You are on page 1of 82

Chapter 19 - Not-For-Profit Entities

Chapter 19 Not-For-Profit Entities
Multiple Choice Questions

1. Which rule-making body is currently setting standards of financial reporting for private notfor-profit universities and for public (governmental) universities?

A. Option A B. Option B C. Option C D. Option D

2. Net assets restricted as to time or purpose should be classified as: I. temporarily restricted. II. permanently restricted. A. I only B. II only C. Both I and II D. Neither I nor II

19-1

Chapter 19 - Not-For-Profit Entities

3. A not-for-profit organization received a donation temporarily restricted as to use. The donated amount was later spent in accordance with the restriction. In which category(ies) of net assets should the related revenues and expenses be recognized?

A. Option A B. Option B C. Option C D. Option D

4. According to FASB 93, "Recognition of Depreciation by Not-For-Profit (NFP) Entities," NFP entities should recognize depreciation: I. on all long-lived tangible assets. II. on all long-lived intangible assets. A. I only B. II only C. Both I and II D. Neither I nor II

5. The term "restricted" as used in university accounting refers to a constraint on the use of funds which has been: I. internally imposed. II. externally imposed. A. I only B. II only C. Either I or II D. Neither I nor II

19-2

Chapter 19 - Not-For-Profit Entities

6. According to Statement of Financial Accounting Standards 117, the statement of financial position of a private university should report the excess of the university's assets over its liabilities as: A. fund balance. B. unrestricted and restricted fund balance. C. retained earnings. D. unrestricted, temporarily restricted, and permanently restricted net assets.

7. Which of the following is an example of volunteer services received by a not-for-profit entity that should be recognized as revenue? I. Services requiring specialized skills, provided by individuals with those skills, that otherwise would have to be purchased. II. Services of lay faculty at a private university operated by a religious order. III. Services that create or enhance non-financial assets, regardless of whether or not they require specialized skills. A. I only B. I and III only C. II and III only D. I, II, and III

8. In a university, class cancellation refunds of tuition and fees should be recorded as: I. a reduction of revenue from tuition and fees. II. a reduction of accounts receivable. A. I only B. II only C. Either I or II D. Neither I nor II

19-3

Chapter 19 - Not-For-Profit Entities

9. Which of the following recognition and measurement bases best summarizes the usual treatment of current contributions to private not-for-profit entities in accordance with FASB 116?

A. Option A B. Option B C. Option C D. Option D

10. According to FASB 124, not-for-profit entities should report investments in the financial statements at: I. fair market value. II. lower of cost or market. A. I only B. II only C. Either I or II D. Neither I nor II

11. Investment income for not-for-profit entities may include: I. interest from debt investments. II. dividends from equity investments. III. changes in the fair values of both debt and equity investments. A. I only B. I and II only C. I and III only D. I, II, and III

19-4

Chapter 19 - Not-For-Profit Entities

12. A private university received $280,000 from student tuition and fees for the year 2009 summer session. The session began on June 20, 2009, and ended on July 30, 2009. The university's fiscal year end is June 30. According to the AICPA College and University Audit Guide, how should the university report the $280,000 of receipts in its financial statements for the year ended June 30, 2009? A. Current revenue of $280,000. B. Current revenue of $70,000 and deferred revenue of $210,000. C. Deferred revenue of $280,000. D. Restricted current revenue of $280,000.

13. Assume that a private university collects tuition and fees at the beginning of summer school, in which two weeks are offered in the first fiscal year and the remaining six weeks are offered in the second fiscal year. According to the approach recommended by the National Association of College and University Business Officers (NACUBO), the university would: A. record the collections as a debit to Cash and a credit to Deferred Revenue for the entire amount of the collections. B. record the collections as a debit to Cash and a credit to Restricted current revenue for the entire amount of the collections. C. account for the entire tuition and fees as revenue in the first fiscal period. D. recognize revenue in the first fiscal period for two-eighths of the tuition and fees and record six-eighths of the collections as a deferred revenue.

14. A private university offers graduate assistantships to qualified students each year. In exchange for the waiver of tuition, graduate assistants are required to assist faculty members with research and other activities. Assume a graduate assistant received a $4,000 tuition waiver for the current academic year. Based on these facts, the university should record A. tuition revenues of $4,000 and expenditures of $4,000. B. tuition revenues of $0 and expenditures of $0. C. tuition revenues of $4,000 and expenditures of $0. D. tuition revenues of $4,000 and a reduction of tuition revenues of $4,000.

19-5

Chapter 19 - Not-For-Profit Entities

15. For the year ended June 30, 2009, a university assessed its students a total of $4,000,000 for tuition and fees. Included in this amount was $300,000 of tuition remissions awarded to graduate teaching assistants, and $150,000 of scholarships awarded to undergraduate students. Tuition and fees totaling $3,550,000 were collected during the year ended June 30, 2009. What amount should be reported in the unrestricted fund as net revenue from tuition and fees for the year ended June 30, 2009? A. $4,000,000 B. $3,550,000 C. $3,700,000 D. $3,850,000

16. A private not-for-profit university generally must depreciate all tangible fixed assets, except: I. works of art and other historical treasures. II. administration buildings. A. I only B. II only C. Both I and II D. Neither I nor II

17. A private college received an offer from a CPA who is an alumnus to teach a one-semester advanced accounting course at no cost. FASB 116 prescribes that this contribution of service: A. need only be disclosed in the footnotes to the financial statements. B. be recorded as an asset with an equivalent amount recorded in the unrestricted fund balance. C. be recorded as a revenue with an equivalent amount recorded as an expenditure. D. need not be recorded if the service is for a period less than one academic year.

18. In accordance with FASB 117, contributions from donors which are to be permanently invested should be disclosed on the statement of activities of a private university as an increase in: A. Permanently restricted net assets. B. Permanently restricted fund balance. C. Endowment fund balance. D. Deferred revenues.

19-6

Chapter 19 - Not-For-Profit Entities

19. For the year ended June 30, 2009, a private college received contributions from alumni which were restricted for faculty research stipends to be awarded during the next fiscal year. For the year ended June 30, 2009, these contributions should be disclosed on the statement of activities of the private college as an increase in: A. the fund balance of the restricted current fund. B. temporarily restricted net assets. C. deferred revenues. D. temporarily restricted fund balance.

20. A private, not-for-profit university should prepare which of the following financial statements?

A. I, II, and III. B. II, III, and IV. C. I, II, and IV. D. II, III, and V.

21. Unrestricted gifts and endowment income of a private university are reported as A. increases in the unrestricted current fund balance on the statement of changes in fund balances. B. unrestricted revenues on the statement of current funds revenues, expenditures, and other changes. C. unrestricted revenues on the statement of activities. D. increases in the unrestricted current fund balance on the statement of activities.

19-7

Chapter 19 - Not-For-Profit Entities

22. One of the major objectives of FASB 117 is to A. emphasize the different fund structures that currently exist for all private, nonprofit organizations. B. change the reporting for governmental organizations so that their reporting is comparable to that of private, nonprofit organizations. C. report combined financial statements, instead of individual fund financial statements, for all private, nonprofit organizations. D. bring about greater uniformity in the financial statements of all private, not-for-profit organizations.

23. A not-for-profit private college in Virginia created a separate foundation responsible for obtaining financial support from alumni and others. Foundation assets are used for the benefit of the college. Donations made to the foundation and subsequently transferred to the college should be: A. recognized as revenues by the foundation when received, and as revenues of the college when transferred. B. recognized as revenues by the foundation when received and as expenses by the foundation when transferred. C. recognized both as a change in its interest in the foundation and as revenues by the college when the donation is received by the foundation. D. recognized as an increase in net assets of the foundation and as revenues of the college when the donation is received by the college.

24. FASB 93: A. guides depreciation. B. guides accounting for contributions. C. establishes financial display requirements. D. establishes the accounting for investments.

19-8

Chapter 19 - Not-For-Profit Entities

25. On the statement of operations prepared for a private, not-for-profit hospital, patient service revenue earned during the year is reported net of amounts for which of the following items? I. Contractual adjustments II. Bad debts expense A. I only B. II only C. I and II D. Neither I nor II

26. A private, not-for-profit hospital received a cash contribution of $100,000 from Samantha Hicks on November 14, 2008. Ms. Hicks specified the money be used to acquire equipment. On December 31, 2008, the hospital had not expended any of Ms. Hicks' contribution. On the statement of changes in net assets for the year ended December 31, 2008, the hospital should report the contribution as a $100,000 increase in A. temporarily restricted net assets. B. unrestricted net assets. C. fund balance. D. deferred revenue.

27. Unrestricted current funds of a private university designated by the governing board for a specific future purpose should be reported as part of: A. unrestricted net assets. B. temporarily restricted net assets. C. board-restricted net assets. D. term endowments.

28. A private, not-for-profit geographic society received cash contributions which were restricted by the donors for the acquisition of fixed assets. In which section of the statement of cash flows would these cash contributions be reported? A. Financing activities B. Investing activities C. Operating activities D. Capital and related financing activities

19-9

Chapter 19 - Not-For-Profit Entities

29. On the statement of activities for a private, not-for-profit literary society, expenses decrease which of the following classes of net assets? I. temporarily restricted net assets II. unrestricted net assets A. I only B. II only C. Either I or II D. Neither I nor II

30. Bridger Hospital, which is operated by a religious organization, provides charity care for the indigent living in the region served by the hospital. How should Bridger report the amount of its charity care on its financial statements? A. In the notes to the financial statements only. B. As unrestricted revenues on the statement of operations. C. As net patient service revenue and as an expense, equal to the net patient service revenue, on the statement of operations. D. As temporarily restricted revenue on the statement of operations.

31. The governing board of Samaritan Hospital, which is operated by a religious organization, designated $500,000 of cash for future expansion of the hospital. On the hospital's balance sheet, the cash designated for future plant expansion would be disclosed in which of the following classes of net assets? A. Temporarily restricted net assets B. Unrestricted net assets C. Plant replacement and expansion. D. Board designated net assets

32. Good Care Hospital, which is operated by a religious organization, received contributions of $1,000,000 from donors who stipulated that the cash be used to construct an addition to the hospital. As of the balance sheet date, none of the contributions had been expended for construction. On the hospital's balance sheet, the cash contributions would be disclosed in which of the following classes of net assets? A. Temporarily restricted net assets B. Donor restricted net assets C. Assets whose use is limited D. Permanently restricted net assets

19-10

Chapter 19 - Not-For-Profit Entities

33. A private, not-for-profit hospital received contributions of $50,000 from donors on June 15, 2009. The donors stipulated that their contributions be used to purchase equipment for the hospital. As of June 30, 2009, the end of the hospital's fiscal year, $12,000 of the contributions had been spent on equipment acquisitions. In the hospital's general fund, what account would be credited to recognize the release of the restrictions on the temporarily restricted contributions used to acquire equipment? A. Revenue released from equipment acquisition restriction B. Other financing sources C. Net assets released from equipment acquisition restriction D. Unrestricted net assets released from equipment acquisition restriction

34. A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. The hospital's revenues from nursing programs and gift shops should be accounted for in the: A. specific purpose fund. B. restricted current fund. C. general fund. D. time-restricted fund.

35. A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. Contributions received from donors for research to be conducted by the hospital should be accounted for in the: A. specific purpose fund. B. time-restricted fund. C. general fund. D. restricted current fund.

36. On June 30, 2009, a voluntary health and welfare organization received pledges from donors amounting to $50,000. The donors did not place any time or use restrictions on the amount pledged. It was estimated that 10 percent of the pledges would not be collected. How should the voluntary health and welfare organization report these pledges on its financial statements prepared at the end of its fiscal year, June 30, 2009? A. As fund balance for $45,000. B. As contribution revenue-unrestricted for $45,000. C. As contribution revenue-unrestricted for $50,000. D. As fund balance-unrestricted for $50,000.

19-11

Chapter 19 - Not-For-Profit Entities

37. The restricted funds of a not-for-profit hospital are often termed "______" funds because they must hold the restricted assets and transfer expendable resources to the general fund for expenditure. A. specific B. controlled C. limited D. holding

38. All restricted funds of private, not-for-profit hospitals account for resources: A. whose use is restricted by the donor. B. received and expended in the hospital's primary health care mission. C. that are only temporarily restricted. D. received or pledged by donors for use in future periods.

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization. The donor did not place any use restrictions on the amount pledged. The stream of the payments is discounted at 6 percent. The first payment of $5,000 is received at the end of the first year. The present value factor for a five-payment annuity due on June 30, 2009, at 6 percent is 4.2124.

39. Based on the preceding information, the journal entry to recognize present value at the time the pledge is received includes: A. a credit to Pledges Receivable—Temporarily Restricted for $25,000. B. a debit to Contributions—Temporarily Restricted for $21,062. C. a debit to Pledges Receivable—Temporarily Restricted for $21,062. D. a credit to Contributions—Temporarily Restricted for $25,000.

40. Based on the preceding information, at the end of the first year, the pledge increased unrestricted net assets by: A. $25,000. B. $21,062. C. $4,212. D. $5,000.

19-12

Chapter 19 - Not-For-Profit Entities

41. Based on the preceding information, the increase in present value of the contributions receivable recognized at the end of the first year equals: A. $5,000. B. $1,264. C. $4212. D. $787.

42. A private, not-for-profit hospital received a donation of medicine from the XYZ Pharmaceutical Company on March 15, 2009. The cost of the medicine to the company was $66,000, and its market value was $110,000. Twenty percent of the medicine was used by the hospital during the year ended June 30, 2009. On the hospital's statement of operations for the year ended June 30, 2009, the contribution of medicine would increase operating revenues by A. $66,000. B. $110,000. C. $52,800. D. $88,000.

43. In accordance with FASB 116, contributions of services are recognized as increases in unrestricted net assets by a private, not for profit entity if which of the following criteria are satisfied? I. The services received create or enhance nonfinancial assets. II. The services require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donations. III. The services will be performed within the current fiscal year. A. I or II. B. I or III. C. II or III. D. I, II, III.

19-13

Chapter 19 - Not-For-Profit Entities

44. The disclosure, "net assets released from restrictions," is reported on which of the following financial statements for a voluntary health and welfare organization? I. The statement of cash flows. II. The statement of activities. A. I only B. II only C. Both I and II. D. Neither I nor II.

45. Good Faith Hospital, operated by a religious organization, billed patients $4,000,000 for services rendered during the year ended June 30, 2009. The hospital realized cash of $3,500,000 from the patient billings because of the following reductions: (1) contractual adjustments of $140,000 granted to private insurance companies and to the federal government; and (2) uncollectible accounts receivable of $360,000. On the statement of operations prepared for the year ended June 30, 2009, Good Faith Hospital should report net patient service revenue of: A. $3,500,000. B. $3,860,000. C. $4,000,000. D. $3,640,000.

46. During the fiscal year ended June 30, 2009, a private, not-for-profit hospital acquired equipment costing $75,000, with cash contributed by donors who restricted their contributions for this purpose. On the hospital's statement of cash flows for the year ended June 30, 2009, the equipment acquisition should be reported in which of the following sections? I. Operating activities II. Financing activities III. Investing activities A. I B. II C. III D. I, II, III

19-14

Chapter 19 - Not-For-Profit Entities

47. During the fiscal year ended June 30, 2009, Global Charities, a voluntary health and welfare organization, received unrestricted cash contributions of $500,000 and temporarily restricted cash contributions of $300,000. All of the temporarily restricted contributions were restricted by the donors for equipment acquisitions. During the year ended June 30, 2009, equipment costing $250,000 was acquired with the restricted contributions. As a result of these two contributions, Global Charities' statement of cash flows, prepared for the year ended June 30, 2009, would report an increase in net cash provided by operating activities of: A. $500,000. B. $800,000. C. $750,000. D. $550,000.

48. A voluntary health and welfare organization received a $300,000 contribution on April 15, 2009, from a donor who stipulated the donation be invested permanently in stocks and bonds. The donor further stipulated earnings from the investments be spent according to the wishes of the governing board of the voluntary health and welfare organization. Earnings from the investments for the year ended June 30, 2009, amounted to $6,000. How would the voluntary health and welfare organization report this information for the year ended June 30, 2009? A. Increase in permanently restricted net assets of $306,000. B. Increase in permanently restricted net assets of $300,000, and in temporarily restricted net assets of $6,000. C. Increase in permanently restricted net assets of $300,000, and in unrestricted net assets of $6,000. D. Increase in permanently restricted net assets of $300,000, and in board-designated net assets of $6,000.

49. Which financial statement is (are) required for a voluntary health and welfare organization which is not required for a private, not-for-profit hospital? I. A statement of operations. II. A statement of functional expenses. A. I only B. II only C. Both I and II D. Neither I nor II

19-15

Chapter 19 - Not-For-Profit Entities

50. A private, not-for-profit hospital expended $35,000 of temporarily restricted assets to acquire equipment. What account should be debited in the hospital's plant replacement and expansion fund as a result of the acquisition of the equipment? A. Net Assets Released—Plant Acquisition. B. Fund balance Released—Plant Acquisition. C. Equipment. D. Contribution Revenue Released—Plant Acquisition.

51. In 2009, a private not-for-profit hospital received a $200,000 cash contribution to its endowment fund. During the year, hospital administration invested $150,000 of the funds. Which of the following statements regarding the effect of these transactions on the preparation of the hospital's statement of cash flow is true? A. The $200,000 contribution will appear in the investing activities section of the cash flow statement as a cash inflow. B. The $200,000 contribution will appear in the financing activities section of the cash flow statement as a cash inflow. C. The $150,000 investment will appear in the investing activities section of the cash flow statement as a cash inflow. D. The $150,000 contribution will appear in the financing activities section of the cash flow statement as a cash inflow.

A private, not-for-profit hospital received a contribution of $40,000 on June 15, 2008. The donor restricted the contribution to funding research activities currently being performed by the hospital. For the year ended December 31, 2008, the hospital spent $30,000 of the contribution on research activities. The hospital expended the remaining $10,000 on research activities in January of 2009.

52. Refer to the above information. On the statement of cash flows prepared for the year ended December 31, 2008, the events described would increase net cash flows provided by A. operating activities by $40,000. B. financing activities by $40,000. C. financing activities by $10,000. D. operating activities by $10,000.

19-16

Chapter 19 - Not-For-Profit Entities

53. Refer to the above information. On the statement of operations prepared for the year ended December 31, 2008, the events described would: A. increase operating income by $30,000. B. have no effect on operating income. C. increase unrestricted net assets by $30,000. D. decrease unrestricted net assets by $30,000.

54. Refer to the above information. On the statement of changes in net assets prepared for the year ended December 31, 2008, the events described would A. increase temporarily restricted net assets by $10,000. B. decrease temporarily restricted net assets by $10,000 C. increase unrestricted net assets by $10,000. D. decrease unrestricted net assets by $10,000.

55. In a private, not-for-profit hospital, which fund would record cash and investments which have been restricted by the governing board for acquisitions of equipment and construction of a new hospital addition? A. The plant replacement and expansion fund. B. The specific purpose fund. C. The endowment fund. D. The general fund.

56. The governing board of a hospital operated by a religious organization designated $3,000,000 of cash to be used for plant expansion. The cash was invested in stocks and bonds which earned $250,000 of dividend and interest income. The income from investments should be reported on the hospital's statement of operations as an increase in: A. temporarily restricted net assets. B. operating income. C. either temporarily restricted net assets or unrestricted net assets, depending upon the nature of the governing board's restrictions. D. fund balance in the general fund.

19-17

Chapter 19 - Not-For-Profit Entities

57. A voluntary health and welfare organization received unrestricted cash donations of $20,000 from donors who attended a dinner held for the benefit of the organization. The costs of the dinner, including room rental, and other expenses, amounted to $7,000. On the statement of activities prepared for the voluntary health and welfare organization, the expenses of the dinner should be: A. reported as management and general expenses. B. netted against the $20,000 of contribution revenue. C. reported as fund raising costs. D. reported as programmatic expenses.

58. On the statement of functional expenses prepared for a voluntary health and welfare organization, depreciation expense is allocated to I. expenses for program services. II. expenses for supporting services. A. I only B. II only C. Both I and II D. Neither I nor II

59. A voluntary health and welfare organization developed and printed informational materials which were intended to both educate the public about how its resources are used to help people in need and to also appeal to the public for much needed support. In this situation, the cost of the informational materials should be A. accounted for as fund-raising expense. B. allocated to expenses for program services. C. allocated between expenses for program services and fund-raising expense. D. accounted for as management and general expense.

60. FASB 117 requires that an "other not-for-profit entity" (ONPO) provide three financial statements. Which of the following is NOT one among them? A. A statement of functional expenses B. A statement of financial position C. A statement of activities D. A statement of cash flows

19-18

Chapter 19 - Not-For-Profit Entities

61. A private, not-for-profit hospital received the following restricted contributions and other receipts during the year ended December 31, 2008:

None of the contributions or other receipts were expended during the ended December 31, 2008. For the year ended December 31, 2008, what amount would be reported on the hospital's statement of changes in net assets as an increase in temporarily restricted net assets? A. $1,500,000 B. $1,200,000 C. $500,000 D. $300,000

62. In accordance with FASB 116, pledges, which are temporarily restricted by donors, are reported as increases in temporarily restricted net assets on the statement of activities of a voluntary health and welfare organization when the A. pledges are received in cash. B. cash received from the pledges is expended in accordance with the donors' wishes. C. pledges are made by the donors. D. cash is received from the pledges is transferred to unrestricted net assets.

63. A voluntary health and welfare organization received $200,000 of pledges from donors on February 15, 2009. The donors did not place either time or use restrictions on the amount pledged. The governing board estimated that 10 percent of the pledges would be uncollectible. During the remainder of fiscal 2009, cash received from pledges amounted to $184,000. For the year ended June 30, 2009, what amount should the voluntary health and welfare organization report as Contributions-Unrestricted? A. $0 B. $200,000 C. $184,000 D. $180,000

19-19

Chapter 19 - Not-For-Profit Entities

64. A voluntary health and welfare organization reports pledges receivable on its statement of financial position at the present value of the future cash collections. How is the increase in the present value of the pledges receivable, which is due to the passage of time, reported on the voluntary health and welfare organization's statement of activities? A. As interest income-temporarily restricted. B. As an increase in pledges receivable-temporarily restricted. C. As an increase in contributions-temporarily restricted. D. As an increase in deferred revenue-temporarily restricted.

Golden Path, a labor union, had the following receipts and expenses for the year ended December 31, 2008:

The union's constitution provides that 12 percent of the per capita dues be designated for the strike insurance fund to be distributed for strike relief at the discretion of the union's executive board.

65. Based on the information provided, in Golden Path's statement of activities for the year ended December 31, 2008, what amount should be reported under the classification of revenue from unrestricted funds? A. $980,000 B. $1,100,000 C. $1,210,000 D. $1,020,000

19-20

Chapter 19 - Not-For-Profit Entities

66. Based on the information provided, in Golden Path's statement of activities for the year ended December 31, 2008, what amount should be reported under the classification of program services? A. $720,000 B. $910,000 C. $440,000 D. $760,000

67. Based on the information provided, in Golden Path's statement of activities for the year ended December 31, 2008, what amount should be reported under the classification of supporting services? A. $150,000 B. $720,000 C. $440,000 D. $290,000

68. Based on the information provided, in Golden Path's statement of activities for the year ended December 31, 2008, what amounts should be reported under the classifications of temporarily and permanently restricted net assets? A. $0 and $110,000 respectively. B. $110,000 and $0 respectively. C. $60,000 and $50,000 respectively. D. $50,000 and $60,000 respectively.

19-21

Chapter 19 - Not-For-Profit Entities

Local Services, a voluntary health and welfare organization had the following classes of net assets on July 1, 2008, the beginning of its fiscal year:

During the year ended June 30, 2009, the following events occurred: (1) It purchased equipment, costing $100,000, with contributions restricted for this purpose. The contributions had been received from donors during June of 2008. (2) It received $130,000 of cash donations which were restricted for research activities. During the year ended June 30, 2009, $90,000 of the contributions were expended on research. (3) It sold investments classified in the permanently restricted class for a loss of $40,000. Dividends and interest income earned on the investments amounted to $70,000. There were no restrictions on how investment income was to be used. (4) It received cash contributions of $200,000 from donors who did not place either time or use restrictions upon their donations. (5) Expenses, excluding depreciation expense, for program services and supporting services incurred during the year ended June 30, 2009, amounted to $260,000. (6) Depreciation expense for the year ended June 30, 2009, was $80,000.

69. Refer to the above information. At June 30, 2009, the amount of permanently restricted net assets reported on the statement of financial position would be: A. $1,070,000. B. $1,030,000. C. $1,000,000. D. $960,000.

70. Refer to the above information. On the statement of activities for the year ended June 30, 2009, temporarily restricted net assets: A. increased $130,000. B. increased $40,000. C. decreased $100,000. D. decreased $60,000.

19-22

Chapter 19 - Not-For-Profit Entities

71. Refer to the above information. On the statement of activities for the year ended June 30, 2009, reclassifications would be reported at A. $190,000. B. $100,000. C. $90,000. D. $230,000.

72. Refer to the above information. Which of the following statements is (are) correct about the program and supporting expenses that would be reported on the statement of activities for the year ended June 30, 2009? I. Program and supporting expenses should be reported at $340,000. II. All of the program and supporting expenses should be reported as a deduction from unrestricted revenues and other support. A. I only B. II only C. I and II D. Neither I nor II

The transactions listed in the following questions occurred in a private, not-for-profit hospital during 2008. For each transaction, indicate its effect on the hospital's statement of operations for the year ended December 31, 2008.

73. Transaction: Billed patients for services rendered. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

19-23

Chapter 19 - Not-For-Profit Entities

74. Transaction: A gain was realized from the sale of endowment investments. The gain is not expendable. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

75. Transaction: Depreciation expense was recorded for the year. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

76. Transaction: The governing board designated assets for plant expansion. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The event is reported on the statement of operations, but there is no effect on operating income. D. The event is not reported on the statement of operations.

77. Transaction: Received contributions restricted by donors for research activities. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

19-24

Chapter 19 - Not-For-Profit Entities

78. Transaction: Expended 50 percent of the contributions restricted for research in the previous item. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

79. Transaction: Received contributions restricted by donors for equipment acquisition. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

80. Transaction: Acquired equipment with all of the contributions received in the previous item. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

81. Transaction: Endowment income was earned. The donor placed no restrictions on the investment earnings. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

19-25

Chapter 19 - Not-For-Profit Entities

82. Transaction: Received cash contribution from donor who stipulated the contribution be permanently invested. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

83. Transaction: Acquired investments with cash received in the previous item. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

84. Transaction: Received tuition revenue from hospital nursing program and cash from sales of goods in the hospital gift shop. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

85. FASB 117 requires that an ONPO provide three financial statements. Which of the following is not one of them? A. A statement of financial position B. A statement of activities C. A statement of cash flows D. A statement of functional expenses

19-26

Chapter 19 - Not-For-Profit Entities

86. Reporting requirements of other not-for-profit entities (ONPOs) are similar to those of which of the following entities? A. A public university B. A voluntary health and welfare organization C. An enterprise fund of a state or local government D. A hospital operated by a county government

Essay Questions

19-27

Chapter 19 - Not-For-Profit Entities

87. The following information is contained in the funds which are used to account for the transactions of the Hope Hospital, which is operated by a nonprofit, religious organization. The balances in the accounts are as of June 30, 2009, the end of the hospital's fiscal year. Credit amounts are in parentheses.

Additional information: The $64,000 in the specific purpose fund is restricted for research activities to be conducted by the hospital. Required: Prepare a balance sheet for Hope Hospital as of June 30, 2009.

19-28

Chapter 19 - Not-For-Profit Entities

Private Not-For-Profit (NFP) Entities. Select from this list of terms to answer the following questions.

Indicate your choice by entering the letter corresponding to the correct term. A term may be used more than once or not at all.

88. "Responsible for establishing accounting standards for private NFP entities" describes which term listed above?

19-29

Chapter 19 - Not-For-Profit Entities

89. "Classification of an endowment contribution" describes which term listed above?

90. "Reported as an expenditure of the fund using plant and equipment" describes which term listed above?

91. "Financial statement of a private NFP entity" describes which term listed above?

92. "Tangible fixed assets not depreciated by a private college or university" describes which term listed above?

19-30

Chapter 19 - Not-For-Profit Entities

93. "Basis for measuring investments in financial statements" describes which term listed above?

94. "Classification of investment income from endowment investments if there are no donor restrictions as to income" describes which term listed above?

95. "Classification of contributions restricted by purpose" describes which term listed above?

96. "Basis for measuring expenditures for contributed services requiring special skills" describes which term listed above?

19-31

Chapter 19 - Not-For-Profit Entities

97. "Basis for measuring contributions" describes which term listed above?

98. "Net asset classifications per FAC 6" describes which term listed above?

99. "Basis of accounting for private NFPs" describes which term listed above?

100. The CFO of a "Not-for-Profit" hospital is making a presentation at your college. The presentation is for Business and Health-Science majors. During the presentation the CFO mentions assets being reported "above the line." On the way out your roommate a healthscience major asks, you an accounting major, to explain what the CFO was referring to. What do you respond?

19-32

Chapter 19 - Not-For-Profit Entities

The transactions described in the following questions occurred in a voluntary health and welfare organization during the year ended December 31, 2008. For each transaction, indicate its effect(s) on the organization's statement of activities prepared for the year ended December 31, 2008. List all effects of transactions affecting more than one class of net assets. Indicate your choice(s) by entering the letter corresponding to the effects listed here:

101. Received cash contributions restricted by donors for research.

102. Incurred fund-raising costs.

19-33

Chapter 19 - Not-For-Profit Entities

103. Depreciation expense for the year was recorded.

104. The governing board designated assets for plant expansion.

105. A gain was realized from the sale of securities which were permanently invested. The gain is restricted as to use.

106. Endowment income was earned. The donor specified that the income be used for community service.

19-34

Chapter 19 - Not-For-Profit Entities

107. Received a multi-year pledge, with cash being received this year and for the next 4 years. Donors did not place any use restrictions on how the pledges were to be spent.

108. Income was earned from investments of assets that the board previously designated for plant expansion.

109. Received pledges from donors who placed no time or use restrictions on how the pledges were to be spent.

110. Received cash contributions restricted by donors for equipment.

19-35

Chapter 19 - Not-For-Profit Entities

111. Acquired equipment with all of the contributions previously received from donors for equipment purchases.

112. Expended 75 percent of the contributions previously received from donors for research.

113. Following are four independent transactions or events that relate to a voluntary health and welfare organization: 1. Cash disbursement of $45,000 was made from the general fund's unrestricted assets for the purchase of new equipment for the organization. 2. The organization receives an unrestricted cash gift of $80,000 from a donor. 3. Common stock investments with a total carrying value of $100,000 were sold by a permanently restricted endowment fund for $112,000 before any dividends were earned on these stocks. The gain is donor-restricted to remain in the permanently restricted fund. 4. General obligation bonds payable with a face amount of $750,000 were sold at par, with the proceeds required to be used solely for construction of a new building. This building was completed at a total cost of $750,000, and the total amount of bond issue proceeds was disbursed toward this cost. Disregard interest capitalization. Required: For each of these transactions or events, prepare journal entries specifying the affected funds and showing how these transactions or events should be recorded by the organization.

19-36

Chapter 19 - Not-For-Profit Entities

114. The FASB has issued five standards that have direct applicability to private, not-for-profit entities. From the list given below, match each standard to the area it deals with.

Chapter 19 Not-For-Profit Entities Answer Key

Multiple Choice Questions

19-37

Chapter 19 - Not-For-Profit Entities

1. Which rule-making body is currently setting standards of financial reporting for private notfor-profit universities and for public (governmental) universities?

A. Option A B. Option B C. Option C D. Option D

AACSB: Reflective Thinking AICPA: Decision Making

2. Net assets restricted as to time or purpose should be classified as: I. temporarily restricted. II. permanently restricted. A. I only B. II only C. Both I and II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

19-38

Chapter 19 - Not-For-Profit Entities

3. A not-for-profit organization received a donation temporarily restricted as to use. The donated amount was later spent in accordance with the restriction. In which category(ies) of net assets should the related revenues and expenses be recognized?

A. Option A B. Option B C. Option C D. Option D

AACSB: Reflective Thinking AICPA: Decision Making

4. According to FASB 93, "Recognition of Depreciation by Not-For-Profit (NFP) Entities," NFP entities should recognize depreciation: I. on all long-lived tangible assets. II. on all long-lived intangible assets. A. I only B. II only C. Both I and II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

19-39

Chapter 19 - Not-For-Profit Entities

5. The term "restricted" as used in university accounting refers to a constraint on the use of funds which has been: I. internally imposed. II. externally imposed. A. I only B. II only C. Either I or II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

6. According to Statement of Financial Accounting Standards 117, the statement of financial position of a private university should report the excess of the university's assets over its liabilities as: A. fund balance. B. unrestricted and restricted fund balance. C. retained earnings. D. unrestricted, temporarily restricted, and permanently restricted net assets.

AACSB: Reflective Thinking AICPA: Decision Making

7. Which of the following is an example of volunteer services received by a not-for-profit entity that should be recognized as revenue? I. Services requiring specialized skills, provided by individuals with those skills, that otherwise would have to be purchased. II. Services of lay faculty at a private university operated by a religious order. III. Services that create or enhance non-financial assets, regardless of whether or not they require specialized skills. A. I only B. I and III only C. II and III only D. I, II, and III

AACSB: Reflective Thinking AICPA: Decision Making

19-40

Chapter 19 - Not-For-Profit Entities

8. In a university, class cancellation refunds of tuition and fees should be recorded as: I. a reduction of revenue from tuition and fees. II. a reduction of accounts receivable. A. I only B. II only C. Either I or II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

9. Which of the following recognition and measurement bases best summarizes the usual treatment of current contributions to private not-for-profit entities in accordance with FASB 116?

A. Option A B. Option B C. Option C D. Option D

AACSB: Reflective Thinking AICPA: Decision Making

10. According to FASB 124, not-for-profit entities should report investments in the financial statements at: I. fair market value. II. lower of cost or market. A. I only B. II only C. Either I or II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

19-41

Chapter 19 - Not-For-Profit Entities

11. Investment income for not-for-profit entities may include: I. interest from debt investments. II. dividends from equity investments. III. changes in the fair values of both debt and equity investments. A. I only B. I and II only C. I and III only D. I, II, and III

AACSB: Reflective Thinking AICPA: Decision Making

12. A private university received $280,000 from student tuition and fees for the year 2009 summer session. The session began on June 20, 2009, and ended on July 30, 2009. The university's fiscal year end is June 30. According to the AICPA College and University Audit Guide, how should the university report the $280,000 of receipts in its financial statements for the year ended June 30, 2009? A. Current revenue of $280,000. B. Current revenue of $70,000 and deferred revenue of $210,000. C. Deferred revenue of $280,000. D. Restricted current revenue of $280,000.

AACSB: Analytic AICPA: Decision Making

13. Assume that a private university collects tuition and fees at the beginning of summer school, in which two weeks are offered in the first fiscal year and the remaining six weeks are offered in the second fiscal year. According to the approach recommended by the National Association of College and University Business Officers (NACUBO), the university would: A. record the collections as a debit to Cash and a credit to Deferred Revenue for the entire amount of the collections. B. record the collections as a debit to Cash and a credit to Restricted current revenue for the entire amount of the collections. C. account for the entire tuition and fees as revenue in the first fiscal period. D. recognize revenue in the first fiscal period for two-eighths of the tuition and fees and record six-eighths of the collections as a deferred revenue.

AACSB: Analytic AICPA: Decision Making

19-42

Chapter 19 - Not-For-Profit Entities

14. A private university offers graduate assistantships to qualified students each year. In exchange for the waiver of tuition, graduate assistants are required to assist faculty members with research and other activities. Assume a graduate assistant received a $4,000 tuition waiver for the current academic year. Based on these facts, the university should record A. tuition revenues of $4,000 and expenditures of $4,000. B. tuition revenues of $0 and expenditures of $0. C. tuition revenues of $4,000 and expenditures of $0. D. tuition revenues of $4,000 and a reduction of tuition revenues of $4,000.

AACSB: Analytic AICPA: Decision Making

15. For the year ended June 30, 2009, a university assessed its students a total of $4,000,000 for tuition and fees. Included in this amount was $300,000 of tuition remissions awarded to graduate teaching assistants, and $150,000 of scholarships awarded to undergraduate students. Tuition and fees totaling $3,550,000 were collected during the year ended June 30, 2009. What amount should be reported in the unrestricted fund as net revenue from tuition and fees for the year ended June 30, 2009? A. $4,000,000 B. $3,550,000 C. $3,700,000 D. $3,850,000

AACSB: Analytic AICPA: Measurement

16. A private not-for-profit university generally must depreciate all tangible fixed assets, except: I. works of art and other historical treasures. II. administration buildings. A. I only B. II only C. Both I and II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

19-43

Chapter 19 - Not-For-Profit Entities

17. A private college received an offer from a CPA who is an alumnus to teach a one-semester advanced accounting course at no cost. FASB 116 prescribes that this contribution of service: A. need only be disclosed in the footnotes to the financial statements. B. be recorded as an asset with an equivalent amount recorded in the unrestricted fund balance. C. be recorded as a revenue with an equivalent amount recorded as an expenditure. D. need not be recorded if the service is for a period less than one academic year.

AACSB: Reflective Thinking AICPA: Decision Making

18. In accordance with FASB 117, contributions from donors which are to be permanently invested should be disclosed on the statement of activities of a private university as an increase in: A. Permanently restricted net assets. B. Permanently restricted fund balance. C. Endowment fund balance. D. Deferred revenues.

AACSB: Reflective Thinking AICPA: Decision Making

19. For the year ended June 30, 2009, a private college received contributions from alumni which were restricted for faculty research stipends to be awarded during the next fiscal year. For the year ended June 30, 2009, these contributions should be disclosed on the statement of activities of the private college as an increase in: A. the fund balance of the restricted current fund. B. temporarily restricted net assets. C. deferred revenues. D. temporarily restricted fund balance.

AACSB: Reflective Thinking AICPA: Decision Making

19-44

Chapter 19 - Not-For-Profit Entities

20. A private, not-for-profit university should prepare which of the following financial statements?

A. I, II, and III. B. II, III, and IV. C. I, II, and IV. D. II, III, and V.

AACSB: Reflective Thinking AICPA: Decision Making

21. Unrestricted gifts and endowment income of a private university are reported as A. increases in the unrestricted current fund balance on the statement of changes in fund balances. B. unrestricted revenues on the statement of current funds revenues, expenditures, and other changes. C. unrestricted revenues on the statement of activities. D. increases in the unrestricted current fund balance on the statement of activities.

AACSB: Reflective Thinking AICPA: Decision Making

22. One of the major objectives of FASB 117 is to A. emphasize the different fund structures that currently exist for all private, nonprofit organizations. B. change the reporting for governmental organizations so that their reporting is comparable to that of private, nonprofit organizations. C. report combined financial statements, instead of individual fund financial statements, for all private, nonprofit organizations. D. bring about greater uniformity in the financial statements of all private, not-for-profit organizations.

AACSB: Reflective Thinking AICPA: Decision Making

19-45

Chapter 19 - Not-For-Profit Entities

23. A not-for-profit private college in Virginia created a separate foundation responsible for obtaining financial support from alumni and others. Foundation assets are used for the benefit of the college. Donations made to the foundation and subsequently transferred to the college should be: A. recognized as revenues by the foundation when received, and as revenues of the college when transferred. B. recognized as revenues by the foundation when received and as expenses by the foundation when transferred. C. recognized both as a change in its interest in the foundation and as revenues by the college when the donation is received by the foundation. D. recognized as an increase in net assets of the foundation and as revenues of the college when the donation is received by the college.

AACSB: Reflective Thinking AICPA: Decision Making

24. FASB 93: A. guides depreciation. B. guides accounting for contributions. C. establishes financial display requirements. D. establishes the accounting for investments.

AACSB: Reflective Thinking AICPA: Decision Making

25. On the statement of operations prepared for a private, not-for-profit hospital, patient service revenue earned during the year is reported net of amounts for which of the following items? I. Contractual adjustments II. Bad debts expense A. I only B. II only C. I and II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

19-46

Chapter 19 - Not-For-Profit Entities

26. A private, not-for-profit hospital received a cash contribution of $100,000 from Samantha Hicks on November 14, 2008. Ms. Hicks specified the money be used to acquire equipment. On December 31, 2008, the hospital had not expended any of Ms. Hicks' contribution. On the statement of changes in net assets for the year ended December 31, 2008, the hospital should report the contribution as a $100,000 increase in A. temporarily restricted net assets. B. unrestricted net assets. C. fund balance. D. deferred revenue.

AACSB: Reflective Thinking AICPA: Decision Making

27. Unrestricted current funds of a private university designated by the governing board for a specific future purpose should be reported as part of: A. unrestricted net assets. B. temporarily restricted net assets. C. board-restricted net assets. D. term endowments.

AACSB: Reflective Thinking AICPA: Decision Making

28. A private, not-for-profit geographic society received cash contributions which were restricted by the donors for the acquisition of fixed assets. In which section of the statement of cash flows would these cash contributions be reported? A. Financing activities B. Investing activities C. Operating activities D. Capital and related financing activities

AACSB: Reflective Thinking AICPA: Decision Making

19-47

Chapter 19 - Not-For-Profit Entities

29. On the statement of activities for a private, not-for-profit literary society, expenses decrease which of the following classes of net assets? I. temporarily restricted net assets II. unrestricted net assets A. I only B. II only C. Either I or II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

30. Bridger Hospital, which is operated by a religious organization, provides charity care for the indigent living in the region served by the hospital. How should Bridger report the amount of its charity care on its financial statements? A. In the notes to the financial statements only. B. As unrestricted revenues on the statement of operations. C. As net patient service revenue and as an expense, equal to the net patient service revenue, on the statement of operations. D. As temporarily restricted revenue on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

31. The governing board of Samaritan Hospital, which is operated by a religious organization, designated $500,000 of cash for future expansion of the hospital. On the hospital's balance sheet, the cash designated for future plant expansion would be disclosed in which of the following classes of net assets? A. Temporarily restricted net assets B. Unrestricted net assets C. Plant replacement and expansion. D. Board designated net assets

AACSB: Reflective Thinking AICPA: Decision Making

19-48

Chapter 19 - Not-For-Profit Entities

32. Good Care Hospital, which is operated by a religious organization, received contributions of $1,000,000 from donors who stipulated that the cash be used to construct an addition to the hospital. As of the balance sheet date, none of the contributions had been expended for construction. On the hospital's balance sheet, the cash contributions would be disclosed in which of the following classes of net assets? A. Temporarily restricted net assets B. Donor restricted net assets C. Assets whose use is limited D. Permanently restricted net assets

AACSB: Reflective Thinking AICPA: Decision Making

33. A private, not-for-profit hospital received contributions of $50,000 from donors on June 15, 2009. The donors stipulated that their contributions be used to purchase equipment for the hospital. As of June 30, 2009, the end of the hospital's fiscal year, $12,000 of the contributions had been spent on equipment acquisitions. In the hospital's general fund, what account would be credited to recognize the release of the restrictions on the temporarily restricted contributions used to acquire equipment? A. Revenue released from equipment acquisition restriction B. Other financing sources C. Net assets released from equipment acquisition restriction D. Unrestricted net assets released from equipment acquisition restriction

AACSB: Reflective Thinking AICPA: Decision Making

34. A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. The hospital's revenues from nursing programs and gift shops should be accounted for in the: A. specific purpose fund. B. restricted current fund. C. general fund. D. time-restricted fund.

AACSB: Reflective Thinking AICPA: Decision Making

19-49

Chapter 19 - Not-For-Profit Entities

35. A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. Contributions received from donors for research to be conducted by the hospital should be accounted for in the: A. specific purpose fund. B. time-restricted fund. C. general fund. D. restricted current fund.

AACSB: Reflective Thinking AICPA: Decision Making

36. On June 30, 2009, a voluntary health and welfare organization received pledges from donors amounting to $50,000. The donors did not place any time or use restrictions on the amount pledged. It was estimated that 10 percent of the pledges would not be collected. How should the voluntary health and welfare organization report these pledges on its financial statements prepared at the end of its fiscal year, June 30, 2009? A. As fund balance for $45,000. B. As contribution revenue-unrestricted for $45,000. C. As contribution revenue-unrestricted for $50,000. D. As fund balance-unrestricted for $50,000.

AACSB: Reflective Thinking AICPA: Decision Making

37. The restricted funds of a not-for-profit hospital are often termed "______" funds because they must hold the restricted assets and transfer expendable resources to the general fund for expenditure. A. specific B. controlled C. limited D. holding

AACSB: Reflective Thinking AICPA: Decision Making

19-50

Chapter 19 - Not-For-Profit Entities

38. All restricted funds of private, not-for-profit hospitals account for resources: A. whose use is restricted by the donor. B. received and expended in the hospital's primary health care mission. C. that are only temporarily restricted. D. received or pledged by donors for use in future periods.

AACSB: Reflective Thinking AICPA: Decision Making

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization. The donor did not place any use restrictions on the amount pledged. The stream of the payments is discounted at 6 percent. The first payment of $5,000 is received at the end of the first year. The present value factor for a five-payment annuity due on June 30, 2009, at 6 percent is 4.2124.

39. Based on the preceding information, the journal entry to recognize present value at the time the pledge is received includes: A. a credit to Pledges Receivable—Temporarily Restricted for $25,000. B. a debit to Contributions—Temporarily Restricted for $21,062. C. a debit to Pledges Receivable—Temporarily Restricted for $21,062. D. a credit to Contributions—Temporarily Restricted for $25,000.

AACSB: Analytic AICPA: Measurement

40. Based on the preceding information, at the end of the first year, the pledge increased unrestricted net assets by: A. $25,000. B. $21,062. C. $4,212. D. $5,000.

AACSB: Analytic AICPA: Measurement

19-51

Chapter 19 - Not-For-Profit Entities

41. Based on the preceding information, the increase in present value of the contributions receivable recognized at the end of the first year equals: A. $5,000. B. $1,264. C. $4212. D. $787.

AACSB: Analytic AICPA: Measurement

42. A private, not-for-profit hospital received a donation of medicine from the XYZ Pharmaceutical Company on March 15, 2009. The cost of the medicine to the company was $66,000, and its market value was $110,000. Twenty percent of the medicine was used by the hospital during the year ended June 30, 2009. On the hospital's statement of operations for the year ended June 30, 2009, the contribution of medicine would increase operating revenues by A. $66,000. B. $110,000. C. $52,800. D. $88,000.

AACSB: Analytic AICPA: Measurement

43. In accordance with FASB 116, contributions of services are recognized as increases in unrestricted net assets by a private, not for profit entity if which of the following criteria are satisfied? I. The services received create or enhance nonfinancial assets. II. The services require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donations. III. The services will be performed within the current fiscal year. A. I or II. B. I or III. C. II or III. D. I, II, III.

AACSB: Reflective Thinking AICPA: Decision Making

19-52

Chapter 19 - Not-For-Profit Entities

44. The disclosure, "net assets released from restrictions," is reported on which of the following financial statements for a voluntary health and welfare organization? I. The statement of cash flows. II. The statement of activities. A. I only B. II only C. Both I and II. D. Neither I nor II.

AACSB: Reflective Thinking AICPA: Decision Making

45. Good Faith Hospital, operated by a religious organization, billed patients $4,000,000 for services rendered during the year ended June 30, 2009. The hospital realized cash of $3,500,000 from the patient billings because of the following reductions: (1) contractual adjustments of $140,000 granted to private insurance companies and to the federal government; and (2) uncollectible accounts receivable of $360,000. On the statement of operations prepared for the year ended June 30, 2009, Good Faith Hospital should report net patient service revenue of: A. $3,500,000. B. $3,860,000. C. $4,000,000. D. $3,640,000.

AACSB: Analytic AICPA: Measurement

19-53

Chapter 19 - Not-For-Profit Entities

46. During the fiscal year ended June 30, 2009, a private, not-for-profit hospital acquired equipment costing $75,000, with cash contributed by donors who restricted their contributions for this purpose. On the hospital's statement of cash flows for the year ended June 30, 2009, the equipment acquisition should be reported in which of the following sections? I. Operating activities II. Financing activities III. Investing activities A. I B. II C. III D. I, II, III

AACSB: Reflective Thinking AICPA: Decision Making

47. During the fiscal year ended June 30, 2009, Global Charities, a voluntary health and welfare organization, received unrestricted cash contributions of $500,000 and temporarily restricted cash contributions of $300,000. All of the temporarily restricted contributions were restricted by the donors for equipment acquisitions. During the year ended June 30, 2009, equipment costing $250,000 was acquired with the restricted contributions. As a result of these two contributions, Global Charities' statement of cash flows, prepared for the year ended June 30, 2009, would report an increase in net cash provided by operating activities of: A. $500,000. B. $800,000. C. $750,000. D. $550,000.

AACSB: Analytic AICPA: Measurement

19-54

Chapter 19 - Not-For-Profit Entities

48. A voluntary health and welfare organization received a $300,000 contribution on April 15, 2009, from a donor who stipulated the donation be invested permanently in stocks and bonds. The donor further stipulated earnings from the investments be spent according to the wishes of the governing board of the voluntary health and welfare organization. Earnings from the investments for the year ended June 30, 2009, amounted to $6,000. How would the voluntary health and welfare organization report this information for the year ended June 30, 2009? A. Increase in permanently restricted net assets of $306,000. B. Increase in permanently restricted net assets of $300,000, and in temporarily restricted net assets of $6,000. C. Increase in permanently restricted net assets of $300,000, and in unrestricted net assets of $6,000. D. Increase in permanently restricted net assets of $300,000, and in board-designated net assets of $6,000.

AACSB: Analytic AICPA: Decision Making

49. Which financial statement is (are) required for a voluntary health and welfare organization which is not required for a private, not-for-profit hospital? I. A statement of operations. II. A statement of functional expenses. A. I only B. II only C. Both I and II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

50. A private, not-for-profit hospital expended $35,000 of temporarily restricted assets to acquire equipment. What account should be debited in the hospital's plant replacement and expansion fund as a result of the acquisition of the equipment? A. Net Assets Released—Plant Acquisition. B. Fund balance Released—Plant Acquisition. C. Equipment. D. Contribution Revenue Released—Plant Acquisition.

AACSB: Reflective Thinking AICPA: Decision Making

19-55

Chapter 19 - Not-For-Profit Entities

51. In 2009, a private not-for-profit hospital received a $200,000 cash contribution to its endowment fund. During the year, hospital administration invested $150,000 of the funds. Which of the following statements regarding the effect of these transactions on the preparation of the hospital's statement of cash flow is true? A. The $200,000 contribution will appear in the investing activities section of the cash flow statement as a cash inflow. B. The $200,000 contribution will appear in the financing activities section of the cash flow statement as a cash inflow. C. The $150,000 investment will appear in the investing activities section of the cash flow statement as a cash inflow. D. The $150,000 contribution will appear in the financing activities section of the cash flow statement as a cash inflow.

AACSB: Reflective Thinking AICPA: Decision Making

A private, not-for-profit hospital received a contribution of $40,000 on June 15, 2008. The donor restricted the contribution to funding research activities currently being performed by the hospital. For the year ended December 31, 2008, the hospital spent $30,000 of the contribution on research activities. The hospital expended the remaining $10,000 on research activities in January of 2009.

52. Refer to the above information. On the statement of cash flows prepared for the year ended December 31, 2008, the events described would increase net cash flows provided by A. operating activities by $40,000. B. financing activities by $40,000. C. financing activities by $10,000. D. operating activities by $10,000.

AACSB: Analytic AICPA: Decision Making

19-56

Chapter 19 - Not-For-Profit Entities

53. Refer to the above information. On the statement of operations prepared for the year ended December 31, 2008, the events described would: A. increase operating income by $30,000. B. have no effect on operating income. C. increase unrestricted net assets by $30,000. D. decrease unrestricted net assets by $30,000.

AACSB: Analytic AICPA: Decision Making

54. Refer to the above information. On the statement of changes in net assets prepared for the year ended December 31, 2008, the events described would A. increase temporarily restricted net assets by $10,000. B. decrease temporarily restricted net assets by $10,000 C. increase unrestricted net assets by $10,000. D. decrease unrestricted net assets by $10,000.

AACSB: Analytic AICPA: Decision Making

55. In a private, not-for-profit hospital, which fund would record cash and investments which have been restricted by the governing board for acquisitions of equipment and construction of a new hospital addition? A. The plant replacement and expansion fund. B. The specific purpose fund. C. The endowment fund. D. The general fund.

AACSB: Reflective Thinking AICPA: Decision Making

19-57

Chapter 19 - Not-For-Profit Entities

56. The governing board of a hospital operated by a religious organization designated $3,000,000 of cash to be used for plant expansion. The cash was invested in stocks and bonds which earned $250,000 of dividend and interest income. The income from investments should be reported on the hospital's statement of operations as an increase in: A. temporarily restricted net assets. B. operating income. C. either temporarily restricted net assets or unrestricted net assets, depending upon the nature of the governing board's restrictions. D. fund balance in the general fund.

AACSB: Reflective Thinking AICPA: Decision Making

57. A voluntary health and welfare organization received unrestricted cash donations of $20,000 from donors who attended a dinner held for the benefit of the organization. The costs of the dinner, including room rental, and other expenses, amounted to $7,000. On the statement of activities prepared for the voluntary health and welfare organization, the expenses of the dinner should be: A. reported as management and general expenses. B. netted against the $20,000 of contribution revenue. C. reported as fund raising costs. D. reported as programmatic expenses.

AACSB: Reflective Thinking AICPA: Decision Making

58. On the statement of functional expenses prepared for a voluntary health and welfare organization, depreciation expense is allocated to I. expenses for program services. II. expenses for supporting services. A. I only B. II only C. Both I and II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

19-58

Chapter 19 - Not-For-Profit Entities

59. A voluntary health and welfare organization developed and printed informational materials which were intended to both educate the public about how its resources are used to help people in need and to also appeal to the public for much needed support. In this situation, the cost of the informational materials should be A. accounted for as fund-raising expense. B. allocated to expenses for program services. C. allocated between expenses for program services and fund-raising expense. D. accounted for as management and general expense.

AACSB: Reflective Thinking AICPA: Decision Making

60. FASB 117 requires that an "other not-for-profit entity" (ONPO) provide three financial statements. Which of the following is NOT one among them? A. A statement of functional expenses B. A statement of financial position C. A statement of activities D. A statement of cash flows

AACSB: Reflective Thinking AICPA: Decision Making

61. A private, not-for-profit hospital received the following restricted contributions and other receipts during the year ended December 31, 2008:

None of the contributions or other receipts were expended during the ended December 31, 2008. For the year ended December 31, 2008, what amount would be reported on the hospital's statement of changes in net assets as an increase in temporarily restricted net assets? A. $1,500,000 B. $1,200,000 C. $500,000 D. $300,000

AACSB: Analytic AICPA: Measurement

19-59

Chapter 19 - Not-For-Profit Entities

62. In accordance with FASB 116, pledges, which are temporarily restricted by donors, are reported as increases in temporarily restricted net assets on the statement of activities of a voluntary health and welfare organization when the A. pledges are received in cash. B. cash received from the pledges is expended in accordance with the donors' wishes. C. pledges are made by the donors. D. cash is received from the pledges is transferred to unrestricted net assets.

AACSB: Reflective Thinking AICPA: Decision Making

63. A voluntary health and welfare organization received $200,000 of pledges from donors on February 15, 2009. The donors did not place either time or use restrictions on the amount pledged. The governing board estimated that 10 percent of the pledges would be uncollectible. During the remainder of fiscal 2009, cash received from pledges amounted to $184,000. For the year ended June 30, 2009, what amount should the voluntary health and welfare organization report as Contributions-Unrestricted? A. $0 B. $200,000 C. $184,000 D. $180,000

AACSB: Reflective Thinking AICPA: Decision Making

64. A voluntary health and welfare organization reports pledges receivable on its statement of financial position at the present value of the future cash collections. How is the increase in the present value of the pledges receivable, which is due to the passage of time, reported on the voluntary health and welfare organization's statement of activities? A. As interest income-temporarily restricted. B. As an increase in pledges receivable-temporarily restricted. C. As an increase in contributions-temporarily restricted. D. As an increase in deferred revenue-temporarily restricted.

AACSB: Reflective Thinking AICPA: Decision Making

19-60

Chapter 19 - Not-For-Profit Entities

Golden Path, a labor union, had the following receipts and expenses for the year ended December 31, 2008:

The union's constitution provides that 12 percent of the per capita dues be designated for the strike insurance fund to be distributed for strike relief at the discretion of the union's executive board.

65. Based on the information provided, in Golden Path's statement of activities for the year ended December 31, 2008, what amount should be reported under the classification of revenue from unrestricted funds? A. $980,000 B. $1,100,000 C. $1,210,000 D. $1,020,000

AACSB: Analytic AICPA: Measurement

19-61

Chapter 19 - Not-For-Profit Entities

66. Based on the information provided, in Golden Path's statement of activities for the year ended December 31, 2008, what amount should be reported under the classification of program services? A. $720,000 B. $910,000 C. $440,000 D. $760,000

AACSB: Analytic AICPA: Measurement

67. Based on the information provided, in Golden Path's statement of activities for the year ended December 31, 2008, what amount should be reported under the classification of supporting services? A. $150,000 B. $720,000 C. $440,000 D. $290,000

AACSB: Analytic AICPA: Measurement

68. Based on the information provided, in Golden Path's statement of activities for the year ended December 31, 2008, what amounts should be reported under the classifications of temporarily and permanently restricted net assets? A. $0 and $110,000 respectively. B. $110,000 and $0 respectively. C. $60,000 and $50,000 respectively. D. $50,000 and $60,000 respectively.

AACSB: Analytic AICPA: Measurement

19-62

Chapter 19 - Not-For-Profit Entities

Local Services, a voluntary health and welfare organization had the following classes of net assets on July 1, 2008, the beginning of its fiscal year:

During the year ended June 30, 2009, the following events occurred: (1) It purchased equipment, costing $100,000, with contributions restricted for this purpose. The contributions had been received from donors during June of 2008. (2) It received $130,000 of cash donations which were restricted for research activities. During the year ended June 30, 2009, $90,000 of the contributions were expended on research. (3) It sold investments classified in the permanently restricted class for a loss of $40,000. Dividends and interest income earned on the investments amounted to $70,000. There were no restrictions on how investment income was to be used. (4) It received cash contributions of $200,000 from donors who did not place either time or use restrictions upon their donations. (5) Expenses, excluding depreciation expense, for program services and supporting services incurred during the year ended June 30, 2009, amounted to $260,000. (6) Depreciation expense for the year ended June 30, 2009, was $80,000.

69. Refer to the above information. At June 30, 2009, the amount of permanently restricted net assets reported on the statement of financial position would be: A. $1,070,000. B. $1,030,000. C. $1,000,000. D. $960,000.

AACSB: Analytic AICPA: Measurement

19-63

Chapter 19 - Not-For-Profit Entities

70. Refer to the above information. On the statement of activities for the year ended June 30, 2009, temporarily restricted net assets: A. increased $130,000. B. increased $40,000. C. decreased $100,000. D. decreased $60,000.

AACSB: Analytic AICPA: Measurement

71. Refer to the above information. On the statement of activities for the year ended June 30, 2009, reclassifications would be reported at A. $190,000. B. $100,000. C. $90,000. D. $230,000.

AACSB: Analytic AICPA: Measurement

72. Refer to the above information. Which of the following statements is (are) correct about the program and supporting expenses that would be reported on the statement of activities for the year ended June 30, 2009? I. Program and supporting expenses should be reported at $340,000. II. All of the program and supporting expenses should be reported as a deduction from unrestricted revenues and other support. A. I only B. II only C. I and II D. Neither I nor II

AACSB: Reflective Thinking AICPA: Decision Making

The transactions listed in the following questions occurred in a private, not-for-profit hospital during 2008. For each transaction, indicate its effect on the hospital's statement of operations for the year ended December 31, 2008.

19-64

Chapter 19 - Not-For-Profit Entities

73. Transaction: Billed patients for services rendered. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

74. Transaction: A gain was realized from the sale of endowment investments. The gain is not expendable. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

75. Transaction: Depreciation expense was recorded for the year. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

19-65

Chapter 19 - Not-For-Profit Entities

76. Transaction: The governing board designated assets for plant expansion. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The event is reported on the statement of operations, but there is no effect on operating income. D. The event is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

77. Transaction: Received contributions restricted by donors for research activities. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

78. Transaction: Expended 50 percent of the contributions restricted for research in the previous item. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

19-66

Chapter 19 - Not-For-Profit Entities

79. Transaction: Received contributions restricted by donors for equipment acquisition. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

80. Transaction: Acquired equipment with all of the contributions received in the previous item. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

81. Transaction: Endowment income was earned. The donor placed no restrictions on the investment earnings. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

19-67

Chapter 19 - Not-For-Profit Entities

-82. Transaction: Received cash contribution from donor who stipulated the contribution be permanently invested. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

83. Transaction: Acquired investments with cash received in the previous item. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

84. Transaction: Received tuition revenue from hospital nursing program and cash from sales of goods in the hospital gift shop. Effect on Statement of Operations: A. Increases operating income. B. Decreases operating income. C. The transaction is reported on the statement of operations, but there is no effect on operating income. D. The transaction is not reported on the statement of operations.

AACSB: Reflective Thinking AICPA: Decision Making

19-68

Chapter 19 - Not-For-Profit Entities

85. FASB 117 requires that an ONPO provide three financial statements. Which of the following is not one of them? A. A statement of financial position B. A statement of activities C. A statement of cash flows D. A statement of functional expenses

AACSB: Reflective Thinking AICPA: Decision Making

86. Reporting requirements of other not-for-profit entities (ONPOs) are similar to those of which of the following entities? A. A public university B. A voluntary health and welfare organization C. An enterprise fund of a state or local government D. A hospital operated by a county government

AACSB: Reflective Thinking AICPA: Decision Making

Essay Questions

19-69

Chapter 19 - Not-For-Profit Entities

87. The following information is contained in the funds which are used to account for the transactions of the Hope Hospital, which is operated by a nonprofit, religious organization. The balances in the accounts are as of June 30, 2009, the end of the hospital's fiscal year. Credit amounts are in parentheses.

Additional information: The $64,000 in the specific purpose fund is restricted for research activities to be conducted by the hospital. Required: Prepare a balance sheet for Hope Hospital as of June 30, 2009.

19-70

Chapter 19 - Not-For-Profit Entities

19-71

Chapter 19 - Not-For-Profit Entities

AACSB: Analytic AICPA: Reporting

19-72

Chapter 19 - Not-For-Profit Entities

Private Not-For-Profit (NFP) Entities. Select from this list of terms to answer the following questions.

Indicate your choice by entering the letter corresponding to the correct term. A term may be used more than once or not at all.

88. "Responsible for establishing accounting standards for private NFP entities" describes which term listed above? D

AACSB: Reflective Thinking AICPA: Decision Making

19-73

Chapter 19 - Not-For-Profit Entities

89. "Classification of an endowment contribution" describes which term listed above? K

AACSB: Reflective Thinking AICPA: Decision Making

90. "Reported as an expenditure of the fund using plant and equipment" describes which term listed above? O

AACSB: Reflective Thinking AICPA: Decision Making

91. "Financial statement of a private NFP entity" describes which term listed above? H

AACSB: Reflective Thinking AICPA: Decision Making

92. "Tangible fixed assets not depreciated by a private college or university" describes which term listed above? P

AACSB: Reflective Thinking AICPA: Decision Making

19-74

Chapter 19 - Not-For-Profit Entities

93. "Basis for measuring investments in financial statements" describes which term listed above? A

AACSB: Reflective Thinking AICPA: Decision Making

94. "Classification of investment income from endowment investments if there are no donor restrictions as to income" describes which term listed above? B

AACSB: Reflective Thinking AICPA: Decision Making

95. "Classification of contributions restricted by purpose" describes which term listed above? L

AACSB: Reflective Thinking AICPA: Decision Making

96. "Basis for measuring expenditures for contributed services requiring special skills" describes which term listed above? A

AACSB: Reflective Thinking AICPA: Decision Making

19-75

Chapter 19 - Not-For-Profit Entities

97. "Basis for measuring contributions" describes which term listed above? A

AACSB: Reflective Thinking AICPA: Decision Making

98. "Net asset classifications per FAC 6" describes which term listed above? N

AACSB: Reflective Thinking AICPA: Decision Making

99. "Basis of accounting for private NFPs" describes which term listed above? G

AACSB: Reflective Thinking AICPA: Decision Making

19-76

Chapter 19 - Not-For-Profit Entities

100. The CFO of a "Not-for-Profit" hospital is making a presentation at your college. The presentation is for Business and Health-Science majors. During the presentation the CFO mentions assets being reported "above the line." On the way out your roommate a healthscience major asks, you an accounting major, to explain what the CFO was referring to. What do you respond? Not-for-Profit hospitals report an operating performance indicator in their statement of operations. This item reports the hospital's operating activities for the period and should include both operating income (loss) for the period and other income available for current operations. FASB 117 requires that net assets released from restrictions that are used in operations to be included in the performance indicator, thus, "above the line". This allows the reader of the financial statements to be able to identify assets that were previously restricted, held for specified purposes by the donor, that are now available for use in operations. Therefore, expenses incurred to achieve the entity's operations can be matched with the resources.

AACSB: Communication AICPA: Critical Thinking

The transactions described in the following questions occurred in a voluntary health and welfare organization during the year ended December 31, 2008. For each transaction, indicate its effect(s) on the organization's statement of activities prepared for the year ended December 31, 2008. List all effects of transactions affecting more than one class of net assets. Indicate your choice(s) by entering the letter corresponding to the effects listed here:

19-77

Chapter 19 - Not-For-Profit Entities

101. Received cash contributions restricted by donors for research. C

AACSB: Reflective Thinking AICPA: Decision Making

102. Incurred fund-raising costs. B

AACSB: Reflective Thinking AICPA: Decision Making

103. Depreciation expense for the year was recorded. B

AACSB: Reflective Thinking AICPA: Decision Making

104. The governing board designated assets for plant expansion. G

AACSB: Reflective Thinking AICPA: Decision Making

105. A gain was realized from the sale of securities which were permanently invested. The gain is restricted as to use. C

AACSB: Reflective Thinking AICPA: Decision Making

19-78

Chapter 19 - Not-For-Profit Entities

106. Endowment income was earned. The donor specified that the income be used for community service. C

AACSB: Reflective Thinking AICPA: Decision Making

107. Received a multi-year pledge, with cash being received this year and for the next 4 years. Donors did not place any use restrictions on how the pledges were to be spent. A and C

AACSB: Reflective Thinking AICPA: Decision Making

108. Income was earned from investments of assets that the board previously designated for plant expansion. A

AACSB: Reflective Thinking AICPA: Decision Making

109. Received pledges from donors who placed no time or use restrictions on how the pledges were to be spent. A

AACSB: Reflective Thinking AICPA: Decision Making

19-79

Chapter 19 - Not-For-Profit Entities

110. Received cash contributions restricted by donors for equipment. C

AACSB: Reflective Thinking AICPA: Decision Making

111. Acquired equipment with all of the contributions previously received from donors for equipment purchases. A and D

AACSB: Reflective Thinking AICPA: Decision Making

112. Expended 75 percent of the contributions previously received from donors for research. D

AACSB: Reflective Thinking AICPA: Decision Making

19-80

Chapter 19 - Not-For-Profit Entities

113. Following are four independent transactions or events that relate to a voluntary health and welfare organization: 1. Cash disbursement of $45,000 was made from the general fund's unrestricted assets for the purchase of new equipment for the organization. 2. The organization receives an unrestricted cash gift of $80,000 from a donor. 3. Common stock investments with a total carrying value of $100,000 were sold by a permanently restricted endowment fund for $112,000 before any dividends were earned on these stocks. The gain is donor-restricted to remain in the permanently restricted fund. 4. General obligation bonds payable with a face amount of $750,000 were sold at par, with the proceeds required to be used solely for construction of a new building. This building was completed at a total cost of $750,000, and the total amount of bond issue proceeds was disbursed toward this cost. Disregard interest capitalization. Required: For each of these transactions or events, prepare journal entries specifying the affected funds and showing how these transactions or events should be recorded by the organization.

19-81

Chapter 19 - Not-For-Profit Entities

AACSB: Analytic AICPA: Reporting

114. The FASB has issued five standards that have direct applicability to private, not-for-profit entities. From the list given below, match each standard to the area it deals with.

AACSB: Reflective Thinking AICPA: Reporting

19-82