Advance in-Service revenue 6,000,000 Service Revenue 6,000,000
2. Since not-for-profits usually recognize gifts of cash and other assets not preceded by a pledge as revenue upon receipt, the transactions would be made in a temporarily restricted fund by the recipient organization and when the cash is received and available for use the transaction is transferred to an unrestricted fund.
Pledges Receivable 6,000,000 Revenue from contributions 6,000,000
Cash 6,000,000 Pledges Receivable 6,000,000
3. Exchange transactions are distinguished from contributions in a couple of different ways. A contribution is a transfer of assets and in this particular transaction the donor does not expect any equal value in return. These transactions are accounted for like any other ordinary commercial transaction and are made to an unrestricted account. In pledges, NFPs recognize gifts of cash or other assets which are not preceded by a pledge as revenue upon receipt. If a gift is of other assets and not cash, the other assets are measured at their fair market value.
4. No, the approach would not have to be much different. This type of promise by the donor to make a contribution only after a report that the research had actually been completed by CAA is called a conditional promise. Resources that are provided by the donor can still be held as restricted or unrestricted funds.
12-8
Cash 30,000 Revenue from contributions 30,000 (restricted fund)
Resources released from restrictions 21,000 (restricted fund) Cash 21,000 Equipment 21,000 (unrestricted fund) Resources released from restriction 21,000
12-9 1. Northwest Ballet Association For the year ended December 31, 2013 Statement of Activities (in millions)
Unrestricted Restricted Revenues: Contributions 6 Interest from investments 0.52
Total revenues 0.52 6
Expenditures: Interest 0.32 Excess of revenue over expenditure 0.20 Resources released 3.40 (3.40)
Net increase in the funds 3.60 2.60
2. Technically, governments restricted grants are comparable to contributions for NFPs. The definition of restricted contributions means that they can be used only for the specified purposes. A conditional gift is also comparable to a restricted gift. NFPs must report their investments at fair value just like any other business entity. The donation should be kept in a restricted fund and the interest and sale of the bond would be kept in an unrestricted fund.
3. The NBA must report their investment according to both GASB and FASB standards at fair value. The $0.7 million which was placed in a reserve fund should be restricted since this money is specifically for repayment of the original debt.
12-10
1. The principal amount in the permanently restricted endowment fund would be $2 million at the end of all years.
2. The principal amount in the related temporarily restricted fund for the year end balances in 2014, 2015 and 2016 would be as follows: 2014 a gain of $120,000 added to unrestricted net assets with a yearend balance of $120,000 2015 a loss of $60,000 added to the unrestricted net assets with a yearend balance of $60,000 2016 only $60,000 to the extent of previous deduction, in gain of $70,000 should be added to unrestricted net assets and yearend balance would be $120,000, temporarily restricted net assets would be $10,000
2. According to FASB statement No. 124, Accounting for certain investments held by not-for-profit Organization, it should first charge investment losses to temporarily restricted net assets. In this scenario, we would assign no loss to the permanently restricted net assets and $500,000 to the temporarily restricted assets.