Exam 22: Accounting for Not-For-Profit Organizations

A small town in a rural area has an organization that serves the local community when there is a financial need.Among the services they provide is free groceries,clothes and furniture,along with transportation to doctors' appointments when the doctor is out of town.This voluntary health and welfare organization (VHWO)accepts most donations of goods,all donations of cash,and has developed a relationship with the local grocer who helps them obtain needed food items.The VHO has one paid administrator who tracks and coordinates the donations,performs application reviews to determine eligibility,and schedules transportation for those in need.Volunteers unload and pack grocery items,sort clothes and furniture,and drive those who need transportation.Gasoline costs are reimbursed to the driver based on mileage.The local CPA provides bookkeeping and tax services for free,and designates 90% of expenses incurred to community services and 10% to management and general. The VHWO had the following transactions in 2011: 1.The administrator is paid $11,000 salary. 2.The accountant services are valued at $6,000 based on their normal billable rate. 3.The landlord of the building they use for their operations has waived their rent and provided the bill of $6,000 for their records.The VHWO paid utilities and property taxes of $3,000. 4.Office furniture was donated with an estimated fair value of $9,400. 5.The VHWO received cash donations of $20,000,$5,000 of which was an unpaid pledge from the prior year.The beginning pledges receivable balance was $6,000,and no amount had previously been estimated to be uncollectible.The prior year balance will now be written off.In addition,$12,000 was pledged to be donated in 2012.Based on recent history,the VHWO knows that 10% of the new pledges will not be collected. Required: Prepare the journal entries for the transactions noted above.

In a not-for-profit,private university,the federal grant funds given directly to students for financial aid are an example of

Which of the following is not true?

Prepare journal entries to record the following transactions for a private,not-for-profit university. 1.Tuition and fees assessed total $10,000,000,80% of which was collected by year-end;tuition scholarships were granted for $1,300,000,and $650,000 was expected to be uncollectible. 2.Revenues collected from sales and services by the university bookstore were $1,450,000. 3.Salaries and wages paid were $5,600,000,$300,000 of which was for employees of the university bookstore. 4.Financial aid funds of $700,000 were received from the Pell Grant program;the funds were then disbursed to the appropriate students. 5.Contributions of $600,000 were received;$30,000 was restricted for the athletic department and the balance was unrestricted.An additional $70,000 was pledged to the athletic department by the alumni. 6.Athletic equipment was purchased with $42,000 previously set aside for that purpose.

Under GAAP,for nonprofit,nongovernmental entities,an unconditional transfer of cash or other assets to an entity,or a settlement or cancellation of its liabilities in a voluntary,non-reciprocal transfer,is called a(n)

Voluntary health and welfare organizations must report expenses classified by

Record the following transactions for Porter Hospital,a private,nonprofit hospital: 1.Gross patient services revenues: $25,000,000.Billed to patients. 2.Included in the above revenues are: charity services,$500,000;contractual adjustments,$11,000,000;and estimated uncollectible amounts,$250,000. 3.Purchased equipment by issuing a 5-year note for $200,000. 4.Received cash donations restricted for a capital building addition program,$5,100,000. 5.Incurred and paid $1,700,000 of contractor billings for the capital building program.

The following information was taken from the accounts and records of the Helping Hands Foundation,a private,not-for-profit organization classified as a VHWO.All balances are as of June 30,2011,unless otherwise noted. The unrestricted support from contributions was received in cash during the year.The expenses included $1,350,000 paid from temporarily-restricted cash donations. Required: Prepare Helping Hands' Statement of Activities for the fiscal year ended June 30,2011.

Carousel Clothes is a voluntary health and welfare organization that provides gently-used second-hand clothes to those in need.They had the following transactions in 2011. 1.Cash gifts were received in the amount of $60,000,of which $13,000 had been pledged in the prior year. 2.Pledges made in the current year but not yet fulfilled amounted to $39,000.Ten percent of the pledges typically prove to be uncollectible.Pledges are made for 2011. 3.An office supply company donates office furniture to the VHWO.The fair value of the furniture is $40,000.No restrictions were placed on the donation. 4.The following expenses were incurred and paid: director's salary,$15,000;facility rental,$18,000;cleaning and repair costs for clothes,$29,000;and purchase of supplies consumed in tagging and distribution of clothes,$5,000.The director's salary is categorized as Support Services and the rest of the costs are Program Services. 5.Restricted pledges were received during the year for $450,000.The pledges are restricted for the construction of a new facility. Required: Prepare the journal entries for Carousel for 2011.

Voluntary health and welfare organizations (VHWO)measure contributions at fair value unless

An alumnus of a nonprofit,nongovernmental university establishes an endowment of $50,000.When the university receives the endowment from the donor,what account will the university credit?

General Hospital is a private,not-for-profit hospital.The following information is available about the operations. 1.Gross patient services charges totaled $3,700,000. 2.Included in the above revenues are: charity services,$360,000;contractual adjustments,$1,200,000;courtesy allowances,$20,000;and estimated uncollectible amounts,$250,000. 3.Premium fees receipts were $110,000. 4.Purchased $75,000 of hospital supplies on account,with payments on that account,$36,000. 5.Received cash donations for a new hospital wing of $2,500,000. 6.Paid contractor $275,000 for billed costs toward the new hospital wing. Required: Prepare journal entries for the aforementioned transactions.

The gift shop of a nonprofit,private hospital has cash revenue of $24,000.What account will the hospital credit?

Childrens Hospital is a private,not-for-profit hospital.The following information is available about the operations. 1.Gross patient services charges totaled $6,400,000. 2.Included in the above revenues are: charity services,$210,000;contractual adjustments,$2,400,000;and courtesy allowances,$37,000. 3.Received a donation of marketable securities with a fair value of $165,000 for the purchase of new diagnostic equipment. 4.The marketable securities were sold for $182,000 and diagnostic equipment was purchased at a cost of $210,000. 5.Revenue from the hospital gift shop was $58,000 and from the cafeteria revenues were $227,000.Received cash from both enterprises. 6.Incurred and paid nursing service costs of $1,700,000 and general service costs of $400,000. Required: Prepare journal entries for the aforementioned transactions.

Not-for-profit,private colleges classify student unions,dining halls,and residence halls as

Marshfield Hospital is a private,not-for-profit hospital.The following transactions occurred: 1.Unrestricted cash gifts that were received last year,but designated for use in the current year,totaled $180,000.The cash gifts were used in the current year in accordance with restrictions. 2.Unrestricted pledges of $800,000 were received.Ten percent of the pledges typically prove uncollectible.Additional cash contributions during the year totaled $300,000. 3.Gifts in kind were received that were sold at a silent auction for $23,000.The fair value of the donated gifts in kind could not be reasonably determined. 4.Expenses were incurred and paid as follows: Salary of doctor,$190,000;facility rental,$36,000;purchases of supplies,$8,000;and utility costs,$10,000. 5.Marketable securities with a fair value of $650,000 were received as a donation with a stipulation that the hospital use the funds to purchase suitable land for the hospital. Required: Prepare journal entries for the aforementioned transactions.

Coats for Kids is a private,not-for-profit organization that provides free coats for children in the suburbs of a large city.Coats for Kids had the following transactions in 2011. 1.Unrestricted cash gifts that were received last year,but designated for use in the current year,totaled $50,000.The cash gifts were used in 2011. 2.Unrestricted pledges of $40,000 were received.They are expected to be collected in 2011.Ten percent of the pledges typically prove uncollectible.Additional cash contributions during the year totaled $65,000. 3.A donor donated investments with a fair value of $10,000.The investments can be sold and used only for the purchase of coats for children. 4.The following expenses were incurred and paid: Salary of director,$15,000,classified as supporting services.The remaining expenses of $47,500 were classified as program services. 5.Pledges of $250,000 were received during the year.The pledges were restricted for use in purchasing new delivery vans.All of these pledges are expected to be collected in the next fiscal year.Ten percent are estimated to be uncollectible. Required: Prepare the journal entries for the aforementioned transactions.

Voluntary health and welfare organizations classify fund-raising costs as

Albatross University,a not-for-profit,nongovernmental university,had the following transactions in 2011. 1.Tuition bills were sent amounting to $8,000,000,with 70% collected before the end of the fiscal year;tuition waivers were granted on the total amount of $400,000,and $220,000 was expected to be uncollectible. 2.Cafeteria sales,all cash,were $1,400,000. 3.Salaries and wages were paid amounting to $5,500,000,of which $370,000 was for cafeteria staff. 4.Long-term debt payments were made from general funds amounting to $800,000,of which $130,000 was for interest. 5.Equipment was purchased for the engineering department with funds previously set aside for that purpose,amounting to $180,000. Required: Prepare the journal entries for 2011 for Albatross University.

An alumnus made a donation of adjoining land to a not-for-profit,nongovernmental university.The donor made no specifications regarding the time period or use of the land.The university would record the gift as