Exam 12: Not-For-Profit Organizations

Whether a not-for-profit's resources are classified as restricted or unrestricted depends on the presence or absence of donor stipulations.

United Charities, a not-for-profit entity, supports activities for lower-income families. They have regularly engaged in activities such as providing transportation for physically challenged individuals, shelters for the temporarily homeless, group meals for the homeless, and shelters for abused women and children. REQUIRED: Record the following transactions. Your entries should clearly indicate the fund in which the entry is made or the class of net assets to which the entry will be closed. If no entry is required, write "No entry required." a. United Charities engaged in a fund-raising campaign that resulted in pledges of $600,000 to support activities of the current year. During the year, United collected $450,000 on these pledges. b. A local citizen pledged $50,000 to purchase and equip a van to provide transportation for physically challenged individuals. This citizen has donated regularly and there is no reason to believe that this pledge will not be collectible. c. In prior years, an advocacy group for abused women donated $10,000 to be used to furnish a "safe-house" for abused women and children. During the current year renovation of the safe house was completed and furniture was acquired at a total cost of $25,000. d. A wealthy benefactor pledged to give $100,000 to United if United successfully raises a matching amount in a capital asset fund-raising drive being conducted over a 12-month period. e. Cash of $60,000 is received from a donor who specifies that the money must be spent to provide educational activities for children who will be living in the "safe-house." It will be next year before the "safe-house" has its first residents. f. A local attorney has agreed to provide legal services to United on a pro bono basis. During the current period the attorney provided services for which she would have billed $1,500. g. Several older housewives provide services at the United Charities group meal facility. The women work in the kitchen serving meals and cleaning up the kitchen. If these services were not donated United would have to purchase them. The cost of the services at the prevailing wage rate for similar employees would be $50,000 for the current year. h. Fixed assets belonging to United Charities had an original cost of $370,000, an estimated salvage value of $70,000, and an estimated useful life of 20 years. Record depreciation if applicable. i. Cash of $90,000 is received from a donor who specifies that $30,000 is for use by United Charities and $60,000 is to be used by Zimbabwe Charities, United's sister organization in Africa.

"Net assets released from restriction" for a not-for-profit organization is comparable to which of the following for a government?

In the current year a not-for-profit entity received a contribution of $100,000 to use for scholarships. The entity had budgeted $400,000 for scholarships in the current year and it disbursed $350,000 for scholarships. The amount the entity can consider as 'released from restriction' in the current year is

Which of the following characteristics most clearly distinguishes an exchange transaction from a contribution?

The Heritage Art Museum, a not-for-profit entity specializing in art items created by natives of the Pacific Northwest, has a December 31 fiscal year-end. The museum has a policy of NOT capitalizing collection items. REQUIRED: Your entries should clearly indicate the fund in which the entry is made or to which class of net assets the account would be closed. If no entry is required, write "No entry required." a. During the current year the museum received admissions fees of $500,000 in cash. b. Citizens of the local community are encouraged to participate in a program called "Friends of the Museum." For a yearly contribution of $25 per family, a family is entitled to free admission to the museum during the calendar year. A "friend of the museum" also receives a monthly one-page newsletter announcing upcoming events. At year-end, there were 1,000 members in "Friends of the Museum." c. During the current year the museum incurred salaries expense of $1 million of which $40,000 remains unpaid at year-end. d. During the year the museum incurred operating expenses of $450,000 of which $30,000 remains unpaid at year-end. Of the $450,000, $50,000 was used to buy supplies and $20,000 of supplies remain on hand at year-end. e. Office equipment owned by the museum has a historical cost of $140,000 and a salvage value of $20,000 and is being depreciated over 8 years on the straight-line basis. f. During the year the museum conducted a fund-raising drive to raise money to acquire new art items for the museum. The museum received pledges of $200,000 of which the museum had collected $160,000 by year-end and expected to ultimately collect another $20,000. g. The museum had a small portfolio of investments in equity securities.. At the beginning of the year the portfolio had a fair value of $60,000. During the year the Museum collected $3,000 in dividends on the securities. At year-end the portfolio had a market value of $62,000. h. During the year a citizen died and willed his wonderful collection of native art to the museum. The appraised value of the collection was $600,000. i. To balance its collection, the museum sold two of its collection items for $250,000, which approximates fair value. These items had a historical cost to the museum of $10,000. j. The proceeds of the sale and additional cash were used to acquire two new items at a cost of $310,000.