To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 21 Test Bank ACCOUNTING FOR NOT-FOR-PROFIT ORGANIZATIONS Multiple Choice Questions LO1 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 not expect returns LO2 A governmental not-for-profit entity has which of the following characteristics? a b c d LO2 It must have It must only A government A government a positive fund balance operate on US soil can void tax regulations for the entity can unilaterally dissolve the entity A non-governmental not-for-profit unit is subject to I GASB II FASB a I only b II only c A combination of I and II depending on the entity’s purpose d Neither I or II LO3 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 b c d net, gross gross, net gross, gross net, net ©2009 Pearson Education, Inc publishing as Prentice Hall 21-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO3 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 LO3 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, nonreciprocal transfer, is called a(n) a b c d LO3 Unconditional promises to give that include promises of payments due in future periods (next year or later) are reported as a b c d LO3 unrestricted revenues a memorandum, until the year of the promised payment deferred revenues until payment is received restricted revenues 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 b c d LO4 unconditional promise to give contribution conditional promise to give residual equity transfer a special purpose contribution an exchange transaction an agency transaction a conditional promise to give Voluntary health and welfare organizations must report expenses classified by a b c d Restriction function and natural classification restriction and natural classification restriction, function and natural classification ©2009 Pearson Education, Inc publishing as Prentice Hall 21-2 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO4 10 Which one of the following statements is not required for voluntary health and welfare organizations? a b c d LO4 11 statement statement statement statement of of of of financial position activities functional expenses changes in net assets Voluntary health and welfare organizations classify fundraising costs as a b c d LO4 12 A A A A costs of services sold program services functional expenses supporting services 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 LO4 13 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 b c d LO5 14 As As As As a restricted revenue an unrestricted contribution both an unrestricted revenue and as an expense a pro bono activity Hospital premium fees are a b c d charity care services only earned to the extent of the services provided refundable to the subscriber if services are unused revenues earned even if the standard charge is above or below the fee ©2009 Pearson Education, Inc publishing as Prentice Hall 21-3 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO5 15 Hospital courtesy allowances are a b c d LO5 16 Activities treated as deductions from gross revenues (contrarevenue accounts) in not-for-profit hospitals and other health care organizations include(s) a b c d LO6 17 tuition waivers and student aid tuition waivers and estimated bad debts estimated bad debts and student aid tuition waivers, student aid and estimated bad debts Not-for-profit college and university student unions, dormitories, and residence halls are considered a b c d LO6 19 charity care services courtesy allowances estimated bad debts all of the above Which of the following is (are) treated as expense(s) by notfor-profit colleges and universities? a b c d LO6 18 charity care services revenue deductions Expenses revenues earned even if the standard charge is above or below the allowance educational and general services auxiliary enterprises independent operations restricted enterprises An alumnus made a donation of adjoining land to a university The university would record the gift as a b c d an endowment asset a restricted revenue an unrestricted revenue an exchange transaction ©2009 Pearson Education, Inc publishing as Prentice Hall 21-4 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO6 20 In a not-for-profit university, the federal grant funds given directly to students are an example of a b c d a bequest an agency transaction unrestricted revenue a restricted contribution ©2009 Pearson Education, Inc publishing as Prentice Hall 21-5 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO3 Exercise The 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 Unrestricted Support - Membership Dues Unrestricted Revenues - Investment Income Temporarily restricted gain on sale of investments Expenses - Research Expenses - Fund Raising Expenses - Management and General Restricted Support - Contributions Restricted Revenues - Investment Income Permanently Restricted Support - Contributions Unrestricted Net Assets, January 1, 2005 Temporarily Restricted Net Assets, January 1, 2005 Permanently Restricted Net Assets, January 1, 2005 $5,000,000 600,000 96,000 9,000 3,200,000 700,000 300,000 600,000 50,000 60,000 500,000 6,000,000 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 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-6 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO3 Exercise The 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 Unrestricted Support - Membership Dues Unrestricted Revenues - Investment Income Temporarily restricted gain on sale of investments Expenses - Research Expenses - Fund Raising Expenses - Management and General Restricted Support - Contributions Restricted Revenues - Investment Income Permanently Restricted Support - Contributions Unrestricted Net Assets, July 1, 2005 Temporarily Restricted Net Assets, July 1, 2005 Permanently Restricted Net Assets, July 1, 2005 $3,000,000 700,000 76,000 19,000 2,200,000 400,000 500,000 600,000 40,000 70,000 450,000 2,100,000 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 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-7 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO4 Exercise Food 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 Unrestricted cash gifts that were received last year, but designated for use in the current year, totaled $20,000 Unrestricted pledges of $40,000 were received Five percent of the pledges typically prove uncollectible Additional cash contributions during the year totaled $25,000 Donations of food totaled $100,000 The inventory of food on hand decreased by $1,500 during the year The following expenses were incurred: Salary of director, $15,000; facility rental for the meals program, $2,500; and purchases of food, $45,000 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 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-8 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO4 Exercise The 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 Unrestricted cash gifts that were received last year, but designated for use in the current year, totaled $40,000 Unrestricted pledges of $400,000 were received Two percent of the pledges typically prove uncollectible Additional cash contributions during the year totaled $200,000 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 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 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 Little Town Hospital is a private, not-for-profit hospital following information is available about the operations The Gross patient services charges totaled $4,000,000 Included in the above revenues are: charity services, $125,000; contractual adjustments, $350,000; courtesy allowances, $10,000; and estimated uncollectible amounts, $150,000 Premium fees receipts were $125,000 Purchased $40,000 of hospital supplies on account, with payments on that account, $36,000 Received cash donations for a new hospital wing of $1,100,000 Paid contractor $275,000 for billed costs toward the new hospital wing Required: Make journal entries for the aforementioned transactions ©2009 Pearson Education, Inc publishing as Prentice Hall 21-9 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO5 Exercise Remote Reconstructive is a private, not-for-profit hospital following information is available about the operations The Gross patient services charges totaled $4,500,000 Included in the above revenues are: charity services, $165,000; contractual adjustments, $400,000; and courtesy allowances, $14,000 Received marketable securities valued at $115,000 for the purchase of new diagnostic equipment The marketable securities were sold for $124,000 and diagnostic equipment was purchased at a cost of $138,000 Revenue from the hospital gift shop was $31,000 and from the cafeteria revenues were $160,000 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 LO6 Exercise Prepare journal entries to record the following transactions for a private, not-for-profit university 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 Revenues collected from sales and services by the university bookstore were $1,000,000 Salaries and wages were $5,000,000, $200,000 of which was for employees of the university bookstore Financial aid funds of $500,000 were received from the Pell Grant program; the funds were then disbursed to the appropriate students 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 Athletic equipment was purchased with $35,000 previously set aside for that purpose ©2009 Pearson Education, Inc publishing as Prentice Hall 21-10 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO6 Exercise A 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 LO6 Exercise The following information is available about the operations for a private, not-for-profit university 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 and pay interest on December 31 of each year The bonds were sold at par and mature in 20 years The university received $2,500,000 in alumni donations for the new business school building The building was constructed at a total cost of $10,500,000 and the contractor was paid in full Interest was paid on the bonds Depreciation on the new building was $525,000 Required: Prepare the appropriate journal entries for the university ©2009 Pearson Education, Inc publishing as Prentice Hall 21-11 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO6 Exercise 10 A 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 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-12 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com SOLUTIONS Multiple Choice Questions b d b b b b d c b 10 d 11 d 12 d 13 c 14 d 15 b 16 b 17 c 18 b 19 c 20 b ©2009 Pearson Education, Inc publishing as Prentice Hall 21-13 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Astronomy Foundation Statement of Activities For the Year Ended December 31, 2005 Changes in Unrestricted Net Assets Revenues and Gains Contributions Membership dues Investment Income Total revenues and gains Net assets released from restrictions Increase in unrestricted net assets Expenses: Program Services: Research Supporting Services: Management and General Fund Raising Total Supporting Services Total Expenses Net increase in unrestricted net assets Changes in Temporarily Restricted Net Assets Contributions Investment Income Gain on Sale of investments Net assets released from restriction Decrease in temporarily restricted net assets $5,000,000 600,000 96,000 5,696,000 1,300,000 6,996,000 3,200,000 300,000 700,000 1,000,000 4,200,000 2,796,000 ( Changes in Permanently Restricted Net Assets Contributions Increase in permanently restricted net assets Increase in net assets Net assets, January 1, 2005 Net assets, December 31,2005 600,000 50,000 9,000 (1,300,000) 641,000) 60,000 60,000 2,215,000 6,550,000 $8,765,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-14 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Archive Foundation Statement of Activities For the Year Ended June 30, 2006 Changes in Unrestricted Net Assets Revenues and Gains Contributions Membership dues Investment Income Total revenues and gains Net assets released from restrictions Increase in unrestricted net assets Expenses: Program Services: Research Supporting Services: Management and General Fund Raising Total Supporting Services Total Expenses Net increase in unrestricted net assets Changes in Temporarily Restricted Net Assets Contributions Investment Income Gain on Sale of investments Net assets released from restriction Decrease in temporarily restricted net assets Changes in Permanently Restricted Net Assets Contributions Increase in permanently restricted net assets Increase in net assets Net assets, July 1, 2005 Net assets, June 30,2006 $3,000,000 700,000 76,000 3,776,000 800,000 4,576,000 2,200,000 500,000 400,000 900,000 3,100,000 1,476,000 600,000 40,000 19,000 (800,000) (141,000) 70,000 70,000 1,405,000 2,610,000 $4,015,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-15 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in 20,000 20,000 Pledges receivable Cash Allowance for uncollectible pledges Unrestricted support - contributions 40,000 25,000 Expenses - meals program - supplies Inventory of supplies Unrestricted contributions donated supplies 101,500 Expenses - management and general Expenses - meals program - supplies Expenses - meals program - rental Cash 15,000 45,000 2,500 Pledges receivable Temporarily restricted support contributions 250,000 2,000 63,000 1,500 100,000 62,500 250,000 Exercise Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in 40,000 40,000 Pledges receivable Cash Allowance for uncollectible pledges Unrestricted support - contributions 400,000 200,000 Cash Unrestricted revenues - sales 16,000 Expenses - management and general Expenses - supplies Expenses - rental Expenses - utilities Cash 110,000 10,000 60,000 12,000 Marketable securities Temporarily restricted support contributions 520,000 8,000 584,000 16,000 192,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-16 520,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Accounts receivable Patient service revenues-unrestricted 4,000,000 4,000,000 Patient service revenues - unrestricted Contractual adjustments Courtesy discounts Expenses - provision for bad debts Accounts receivable Allowance for uncollectibles 125,000 350,000 10,000 150,000 Cash Premium revenue - unrestricted 125,000 Supplies inventory Accounts payable 40,000 Accounts payable Cash 36,000 485,000 150,000 125,000 40,000 36,000 Cash Temporarily restricted support Construction in progress Cash Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in 1,100,000 1,100,000 275,000 275,000 275,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-17 275,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Accounts receivable Patient service revenues-unrestricted 4,500,000 4,500,000 Patient service revenues - unrestricted Contractual adjustments Courtesy discounts Accounts receivable 165,000 400,000 14,000 Marketable securities Temporarily restricted support 115,000 Cash Marketable securities Temporarily restricted support investment income 124,000 Equipment Cash 138,000 Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in 579,000 115,000 115,000 9,000 138,000 124,000 124,000 Cash Other operating revenue unrestricted 191,000 Nursing service expense General services expense Cash 1,000,000 500,000 1,500,000 191,000 Exercise Accounts receivable Revenues - educational and general Tuition reduction - scholarships Expenses - bad debts Accounts receivable Allowance for uncollectible accounts 10,000,000 10,000,000 800,000 400,000 Cash Accounts receivable ©2009 Pearson Education, Inc publishing as Prentice Hall 21-18 800,000 400,000 8,500,000 8,500,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Cash Revenues - auxiliary enterprises 1,000,000 1,000,000 Expenses - educational and general Expenses - auxiliary enterprises Cash 4,800,000 200,000 5,000,000 Cash Grant funds held for students 500,000 Grant funds held for students Cash 500,000 Cash Contributions receivable Unrestricted revenues - contributions Temporarily restricted revenues contributions 250,000 25,000 Equipment Cash 35,000 500,000 500,000 200,000 75,000 Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in 35,000 35,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-19 35,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Cash Temporarily restricted revenues-research 2,000,000 2,000,000 Expenses - research Cash/Payables 1,150,000 Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in Cash Permanently restricted revenues endowment contribution 1,150,000 1,150,000 1,150,000 1,000,000 1,000,000 Cash Temporarily restricted revenues endowment income 50,000 Expenses-research Cash/Payables 44,000 Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in 50,000 44,000 44,000 44,000 Exercise Cash Bonds payable 9,000,000 9,000,000 Cash Temporarily restricted revenues Contributions 2,500,000 Building Cash Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in 2,500,000 10,500,000 10,500,000 10,500,000 10,500,000 Expenses - interest Cash 720,000 Expenses – depreciation Accumulated depreciation 525,000 720,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-20 525,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 10 Cash Temporarily restricted revenues-stadium 500,000 Buildings - stadium Cash 650,000 Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in Expenses - depreciation Accumulated depreciation Cash Permanently restricted revenues endowment contribution 500,000 650,000 650,000 650,000 51,000 51,000 2,500,000 2,500,000 Cash Temporarily restricted revenues endowment income 201,000 Expenses - student aid Cash 299,000 Temporarily restricted net assets reclassifications out Unrestricted net assets reclassifications in 201,000 299,000 299,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 21-21 299,000 ... 641,000) 60,000 60,000 2 ,215 ,000 6,550,000 $8,765,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 21- 14 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com... below the fee ©2009 Pearson Education, Inc publishing as Prentice Hall 21- 3 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO5 15 Hospital courtesy... transaction ©2009 Pearson Education, Inc publishing as Prentice Hall 21- 4 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO6 20 In a not-for-profit