Test bank advanced financial accounting ch 19 not for profit entities

For the year ended June 30, 2009, a private college received contributions from alumniwhich were restricted for faculty research stipends to be awarded during the next fiscal year.For th

Chapter 19 Not-For-Profit Entities

Multiple Choice Questions

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

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

I on all long-lived tangible assets

II on all long-lived intangible assets

6 According to Statement of Financial Accounting Standards 117, the statement of financialposition of a private university should report the excess of the university's assets over itsliabilities 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-profitentity 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 theyrequire 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

9 Which of the following recognition and measurement bases best summarizes the usualtreatment of current contributions to private not-for-profit entities in accordance with FASB116?

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

12 A private university received $280,000 from student tuition and fees for the year 2009summer 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 AuditGuide, how should the university report the $280,000 of receipts in its financial statements forthe 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 summerschool, in which two weeks are offered in the first fiscal year and the remaining six weeks areoffered in the second fiscal year According to the approach recommended by the NationalAssociation 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 entireamount of the collections

B record the collections as a debit to Cash and a credit to Restricted current revenue for theentire 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 andrecord six-eighths of the collections as a deferred revenue

14 A private university offers graduate assistantships to qualified students each year Inexchange for the waiver of tuition, graduate assistants are required to assist faculty memberswith research and other activities Assume a graduate assistant received a $4,000 tuitionwaiver 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

15 For the year ended June 30, 2009, a university assessed its students a total of $4,000,000for tuition and fees Included in this amount was $300,000 of tuition remissions awarded tograduate 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 feesfor the year ended June 30, 2009?

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 permanentlyinvested 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

19 For the year ended June 30, 2009, a private college received contributions from alumniwhich 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 ofactivities 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 financialstatements?

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 fundbalances

B unrestricted revenues on the statement of current funds revenues, expenditures, and otherchanges

C unrestricted revenues on the statement of activities

D increases in the unrestricted current fund balance on the statement of activities

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, forall private, nonprofit organizations

D bring about greater uniformity in the financial statements of all private, not-for-profitorganizations

23 A not-for-profit private college in Virginia created a separate foundation responsible forobtaining 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 collegeshould be:

A recognized as revenues by the foundation when received, and as revenues of the collegewhen transferred

B recognized as revenues by the foundation when received and as expenses by the foundationwhen transferred

C recognized both as a change in its interest in the foundation and as revenues by the collegewhen the donation is received by the foundation

D recognized as an increase in net assets of the foundation and as revenues of the collegewhen 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

25 On the statement of operations prepared for a private, not-for-profit hospital, patientservice revenue earned during the year is reported net of amounts for which of the followingitems?

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 aspecific 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 wererestricted by the donors for the acquisition of fixed assets In which section of the statement ofcash flows would these cash contributions be reported?

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

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 balancesheet, the cash designated for future plant expansion would be disclosed in which of thefollowing 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 thehospital 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 inwhich of the following classes of net assets?

A Temporarily restricted net assets

B Donor restricted net assets

C Assets whose use is limited

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 thehospital 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, whataccount would be credited to recognize the release of the restrictions on the temporarilyrestricted 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 anddonor 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 anddonor restricted funds Contributions received from donors for research to be conducted bythe 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 fromdonors amounting to $50,000 The donors did not place any time or use restrictions on theamount pledged It was estimated that 10 percent of the pledges would not be collected How

37 The restricted funds of a not-for-profit hospital are often termed " " funds becausethey must hold the restricted assets and transfer expendable resources to the general fund forexpenditure.

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 avoluntary health and welfare organization The donor did not place any use restrictions on theamount 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-paymentannuity 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 thetime 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 increasedunrestricted net assets by:

A $25,000

B $21,062

C $4,212

41 Based on the preceding information, the increase in present value of the contributionsreceivable 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 thehospital during the year ended June 30, 2009 On the hospital's statement of operations for theyear ended June 30, 2009, the contribution of medicine would increase operating revenues by

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

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 forservices 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 thefederal 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:

I Operating activities

II Financing activities

III Investing activities

A I

B II

C III

D I, II, III

47 During the fiscal year ended June 30, 2009, Global Charities, a voluntary health andwelfare organization, received unrestricted cash contributions of $500,000 and temporarilyrestricted cash contributions of $300,000 All of the temporarily restricted contributions wererestricted 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 ofthese two contributions, Global Charities' statement of cash flows, prepared for the year endedJune 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 theinvestments for the year ended June 30, 2009, amounted to $6,000 How would the voluntaryhealth 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 netassets of $6,000

C Increase in permanently restricted net assets of $300,000, and in unrestricted net assets of

50 A private, not-for-profit hospital expended $35,000 of temporarily restricted assets toacquire equipment What account should be debited in the hospital's plant replacement andexpansion 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 itsendowment 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 flowstatement as a cash inflow

B The $200,000 contribution will appear in the financing activities section of the cash flowstatement as a cash inflow

C The $150,000 investment will appear in the investing activities section of the cash flowstatement as a cash inflow

D The $150,000 contribution will appear in the financing activities section of the cash flowstatement as a cash inflow

A private, not-for-profit hospital received a contribution of $40,000 on June 15, 2008 Thedonor restricted the contribution to funding research activities currently being performed bythe 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 researchactivities in January of 2009

52 Refer to the above information On the statement of cash flows prepared for the yearended 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

53 Refer to the above information On the statement of operations prepared for the yearended 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 theyear 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 whichhave 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 bondswhich 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

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 welfareorganization, 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 tohelp 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 financialstatements 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

61 A private, not-for-profit hospital received the following restricted contributions and otherreceipts 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

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 onFebruary 15, 2009 The donors did not place either time or use restrictions on the amountpledged 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 Forthe 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

64 A voluntary health and welfare organization reports pledges receivable on its statement offinancial position at the present value of the future cash collections How is the increase in thepresent value of the pledges receivable, which is due to the passage of time, reported on thevoluntary 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 endedDecember 31, 2008:

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

65 Based on the information provided, in Golden Path's statement of activities for the yearended 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

66 Based on the information provided, in Golden Path's statement of activities for the yearended December 31, 2008, what amount should be reported under the classification ofprogram services?

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

Local Services, a voluntary health and welfare organization had the following classes of netassets 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 oruse restrictions upon their donations

(5) Expenses, excluding depreciation expense, for program services and supporting servicesincurred 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 restrictednet 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

71 Refer to the above information On the statement of activities for the year ended June 30,

2009, reclassifications would be reported at

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

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

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 onoperating 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 onoperating 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 operatingincome

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 onoperating income

D The transaction is not reported on the statement of operations

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 onoperating 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 onoperating 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 onoperating 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

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 onoperating 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 onoperating 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 onoperating 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 thefollowing 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

86 Reporting requirements of other not-for-profit entities (ONPOs) are similar to those ofwhich 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

87 The following information is contained in the funds which are used to account for thetransactions 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.

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 beused more than once or not at all

88 "Responsible for establishing accounting standards for private NFP entities" describeswhich term listed above?

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 termlisted 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 whichterm listed above?

93 "Basis for measuring investments in financial statements" describes which term listedabove?

94 "Classification of investment income from endowment investments if there are no donorrestrictions 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?

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 Thepresentation is for Business and Health-Science majors During the presentation the CFOmentions assets being reported "above the line." On the way out your roommate a health-science major asks, you an accounting major, to explain what the CFO was referring to What

do you respond?

The transactions described in the following questions occurred in a voluntary health andwelfare organization during the year ended December 31, 2008 For each transaction, indicateits 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 Indicateyour 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

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 Thegain is restricted as to use

106 Endowment income was earned The donor specified that the income be used forcommunity service

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 forplant expansion

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

110 Received cash contributions restricted by donors for equipment

111 Acquired equipment with all of the contributions previously received from donors forequipment 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 healthand welfare organization:

1 Cash disbursement of $45,000 was made from the general fund's unrestricted assets for thepurchase 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 onthese 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 theproceeds required to be used solely for construction of a new building This building wascompleted 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 fundsand showing how these transactions or events should be recorded by the organization

114 The FASB has issued five standards that have direct applicability to private, profit entities From the list given below, match each standard to the area it deals with.

not-for-Chapter 19 Not-For-Profit Entities Answer Key

Multiple Choice Questions

1 Which rule-making body is currently setting standards of financial reporting for privatenot-for-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:

AACSB: Reflective Thinking

AICPA: Decision Making

3 A not-for-profit organization received a donation temporarily restricted as to use Thedonated amount was later spent in accordance with the restriction In which category(ies) ofnet 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

5 The term "restricted" as used in university accounting refers to a constraint on the use offunds which has been:

AACSB: Reflective Thinking

AICPA: Decision Making

6 According to Statement of Financial Accounting Standards 117, the statement of financialposition of a private university should report the excess of the university's assets over itsliabilities 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-profitentity 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 theyrequire specialized skills

A.I only

B.I and III only

C.II and III only

D I, II, and III

AACSB: Reflective Thinking