Exam 22: Accounting for Not-For-Profit Organizations

The following information is available about the operations for a private,not-for-profit university. 1.The university sold $20,000,000 of 5% bonds to finance the construction of a new building for the business school.The bonds were sold on January 1 and pay interest on December 31 of each year.The bonds were sold at par and mature in 20 years. 2.The university received $7,500,000 cash in alumni and corporate donations for the new business school building. 3.The building was constructed at a total cost of $22,000,000 and the contractor was paid in full. 4.Interest was paid on the bonds. 5.Depreciation on the new building the first year was $275,000. Required: Prepare the appropriate journal entries for the university for these transactions.

Match each of the following descriptions with the correct category for a private,not-for-profit hospital.Each term may be used more than once.

A private,not-for-profit university received donations of $1,000,000 cash in 2011 that were restricted to certain research projects on sustainability,with an emphasis on reducing the campus waste.The university incurred and paid $450,000 of expenses on this research in 2011. In 2011,an alumnus contributed a $700,000 endowment for energy research with all endowment income restricted for that purpose.Income totaled $35,000 for the year.Energy research expenses incurred and paid were $22,000. Required: Prepare the appropriate journal entries for the university for these transactions.

For a Voluntary Health and Welfare Organization,what entry is prepared when the restriction on a cash donation is met?

Wilhelman University,a not-for-profit,nongovernmental university,had the following transactions in 2011. 1.Tuition bills were sent amounting to $4,000,000,with tuition waivers granted on that amount of $200,000. 2.State funding was received in the amount of $2,000,000. 3.The bookstore and cafeteria sales amounted to $1,600,000,and their cost of sales was $1,500,000.Assume cash sales and cash purchases for these auxiliary operations. 4.Endowment income amounted to $100,000 that was restricted to chair the accounting department,and $200,000 of unrestricted income. 5.Expenses were incurred and paid as follows: faculty,$3,800,000 (including faculty chair,paid in part by endowment income);Student services,$250,000;Facilities operations,$350,000;and scholarships (excluding tuition waived),$400,000. Required: Prepare the journal entries for 2011 for Wilhelman University.

Will Wealth made three charitable donations in 2011.Each was for $500,000,however they were made to three different organizations as follows: 1.Will donated to a local voluntary health and welfare organization (VHWO),and indicated that the funds could be used as the VHO wanted. 2.Will donated to a local private,not-for-profit university,designating the funds to be used for scholarships and student aid. 3.Will donated to the local not-for-profit,nongovernmental hospital,designating the funds to be used for purchase of diagnostic equipment. Required: For each of the above three situations: A.Prepare the journal entry that each organization would prepare at the time of the contribution. B.Prepare the journal entry that each organization would prepare at the time of the subsequent spending of the funds.Assume that the spending is in accordance with any restrictions that Will placed on the donation.

Voluntary health and welfare organizations

A donor gives a Voluntary Health and Welfare Organization(VHWO)$1,000 cash that is restricted for a research project.What account does the VHWO credit when the VHWO receives the money?

In a nongovernmental,nonprofit hospital,contractual adjustments are

For nonprofit,nongovernmental organizations,unconditional promises to give that include promises of payments due in future periods (next year or later)are reported as

A nongovernmental,not-for-profit entity is subject to: I.GASB II)FASB

The following information was taken from the accounts and records of the Community Chest Foundation,a private,not-for-profit VHWO organization.All balances are as of December 31,2011,unless otherwise noted. The unrestricted support from contributions was received in cash during the year.The expenses included $980,000 paid from temporarily-restricted cash donations. Required: Prepare Community Chest's Statement of Activities for the year ended December 31,2011.

Which one of the following statements is not required for voluntary health and welfare organizations?

On January 1,2011,a Voluntary Health and Welfare Organization (VHWO)receives an unconditional promise to give $6,000.The money is not collectible until 2012.The VHWO estimates that 10% of pledges are uncollectible.On January 1,2011,the VHWO will credit

A private,not-for-profit university received donations of $800,000 in 2011 that were restricted to capital improvements of the football stadium.The university spent $670,000 on capital improvements for the stadium in 2011 and recorded depreciation of $130,000. In 2011,an alumnus contributed a $1,500,000 endowment for football scholarships with all endowment income restricted for that purpose.Endowment income totaled $75,000 for the year and scholarship awards were $68,000. Required: Prepare the appropriate journal entries for the university for these transactions.

The Trasque Hospital is a nongovernmental,not-for-profit hospital.During 2011,they had the following transactions. 1.Trasque's standard charges for services rendered amounted to $550,000.Contractual adjustments on those amounts with third-party payors amounted to $230,000.Bad debts on the remaining balance are estimated to be 10%. 2.The hospital received a cash donation of $20,000 to be used for medical equipment. 3.The hospital also received rent from a local shelter that uses the basement of their facility for overflow housing,amounting to $6,000 per year. 4.The hospital paid the following costs: Professional fees (doctors and physician assistants),$80,000;Nursing services,$70,000;and administrative services,$40,000. 5.The hospital paid for pharmaceuticals and medical supplies amounting to $110,000.The hospital had an agreement with the pharmaceutical and medical supply vendors to carry all inventory on consignment,due to their not-for-profit status.As a result,items are only paid for as consumed,and all inventory belongs to the vendors. Required: Prepare the journal entries for Trasque for 2011.

Southtown Community Hospital (SCH)shows the following balances on its trial balance at June 30,2011,their fiscal year end.SCH is a not-for-profit,nongovernmental hospital.$260,000 cash was spent on equipment from donations restricted for that purpose. Required: Prepare a statement of operations for Southtown Community Hospital at June 30,2011.

In a nonprofit,nongovernmental hospital,courtesy allowances are

A gift-in-kind,for which the not-for-profit entity has no discretion on disposition,should be accounted for by the not-for-profit,nongovernmental entity as