Exam 22: Accounting for Not-For-Profit Organizations

Nongovernmental not-for-profit entities follow FASB standards.

Southtown Community Hospital (SCH)shows the following balances on its trial balance at June 30,2014,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. Debits: Administrative services expense 200,000 Contractual allowances 1,200,000 Depreciation expense 700,000 Employee disccunts 300,000 General services expense 900,000 Loss on sale of fixed assets 100,000 Nursing services expense 4,000,000 Resident and visiting professional services expense 3,000,000 Phovision for bad debts 600,000 Credits: Income from investment in clinic 120,000 Ietient service revenues 10,000,000 Iharmacy 400,000 Cafeteria services 200,000 Unrestricted contributions 350,000 Unsestricted income from endowment funds 200,000 Restricted donations for equipment purchases 500,000 Required: Prepare a statement of operations for Southtown Community Hospital at June 30,2014.

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

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.

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

Which of the following is not true?

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

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

Not-for-profits have three classes of net assets within the financial statements: unrestricted,temporarily restricted,and permanently restricted.

A private,not-for-profit university received donations of $800,000 in 2014 that were restricted to capital improvements of the football stadium.The university spent $670,000 on capital improvements for the stadium in 2014 and recorded depreciation of $130,000. In 2014,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.

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?

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 2014: 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 2015.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.

Governmental not-for-profit entities follow GASB.

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

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.

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 2014. 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 2014. 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 2014.

Voluntary health and welfare organizations must report expenses classified by

A nongovernmental,not-for-profit entity is subject to

In a nonprofit,nongovernmental hospital,courtesy allowances are

Contractual adjustments are discounts arranged with third-party payors that frequently have agreements to reimburse at less-than-established rates.