Exam 12: Not-For-Profit Organizations

During the annual fund-raising drive, the Cancer Society raised $900,000 in pledges of financial support for general operations. By fiscal year-end, the society had collected $600,000 of the pledges. The society estimates that 10% of the remaining pledges will be uncollectible. The NET amount of revenue the society should recognize during the current year from this pledge drive is

FASB Statement No. 95 requires not-for-profits to use the direct method in their statements of cash flows.

Nelson County Historical museum, a not-for-profit entity that capitalizes its collection items, received a gift of several Civil War artifacts to be used for display and research. The donor found these items while cleaning out the closet of an old house. The fair value is hard to estimate but a dealer in these types of artifacts estimates their value at $2,000. The entry to record this donation is

Simplex Games, a not-for-profit entity organized to provide athletic competition opportunities for high school students, utilizes a number of volunteers in carrying out its mission. At the 2017 Games 50 volunteers provided a total of 1,000 hours of service performing tasks such as picking up litter and delivering water to the athletes. A local CPA firm donates its services to prepare the annual tax return and other federal and state required paperwork which must be filed to maintain its status as a tax-exempt organization. During 2017 the CPA firm provided 50 hours of service. If purchased, the CPA services would have cost $60 per hour and the game workers would have cost $6 per hour. How much contributed service revenue should Simplex Games recognize in 2017?

The increase in unrestricted net assets in 2016 as a result of the fund-raising drive is

Traditional financial ratios, such as measures of liquidity and debt burden, are seldom useful for assessing the fiscal health of not-for-profits.

In June 2016, the wealthy parents of a college sophomore pledge to donate $1.5 million to the college she attends, making payments of $0.5 million at the end of each of her remaining years at the school until her expected graduation in 2019. The college applies a discount rate of 3 percent. At that rate, the present value of $1 for three periods is $2.82861. REQUIRED: What entry, if any, would be required to recognize the pledge? What entry(ies), if any, would be required to record the receipt of the first $0.5 million at the end of year 2016? Assume that the college uses separate funds to track restricted resources and indicate in which fund each entry is made.

St. Mary's Extended Care Center, a not-for-profit entity, enjoys the services of a group of high-school-age people who each agree to work three afternoons a week for three hours each afternoon performing a variety of patient-related services, such as writing letters for those who are unable to do so, delivering mail to the patient rooms, and pushing wheel-chair patients across the grounds. The services rendered by these young people enhance the quality of life for the residents. They could not be provided if they were not donated because there are not enough resources to do so. The past year the young people donated 5,000 hours in total. The services would have cost $6.00 per hour if they had been purchased but they were worth $10 an hour to St. Mary's. What is the amount of contributed revenue that should be recognized by St. Mary's related to these services?

The FASB requires external financial reports to provide information about

A not-for-profit art museum that has elected not to capitalize its art collection receives a donation of a rare piece of Tlinket Indian art. The donor paid $8,000 for the piece several years ago. Today the piece has an estimated fair value of $50,000. What entry should the art museum make upon receipt of this donation?

The FASB requires the balance sheets of not-for-profits to display

Unlike governments, not-for-profits should not recognize contributions of art collections as revenue unless they capitalize them.

FASB standards require not-for-profit organizations to classify their resources into three categories: unrestricted, temporarily restricted, and permanently restricted.

In a prior year, United Charities received a $125,000 gift to be used to acquire vans to provide transportation for physically challenged adults. During the current year, United acquired two vans at a cost of $75,000 each. The appropriate entry(ies) to record the acquisition is

The Friends of the Library (FOL), a not-for-profit entity, received a gift restricted to the acquisition of a special piece of equipment used to restore books. Late last year FOL acquired the machine at a total cost of $19,000. The machine is estimated to have a useful life of eight years and a salvage value of $3,000. In what fund should FOL make the entry to record the depreciation for the current year?

Music Lovers Foundation, a not-for-profit governed by an independent board, was founded to support the Northern State University Choir until such time as the state legislature adequately funds the choir. When the choir is adequately funded by appropriation, the Foundation may direct resources to other music projects that it deems acceptable. When Music Lovers accepts a contribution from a donor it should debit cash and/or other assets and credit

The Midwest Circulatory Diseases Society placed an advertisement in prominent publications in the region. The advertisement provided information about symptoms of the diseases and offered practical advice for controlling their immediate effects. The society's accountants estimate that about 75 percent of the advertising copy was devoted to information about the disease and the remainder was an appeal for funds. The advertisement cost $20,000. Using the physical units method of separating joint costs, how much of the cost of the advertisement should be reported as program costs?

Native Art Museum, a not-for-profit entity that elects not to capitalize its collection items, purchased for $10,000 a wonderful totem pole for display near the door of the museum. As a result of this transaction, which of the following entries should be made?

Donor restrictions are only recognized when there is a specific purpose for the donated resources.

A generous benefactor pledges $1 million to The R. J. Smith Foundation, a not-for-profit entity that promotes the arts. The gift is to be used to provide scholarships for talented musicians at a music camp operated by the Foundation. The gift was given in August 2013 to support the Summer 2014 music program. The foundation director argues that the gift is a conditional restricted gift and therefore cannot be recognized as revenue in 2013. The accountant argues that the gift is an unconditional restricted gift and must be recognized in the current year. What is the basis for the director's argument? What is the basis for the accountant's argument? In your answer provide an explanation of the terms conditional, unconditional, restricted and unrestricted.