were received that were sold at a silent auction for $16,000. The fair value of the donated gifts in kind could not be reasonably determined.
4. Expenses were incurred as follows: Salary of doctor, $110,000; facility rental for the clinic program, $60,000; purchases of supplies, $10,000; and utility costs, $12,000.
5. Marketable securities with a fair value of $520,000 were received
with a stipulation that the clinic use the funds to purchase a suitable property for the clinic.
Required:
Make journal entries for the aforementioned transactions.
LO5
Exercise 5Little Town Hospital is a private, not-for-profit hospital. The following information is available about the operations.
1. Gross patient services charges totaled $4,000,000.
2. Included in the above revenues are: charity services, $125,000; contractual adjustments, $350,000; courtesy allowances, $10,000; and estimated uncollectible amounts, $150,000.
3. Premium fees receipts were $125,000.
4. Purchased $40,000 of hospital supplies on account, with payments on that account, $36,000.
5. Received cash donations for a new hospital wing of $1,100,000.
6. Paid contractor $275,000 for billed costs toward the new hospital wing.
Required:
Make journal entries for the aforementioned transactions.
LO5
Exercise 6Remote Reconstructive is a private, not-for-profit hospital. The following information is available about the operations.
1. Gross patient services charges totaled $4,500,000.
2. Included in the above revenues are: charity services, $165,000; contractual adjustments, $400,000; and courtesy allowances, $14,000.
3. Received marketable securities valued at $115,000 for the purchase of new diagnostic equipment.
4. The marketable securities were sold for $124,000 and diagnostic equipment was purchased at a cost of $138,000.
5. Revenue from the hospital gift shop was $31,000 and from the cafeteria revenues were $160,000.
6. Incurred and paid nursing service costs of $1,000,000 and general service costs of $500,000.
Required:
Make journal entries for the aforementioned transactions.
LO6Exercise 7Prepare journal entries to record the following transactions for a private, not-for-profit university.
1. Tuition and fees assessed total $10,000,000, 85% of which was collected by year-end; tuition scholarships were granted for $800,000, and $400,000 was expected to be uncollectible.
2. Revenues collected from sales and services by the university bookstore were $1,000,000.
3. Salaries and wages were $5,000,000, $200,000 of which was for employees of the university bookstore.
4. Financial aid funds of $500,000 were received from the Pell Grant program; the funds were then disbursed to the appropriate students.
5. Contributions of $250,000 were received; $50,000 was restricted for the athletic department and $200,000 was unrestricted. An additional $25,000 was pledged to the athletic department by the alumni.
6. Athletic equipment was purchased with $35,000 previously set aside for that purpose.
LO6Exercise 8A private, not-for-profit university received donations of $2,000,000 in 2005 that were restricted to certain research projects on zero gravity material science. The university incurred $1,150,000 of expenses on this research in 2005.
In 2005, an alumnus contributed a $1,000,000 endowment for genetic research with all endowment income restricted for that purpose. Income totaled $50,000 for the year and zero gravity research expenses were $44,000.
Required:
Prepare the appropriate journal entries for the university.
LO6Exercise 9The following information is available about the operations for a private, not-for-profit university.
1. The university sold $9,000,000 of 8% bonds to finance the construction of a new building for the business school. The bonds were sold on January 1 and pay interest on December 31 of each year. The bonds were sold at par and mature in 20 years.2. The university received $2,500,000 in alumni donations for the new business school building.3. The building was constructed at a total cost of $10,500,000 and the contractor was paid in full.4. Interest was paid on the bonds.5. Depreciation on the new building was $525,000. Required:
Prepare the appropriate journal entries for the university.
LO6Exercise 10A private, not-for-profit university received donations of $500,000 in 2005 that were restricted to capital improvements of the football stadium. The university spent $650,000 on capital improvements for the stadium in 2005 and recorded depreciation of $51,000.
In 2005, an alumnus contributed a $2,500,000 endowment for football scholarships with all endowment income restricted for that purpose. Income totaled $201,000 for the year and scholarship awards were $299,000.
Required:
Prepare the appropriate journal entries for the university.
SOLUTIONSMultiple Choice Questions
1.b
2.d
3.b
4.b
5.b
6.b
7.d
8.c
9.b
10.d
11.d
12.d
13.c
14.d
15.b
16.b
17.c
18.b
19.c
20.b
Exercise 1Astronomy Foundation
Statement of Activities
For the Year Ended December 31, 2005Changes in Unrestricted Net Assets
Revenues and Gains
Contributions
$5,000,000
Membership dues
600,000
Investment Income
96,000
Total revenues and gains
5,696,000
Net assets released from restrictions 1,300,000 Increase in unrestricted net assets 6,996,000Expenses:
Program Services:
Research
3,200,000
Supporting Services:
Management and General
300,000
Fund Raising
700,000
Total Supporting Services
1,000,000
Total Expenses
4,200,000
Net increase in unrestricted net assets
2,796,000Changes in Temporarily Restricted Net Assets
Contributions
600,000
Investment Income
50,000
Gain on Sale of investments
9,000
Net assets released from restriction
(1,300,000)
Decrease in temporarily restricted net assets ( 641,000)Changes in Permanently Restricted Net Assets
Contributions
60,000
Increase in permanently restricted net assets
60,000Increase in net assets
2,215,000
Net assets, January 1, 2005
6,550,000Net assets, December 31,2005
$8,765,000Exercise 2Archive Foundation
Statement of Activities
For the Year Ended June 30, 2006Changes in Unrestricted Net Assets
Revenues and Gains
Contributions
$3,000,000
Membership dues
700,000
Investment Income
76,000
Total revenues and gains
3,776,000
Net assets released from restrictions 800,000 Increase in unrestricted net assets 4,576,000Expenses:
Program Services:
Research
2,200,000
Supporting Services:
Management and General
500,000
Fund Raising
400,000
Total Supporting Services
900,000
Total Expenses
3,100,000
Net increase in unrestricted net assets 1,476,000Changes in Temporarily Restricted Net Assets
Contributions
600,000
Investment Income
40,000
Gain on Sale of investments
19,000
Net assets released from restriction
(800,000)
Decrease in temporarily restricted net assets (141,000)
Changes in Permanently Restricted Net Assets
Contributions
70,000
Increase in permanently restricted net assets 70,000Increase in net assets
1,405,000
Net assets, July 1, 2005
2,610,000Net assets, June 30,2006
$4,015,000Exercise 31. Temporarily restricted net assets -
reclassifications out
20,000
Unrestricted net assets -
reclassifications in
20,000
2. Pledges receivable
40,000
Cash
25,000
Allowance for uncollectible pledges
2,000
Unrestricted support - contributions
63,000
3. Expenses - meals program - supplies
101,500
Inventory of supplies
1,500
Unrestricted contributions -
donated supplies
100,000
4. Expenses - management and general
15,000
Expenses - meals program - supplies
45,000
Expenses - meals program - rental
2,500
Cash
62,500
5. Pledges receivable
250,000
Temporarily restricted support -
contributions
250,000
Exercise 41. Temporarily restricted net assets -
reclassifications out
40,000
Unrestricted net assets -
reclassifications in
40,000
2. Pledges receivable
400,000
Cash
200,000
Allowance for uncollectible pledges
8,000
Unrestricted support - contributions
584,000
3. Cash
16,000
Unrestricted revenues - sales
16,000
4. Expenses - management and general
110,000
Expenses - supplies
10,000
Expenses - rental
60,000
Expenses - utilities
12,000
Cash
192,000
5. Marketable securities
520,000
Temporarily restricted support -
contributions
520,000
Exercise 5
Accounts receivable
4,000,000
Patient service revenues-unrestricted
4,000,000
2.
Patient service revenues - unrestricted
125,000
Contractual adjustments
350,000
Courtesy discounts
10,000
Expenses - provision for bad debts
150,000
Accounts receivable
485,000
Allowance for uncollectibles
150,000
3.
Cash
125,000
Premium revenue - unrestricted
125,000
4.
Supplies inventory
40,000
Accounts payable
40,000
Accounts payable
36,000
Cash
36,000
5.
Cash
1,100,000
Temporarily restricted support
1,100,000
6. Construction in progress
275,000
Cash
275,000
Temporarily restricted net assets -
reclassifications out
275,000
Unrestricted net assets -
reclassifications in
275,000
Exercise 61.
Accounts receivable
4,500,000
Patient service revenues-unrestricted
4,500,000
2.
Patient service revenues - unrestricted
165,000
Contractual adjustments
400,000
Courtesy discounts
14,000
Accounts receivable
579,000
3. Marketable securities
115,000
Temporarily restricted support
115,000
4. Cash
124,000
Marketable securities
115,000
Temporarily restricted support -
investment income
9,000
Equipment
138,000
Cash
138,000
Temporarily restricted net assets -
reclassifications out
124,000
Unrestricted net assets -
reclassifications in
124,000
5. Cash
191,000
Other operating revenue -
unrestricted
191,000
6. Nursing service expense
1,000,000
General services expense
500,000
Cash
1,500,000
Exercise 7
Accounts receivable
10,000,000
Revenues - educational and general
10,000,000
Tuition reduction - scholarships
800,000
Expenses - bad debts
400,000
Accounts receivable
800,000
Allowance for uncollectible accounts
400,000
Cash
8,500,000
Accounts receivable
8,500,000
Cash
1,000,000
Revenues - auxiliary enterprises
1,000,000
Expenses - educational and general
4,800,000
Expenses - auxiliary enterprises 200,000
Cash
5,000,000
4.
Cash
500,000
Grant funds held for students
500,000
Grant funds held for students
500,000
Cash
500,000
5.
Cash
250,000
Contributions receivable
25,000
Unrestricted revenues - contributions
200,000
Temporarily restricted revenues -
contributions
75,000
6.
Equipment
35,000
Cash
35,000
Temporarily restricted net assets -
reclassifications out....35,000
Unrestricted net assets -
reclassifications in
35,000
Exercise 8Cash
2,000,000
Temporarily restricted revenues-research 2,000,000
Expenses - research
1,150,000
Cash/Payables.
1,150,000
Temporarily restricted net assets -
reclassifications out
1,150,000
Unrestricted net assets -
reclassifications in
1,150,000
Cash
1,000,000
Permanently restricted revenues -
endowment contribution
1,000,000
Cash
50,000
Temporarily restricted revenues -
endowment income
50,000
Expenses-research
44,000
Cash/Payables.
44,000
Temporarily restricted net assets -
reclassifications out
44,000
Unrestricted net assets -
reclassifications in
44,000
Exercise 91. Cash
9,000,000
Bonds payable
9,000,000
2. Cash
2,500,000
Temporarily restricted revenues -
Contributions
2,500,000
3. Building
10,500,000
Cash
10,500,000
Temporarily restricted net assets -
reclassifications out
10,500,000
Unrestricted net assets -
reclassifications in
10,500,000
4. Expenses - interest
720,000
Cash
720,000
5. Expenses depreciation
525,000
Accumulated depreciation
525,000
Exercise 10Cash
500,000
Temporarily restricted revenues-stadium 500,000
Buildings - stadium
650,000
Cash.
650,000
Temporarily restricted net assets -
reclassifications out
650,000
Unrestricted net assets -
reclassifications in
650,000
Expenses - depreciation
51,000
Accumulated depreciation
51,000
Cash
2,500,000
Permanently restricted revenues -
endowment contribution
2,500,000
Cash
201,000
Temporarily restricted revenues -
endowment income
201,000
Expenses - student aid
299,000
Cash.
299,000
Temporarily restricted net assets -
reclassifications out
299,000
Unrestricted net assets -
reclassifications in
299,0002009 Pearson Education, Inc. publishing as Prentice Hall
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