Resources of an unrestricted fund that are designated by the governing board for endowment purposes are accounted for in the unrestricted fund by all NNOs except a.. Under Newman Hospita
Trang 1Chapter 19 Accounting for Nongovernment Nonbusiness Organizations: Colleges and
Universities, Hospitals, and Other Healthcare Organizations
Multiple Choice
1 Special entities are not-for-profit organizations that are
a government owned
b privately owned
c publicly owned
d either government owned or privately owned
2 A municipality's capital projects fund is similar to a university's
a renewals and replacements fund
b retirement of indebtedness fund
c investment in plant fund
d none of these
3 Board designated funds should be accounted for as
a restricted funds
b specific purpose funds
c unrestricted funds
d none of these
4 For a university, the receipt of assets for operating activities that have external restrictions as to the
purposes for which they can be used is recorded by crediting
a Fund Balance-Restricted
b Contribution Revenue
c Deferred Revenue
d Net Assets Released
5 Which of the following statements related to pledges is incorrect?
a Pledges are signed commitments to contribute specific amounts of money on a future date or in installments
b Pledges are recorded as revenues when a promise to give is nonrevocable and unconditional
c Pledges are generally enforceable contracts
d All of these are correct
6 When the donor has specified a particular date or event after which the principal of the Endowment
Fund may be expended, the Endowment Fund is referred to as a(n)
a pure endowment fund
b term endowment fund
c quasi endowment fund
d expendable endowment fund
Trang 27 The basic financial statements for all NNOs include a
1 Balance sheet
2 Statement of activities
3 Statement of cash flows
a 1 and 3
b 2 and 3
c 1 and 2
d 1, 2, and 3
8 Revenues and expenses of hospitals are recorded in the accounts of the
a Endowment Fund
b General Fund
c Plant Replacement Fund
d Specific Purpose Fund
9 Investments are reported by NNOs at
a cost
b fair value
c the lower of cost or fair value
d the higher of cost or fair value
10 Resources of an unrestricted fund that are designated by the governing board for endowment
purposes are accounted for in the unrestricted fund by all NNOs except
a voluntary health and welfare organizations
b hospitals
c colleges and universities
d other NNOs
11 In accounting for loan funds, revenue is recorded when the
a contribution is received
b loan is made to students
c loan is repaid by students
d students graduate
12 All of the following are a plant fund in colleges and universities except
a unexpended plant fund
b funds for renewals and replacements
c investment in plant
d plant replacement and expansion fund
13 Most property, plant and equipment transactions of hospitals are accounted for in the
a fund for renewals and replacements
b general fund
c plant replacement and expansion fund
d unexpended plant fund
14 All NNOs have current restricted funds and unrestricted funds except
a colleges and universities
Trang 315 Tuition waivers for which there is no intention of collection from the student should be classified by
a college as:
Revenue Expenditures
16 Which of the following is used for current expenditures by a college?
Unrestricted Restricted Current Funds Current Funds
17 Under Newman Hospital’s established rate structure, the hospital would have earned patient service
revenue of $7,000,000 for the year ended December 31, 2011 However, Newman did not expect to collect this amount because of charity allowances of $1,000,000 and discounts of $500,000 to third party payers In May 2011, Newman purchased bandages from Ace Supply Co at a cost of $5,000 However, Ace notified Newman that the invoice was being cancelled and that the bandages were being donated to Newman
For the year ended December 31, 2011, how much should Newman record as patient service
revenue?
a $7,000,000
b $6,500,000
c $6,000,000
d $5,500,000
18 Under Newman Hospital’s established rate structure, the hospital would have earned patient service
revenue of $7,000,000 for the year ended December 31, 2011 However, Newman did not expect to collect this amount because of charity allowances of $1,000,000 and discounts of $500,000 to third party payers In May 2011, Newman purchased bandages from Ace Supply Co at a cost of $5,000 However, Ace notified Newman that the invoice was being cancelled and that the bandages were being donated to Newman
For the year ended December 31, 2011, Newman should record the donation of bandages as:
a a $5,000 reduction in operating expenses
b nonoperating revenue of $5,000
c other operating revenue of $5,000
d a memorandum entry only
Trang 419 The following funds were among those on Cole University's books at April 30, 2011:
Funds to be used for acquisition of additional properties
for university purposes (unexpended at 4/30/11) $2,500,000
Funds set aside for debt service charges and for the
retirement of indebtedness on university properties 5,000,000
How much of the above-mentioned funds should be included in plant funds?
a $0
b $2,500,000
c $5,000,000
d $7,500,000
20 Which basis of accounting should a voluntary health and welfare organization use?
a Cash basis for all funds
b Modified accrual basis for all funds
c Accrual basis for all funds
d Accrual basis for some funds and modified accrual basis for other funds
21 Which one of the following statements is not required for NNOs?
a statement of financial position
b statement of cash flows
c statement of changes in net assets
d statement of activities
22 Admissions, counseling and registration are considered to be:
a educational and general services
b auxiliary enterprises
c student services
d institutional support
23 A good reason for NNOs to adopt fund accounting even though FASB standards do not require it is
because:
a the capital assets are significant
b the donated services are significant
c the program services are involved with more than one type of revenue
d restrictions are placed by donors in many cases
24 Which of the following groups of not-for-profit entities must use fund accounting to be in
conformity with GAAP?
Governmental Nongovernmental
25 GASB No 35 allows public colleges and universities to:
a apply guidance designed for special-purpose governments
b use FASB standards to permit consistent reporting
Trang 526 For the fall semester of 2011, Newton College assessed its students $5,000,000 for tuition and fees
The net amount realized was only $4,700,000 because of the following revenue reductions:
Refunds occasioned by class cancellations and student withdrawals $ 80,000 Tuition remissions granted to faculty members’ families 20,000
How much should Newton College report for the period for unrestricted current funds revenues from tuition and fees?
a $5,000,000
b $4,900,000
c $4,780,000
d $4,700,000
27 During the years ending June 30, 2010, and June 30, 2011, Madison University conducted a cancer
research project financed by a $3,000,000 gift from an alumnus This entire amount was pledged by the donor on July 10, 2009, although he paid only $800,000 at that date The gift was restricted to the financing of this particular research project During the two-year research period, Madison related gift receipts and research expenditures were as follows:
Year Ended June 30
Cancer research restricted expenditures 1,400,000 1,600,000 How much gift revenue should Madison University report in the temporarily restricted column of its statement of activities for the year ended June 30, 2011?
a $3,000,000
b $1,600,000
c $1,200,000
d $0
28 Bell Foundation, a voluntary health and welfare organization, supported by contributions from the
general public, included the following costs in its statement of functional expenses for the year ended December 31, 2011
Bell’s functional expenses for 2011 program services included
a $200,000
b $600,000
c $1,000,000
d $1,800,000
Trang 629 National Service Center is a voluntary welfare organization funded by contributions from the
general public During 2010 unrestricted pledges of $800,000 were received, half of which were payable in 2010 with the other half payable in 2011 for use in 2011 It was estimated that 10% of these pledges would be uncollectible How much should National report as net contribution revenue for 2010 with respect to the pledges?
a $800,000
b $720,000
c $360,000
d $0
30 Cindy Duncan is a social worker on the staff of National Service Center, a voluntary welfare
organization She earns $42,000 annually for a normal workload of 2,000 hours During 2011 she contributed an additional 800 hours of her time to National at no extra charge How much should National record in 2011 as contributed service expense?
a $0
b $1,680
c $8,400
d $16,800
Problems
19-1 The following events affected the Burlington University Loan Fund:
1 $300,000 is received from a donor to establish a student loan fund Loans will carry a 6% annual interest rate
2 The Loan Fund loaned the $300,000 to students Five percent of the loans are estimated to be uncollectible
3 Loans of $50,000 were repaid with $3,000 of interest
4 A $1,000 student loan was written off as uncollectible
Required:
Prepare the journal entries necessary to record these transactions
19-2 On October 10, 2010, a national voluntary health help foundation was the recipient of a telethon
sponsored by a renowned celebrity Phone donations totaling $8,500,000 were promised Based on historical information, 15% of these pledges are expected to be uncollectible Of these pledges,
$7,100,000 were collected in 2011; the remainder were considered uncollectible
Required:
Identify the proper fund and prepare the journal entries necessary in 2010 and 2011
Trang 719-3 Prepare journal entries for the following transactions or events:
1 The board of trustees of Young College voted to designate $300,000 for expansion of the student union and $90,000 for future research projects
2 In accordance with the requirements of a bond indenture, Young College transferred $85,000 of unrestricted funds for the accumulation of cash to retire the debt related to the construction of the Central Computer Building
3 A governing board of a hospital designates $280,000 for the future expansion of the emergency care facilities
4 A heart association receives pledges of $900,000 from the general public in connection with a telethon It is estimated that 30% of the amounts pledged will not be collectible
5 An ONNO receives the donated services of a CPA with a market value of $10,000
6 On November 3, 2011, $75,000 was donated to a university for library acquisitions of which
$50,000 was expended for this purpose during the remainder of the fiscal year
7 On November 4, 2011, $15,000 was contributed to a voluntary health organization to be used to conduct CPR classes for the public During the remainder of the current fiscal year $14,000 was expended for this purpose
8 On November 5, 2011, $100,000 was contributed to a hospital for cancer research of which
$90,000 was expended for this purpose during the remainder of the fiscal year
19-4 An NNO obtained cash for the acquisition of property and equipment as follows:
These funds are used to acquire land In addition, $20,000 in principal and $2,000 in interest is paid
on indebtedness relating to property and equipment Depreciation on property and equipment for the year is $80,000
Required:
Prepare all necessary entries in the affected funds of the NNO, assuming that the NNO is a:
a Voluntary health and welfare organization
b University
c Hospital
Trang 819-5
The following information was taken from the accounts and records of the NSP Foundation, a private, not-for-profit organization All balances are as of June 30, 2011, unless otherwise noted
Unrestricted Revenues – Investment Income 28,000 Temporarily Restricted Gain on Sale of Investments 13,000
Permanently Restricted Support – Contributions 50,000
Temporarily Restricted Net Assets, July 1, 2010 40,000 Permanently Restricted Net Assets, July 1, 2010 10,000 The unrestricted support from contributions was received in cash during the year The expenses included
$500,000 payable from donor-restricted resources
Required:
Prepare NSP’s statement of activities for the fiscal year ended June 30, 2011
19-6
Christy Hospital received money from a donor to set up an endowment fund The following information pertains to this contribution:
2010
1 $3,000,000 was received to establish the fund The requirements were
a $150,000 of the endowment fund’s income must be used for research grants each year
b The remainder of income is under the discretion of the governing board
c The principal is expendable after the donor’s death It shall be used to purchase equipment
2 The cash received was invested in a number of securities
2011
3 Dividends of $150,000 and interest of $400,000 were received
4 The income was transferred to the appropriate funds
5 Of the restricted income, only $100,000 was expended for its specified purpose during 2011
6 The governing board specified that $300,000 of the income would be used for loans for deserving medical students
2012
7 $250,000 was lent to medical students
8 The donor died of cancer
Trang 9Required:
Set up headings for the following funds: Endowment, General, Specific Purpose, and Plant
Replacement and Expansion Prepare the entries necessary in each fund to record the events listed above
19-7
The following events were recorded on the books of Denton Hospital for the year ended December 31, 2011
1 Revenue from patient services totaled $12,000,000 The allowance for uncollectibles was
established at $2,500,000 Of the $12,000,000 revenue, $4,500 was recognized under cost
reimbursement agreements This revenue is subject to audit and retroactive adjustment by third-party payors
2 Patient service revenue is accounted for at established rates on the accrual basis
3 Other operating revenue totaled $260,000, of which $120,000 was from specific purpose funds
4 Denton received $310,000 in unrestricted gifts and bequests They are recorded at fair market value
when received
5 Endowment funds earned $120,000 in unrestricted income
6 Board designated funds earned $62,000 in income
7 Denton’s operating expenses for the year amounted to $10,030,000 This included $380,000 in
straight-line depreciation
Required:
Prepare a statement of activities for Denton Hospital for the year ended December 31, 2011
Short Answer
1 The fund structure and terminology differ among NNOS, but there are six funds commonly used
Identify the funds used by nongovernment nonbusiness organizations
2 Contributions to NNOS include gifts of cash, pledges, donated services, and gifts of noncash assets Explain how contributions are recorded by NNOS
Short Answer Questions from the Textbook
1 What authoritative body(s) is (are) responsible for establishing financial accounting standards for NNOs?
2 Why do most NNOs use fund accounting?
3 NNOs distinguish between restricted and un restricted funds Why is this distinction important?
4 What is the major difference in accounting for the general fund of a hospital and the unrestricted fund of other NNOs?
5 What is the major difference in accounting between conditional and unconditional pledges? Give an example of each
6 What is the relationship (if any) between board-designated funds and nonmandatory transfers?
7 May board designated funds ever be accounted for in the unrestricted current fund? Explain
Trang 108 When should an NNO record donated services in its accounting records?
9 The donated services of volunteer workers on fundraising campaigns are usually not given ac-counting recognition Why?
10 Universities and hospitals often reduce their standard service charge to students or patients How are these reductions reflected in the statements of revenue and expenses of these organizations?
Explain
11 What fund is used to account for the library books owned by a university? How should depreciation
of the library books be reflected in the financial statements of the university?
12 In which fund of a hospital are medical equipment and related longterm obligations recorded? Would your answer be the same for a voluntary health and welfare organization? Explain
13 What capital assets (if any) of ONNOs need not be depreciated?
14 Identify three different types of endowment funds and explain how they differ
15 Distinguish an annuity fund from a life income fund