Question 1

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.

Accepted Answer

1. Patient accounts receivable$\quad$$\quad$6,400,000
Patient service revenues - ungestricted$\quad$$\quad$6,400,000 2. Patient service revenues - unrestricted $\quad$$\quad$210,000
Contractual adjustments $\quad$$\quad$$\quad$$\quad$2,400,000
Courtesy discounts $\quad$$\quad$$\quad$$\quad$$\quad$37,000
Patient accounts receivable$\quad$$\quad$$\quad$$\quad$$\quad$2,647,000 3. Marketable securities$\quad$$\quad$$\quad$ 165,004
Temporarily restricted support$\quad$165,000 4. Cash$\quad$$\quad$$\quad$$\quad$182,000
Marketable securities$\quad$165,000
Temporarily restricted support - gain
on stale of marketable securities$\quad$17,000 Equpment$\quad$210,000
Cash$\quad$$\quad$210,000 Temporarily restricted net assets -
reclassifications out$\quad$$\quad$$\quad$$\quad$$\quad$182,000
Unrestricted net assets -
reclassifications in$\quad$$\quad$$\quad$$\quad$$\quad$182,000 5. Cash $\quad$$\quad$$\quad$285,006
Other operating revenue - unrestricted$\quad$285,000 6. Nursing service expense $\quad$$\quad$1,700,000
General services expense $\quad$$\quad$$\quad$$\quad$400,000
Cash$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$2,100,000

Question 2

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.

Accepted Answer

1. Patient accounts receivable$\quad$$\quad$$\quad$3,700,000
Patient service revenues - unrestricted$\quad$$\quad$$\quad$3,700,000 2. Patient service revenues - unrestricted $\quad$360,000
Contractual adjustments $\quad$$\quad$$\quad$$\quad$1,200,000
Courtesy discounts $\quad$$\quad$$\quad$$\quad$$\quad$20,000
Patient accounts receivable$\quad$$\quad$$\quad$$\quad$1,580,000 bad debt expense$\quad$$\quad$$\quad$250,000
Allowance for uncollectible patient
Accounts receivable$\quad$$\quad$$\quad$250,040 3. Cash $\quad$$\quad$$\quad$$\quad$110,000 
Premium revenue - unrestricted$\quad$110,000 4. Supplies inventory$\quad$$\quad$$\quad$75,000
Accounts payable$\quad$$\quad$$\quad$$\quad$75,000 Accounts payable$\quad$36,000
Cash$\quad$$\quad$$\quad$36,000 5. Cash$\quad$$\quad$$\quad$2,500,000
Temporarily restricted support$\quad$2,500,000 6. Construction in progress$\quad$275,000
Cash$\quad$$\quad$275,040 Temporarily restricted net assets -
reclassifications out$\quad$$\quad$$\quad$$\quad$275,000
Unrestricted net assets -
reclassifications in$\quad$$\quad$$\quad$$\quad$275,000

Question 3

GAAP defines a contribution as unconditional transfer of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary,nonreciprocal transfer by another entity acting other than as an owner.

Accepted Answer

A) True 
 B)False  True

Question 4

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

Accepted Answer

A)  unrestricted revenues.
B)  unrestricted support.
C)  deferred revenues until payment is received.
D)  restricted support.

Question 5

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?

Accepted Answer

A)  Nonoperating Revenue
B)  Permanently Restricted Revenue
C)  Unrestricted Support
D)  Temporarily Restricted Support

Question 6

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

Accepted Answer

A)  an endowment asset.
B)  temporarily restricted revenue.
C)  unrestricted revenue.
D)  permanently restricted support.

Question 7

Not-for-profits organizations report expenses by functional classification: program services and supporting services.

Accepted Answer

A) True 
 B)False

Question 8

Wilhelman University,a not-for-profit,nongovernmental university,had the following transactions in 2014.
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 2014 for Wilhelman University.

Accepted Answer

The answer of Wilhelman University,a not-for-profit,nongovernmental university,had the following transactions...

Question 9

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

Accepted Answer

A)  Debit Unrestricted Net Assets,Credit Restricted Net Assets
B)  Debit Unrestricted Fund Balance,Credit Restricted Fund Balance
C)  Debit Restricted Fund Balance,Credit Unrestricted Fund Balance
D)  Debit Temporarily Restricted Net Assets - Reclassifications out,Credit Unrestricted Net Assets - Reclassifications in

Question 10

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 31,2014,unless otherwise noted.
 $\begin{array}{ll}\text { Unrestricted Support - Contributions }&\$6,500,000\
\text { Unrestricted Support - Membership Dues } & 700,000 \
\text { Unrestricted Revenues - Investment Income } & 63,000 \
\text { Temporarily restricted gain on sale of investments } & 20,000 \
\text { Expenses - Program Services } & 2,950,000 \
\text { Expenses - Supporting Services } & 670,000\\text { Expenses - Supporting Services } & 350,000 \
\text { Temporarily Restricted Support - Contributions } & 560,000 \
\text { Temporarily Restricted Revenues - Investment Income } & 70,000 \
\text { Permanently Restricted Support - Contributions } & 80,000 \
\text { Unrestricted Net Assets, January 1, 2014 } & 500,000 \
\text { Temporarily Restricted Net Assets, January 1, 2014 } & 4,000,000 \
\text { Permanently Restricted Net Assets, January 1, 2014 } & 50,000
\end{array}$ 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 31,2014.

Accepted Answer

The answer of The following information was taken from the...

Question 11

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)

Accepted Answer

A)  unconditional promise to give.
B)  contribution.
C)  conditional promise to give.
D)  residual equity transfer.

Question 12

Voluntary health and welfare organizations

Accepted Answer

A)  may not have paid executives or staff.
B)  are governed by separate GASB statements.
C)  use fund accounting,following the rules for proprietary fund reporting.
D)  are supported by,and provide voluntary services to,the public.

Question 13

Match between columns
                        Premises: Charges to patients for patient services
Contractual allowances arranged with third-party payors
Other operating revenue—unrestricted
Depreciation expense on hospital equipment
Courtesy allowances provided to hospital patients
Fees paid to the doctors
Premium fees
Cafeteria sales
Wages paid to nursing staff
Wages paid to hospital janitors

Accepted Answer

The Answer of Deduction from Revenue and Revenue and Gains is...

Question 14

The Trasque Hospital is a nongovernmental,not-for-profit hospital.During 2014,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 2014.

Accepted Answer

The answer of The Trasque Hospital is a nongovernmental,not-for-profit hospital.During...

Question 15

Colleges and universities maintain accounts and reports on a modified-accrual basis.

Accepted Answer

A) True 
 B)False

Question 16

Not-for-profit health care organizations present a statement of financial position,a statement of operations,a statement of changes in net assets,and a statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 17

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.

Accepted Answer

The answer of Marshfield Hospital is a private,not-for-profit hospital.The following...

Question 18

Will Wealth made three charitable donations in 2014.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.

Accepted Answer

The answer of Will Wealth made three charitable donations in...

Question 19

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

Accepted Answer

A)  A statement of financial position
B)  A statement of activities
C)  A statement of functional expenses
D)  A statement of changes in net assets

Question 20

In a nongovernmental,nonprofit hospital,contractual adjustments are

Accepted Answer

A)  the discounted rate given to hospital employees.
B)  discounts arranged with third-party payors.
C)  recorded as a deduction from revenue or as an expense.
D)  additional amounts paid by select group participants.

Exam 22: Accounting for Not-For-Profit Organizations

GAAP defines a contribution as unconditional transfer of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary,nonreciprocal transfer by another entity acting other than as an owner.

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 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?

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

Not-for-profits organizations report expenses by functional classification: program services and supporting services.

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

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

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.

Colleges and universities maintain accounts and reports on a modified-accrual basis.

Not-for-profit health care organizations present a statement of financial position,a statement of operations,a statement of changes in net assets,and a statement of cash flows.

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

In a nongovernmental,nonprofit hospital,contractual adjustments are