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LO2
2.
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3.
It must have
It must only
A government
A government
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4.
a. I. only.
b. II. only.
c. A combination of I and II depending on the entitys
purpose.
d. Neither I or II
In accounting for private, not-for-profit organizations,
revenues and expenses are reported at _________ amounts and
most gains and losses are reported at ___________ amounts.
a.
b.
c.
d.
net, gross
gross, net
gross, gross
net, net
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5.
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6.
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7.
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8.
unrestricted revenues.
a memorandum, until the year of the promised payment.
deferred revenues until payment is received.
restricted revenues.
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9.
Restriction.
function and natural classification.
restriction and natural classification.
restriction, function and natural classification.
LO4
10.
LO4
11.
statement
statement
statement
statement
of
of
of
of
financial position.
activities.
functional expenses.
changes in net assets.
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12.
A
A
A
A
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13.
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14.
As
As
As
As
a restricted revenue.
an unrestricted contribution.
both an unrestricted revenue and as an expense.
a pro bono activity.
LO5
15.
LO5
16.
Activities treated as deductions from gross revenues (contrarevenue accounts) in not-for-profit hospitals and other health
care organizations include(s)
a.
b.
c.
d.
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17.
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19.
Which of the following is (are) treated as expense(s) by notfor-profit colleges and universities?
a.
b.
c.
d.
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18.
an endowment asset.
a restricted revenue.
an unrestricted revenue.
an exchange transaction.
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20.
a bequest.
an agency transaction.
unrestricted revenue.
a restricted contribution.
LO3
Exercise 1
The following information was taken from the accounts and records of
the Astronomy Foundation, a private, not-for-profit organization. All
balances are as of December 31, 2005, unless otherwise noted.
Unrestricted Support - Contributions..................
Unrestricted Support - Membership Dues................
Unrestricted Revenues - Investment Income.............
Temporarily restricted gain on sale of investments. . . .
Expenses - Research...................................
Expenses - Fund Raising...............................
Expenses - Management and General.....................
Restricted Support - Contributions....................
Restricted Revenues - Investment Income...............
Permanently Restricted Support - Contributions........
Unrestricted Net Assets, January 1, 2005..............
Temporarily Restricted Net Assets, January 1, 2005. . . .
Permanently Restricted Net Assets, January 1, 2005. . . .
$5,000,000
600,000
96,000
9,000
3,200,000
700,000
300,000
600,000
50,000
60,000
500,000
6,000,000
50,000
LO3
Exercise 2
The following information was taken from the accounts and records of
the Archive Foundation, a private, not-for-profit organization. All
balances are as of June 30, 2006, unless otherwise noted.
Unrestricted Support - Contributions..................
$3,000,000
Unrestricted Support - Membership Dues................
700,000
Unrestricted Revenues - Investment Income.............
76,000
Temporarily restricted gain on sale of investments. . . .
19,000
Expenses - Research...................................
2,200,000
Expenses - Fund Raising...............................
400,000
Expenses - Management and General.....................
500,000
Restricted Support - Contributions....................
600,000
Restricted Revenues - Investment Income...............
40,000
Permanently Restricted Support - Contributions........
70,000
Unrestricted Net Assets, July 1, 2005.................
450,000
Temporarily Restricted Net Assets, July 1, 2005.......
2,100,000
Permanently Restricted Net Assets, July 1, 2005
60,000
The unrestricted support from contributions was received in cash
during the year. The expenses included $800,000 payable from donor restricted resources.
Required:
Prepare Archive's statement of activities for the fiscal year ended
June 30, 2006.
LO4
Exercise 3
Food for the Golden Years is a private, not-for-profit organization
that provides free meals for the post-65 age group in the suburbs of a
large city. Record the following transactions in the accounts of Food
for the Golden Years. The following transactions affected the accounts
of Food for the Golden Years.
1. Unrestricted cash gifts that were received last year, but designated
for use in the current year, totaled $20,000.
2. Unrestricted pledges of $40,000 were received. Five percent of the
pledges typically prove uncollectible. Additional cash contributions
during the year totaled $25,000.
3. Donations of food totaled $100,000. The inventory of food on hand
decreased by $1,500 during the year.
4. The following expenses were incurred: Salary of director, $15,000;
facility rental for the meals program, $2,500; and purchases of
food, $45,000.
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.
Required:
Make journal entries for the aforementioned transactions.
LO4
Exercise 4
The Rehabilitation Clinic is a private, not-for-profit organization
that provides free rehabilitation health services for the uninsured.
The following transactions occurred for the Rehabilitation Clinic.
1. Unrestricted cash gifts that were received last year, but designated
for use in the current year, totaled $40,000.
2. Unrestricted pledges of $400,000 were received. Two percent of the
pledges typically prove uncollectible. Additional cash contributions
during the year totaled $200,000.
3. Gifts in kind were received that were sold at a silent auction for
$16,000. The fair value of the donated gifts in kind could not be
reasonably determined.
4. Expenses were incurred as follows: Salary of doctor, $110,000;
facility rental for the clinic program, $60,000; purchases of
supplies, $10,000; and utility costs, $12,000.
5. Marketable securities with a fair value of $520,000 were received
with a stipulation that the clinic use the funds to purchase a
suitable property for the clinic.
Required:
Make journal entries for the aforementioned transactions.
LO5
Exercise 5
Little Town Hospital is a private, not-for-profit hospital.
following information is available about the operations.
The
LO5
Exercise 6
Remote Reconstructive is a private, not-for-profit hospital.
following information is available about the operations.
The
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Exercise 7
Prepare journal entries to record the following transactions for a
private, not-for-profit university.
1. Tuition and fees assessed total $10,000,000, 85% of which was
collected by year-end; tuition scholarships were granted for
$800,000, and $400,000 was expected to be uncollectible.
2. Revenues collected from sales and services by the university
bookstore were $1,000,000.
3. Salaries and wages were $5,000,000, $200,000 of which was for
employees of the university bookstore.
4. Financial aid funds of $500,000 were received from the Pell Grant
program; the funds were then disbursed to the appropriate students.
5. Contributions of $250,000 were received; $50,000 was restricted for
the athletic department and $200,000 was unrestricted. An additional
$25,000 was pledged to the athletic department by the alumni.
6. Athletic equipment was purchased with $35,000 previously set aside
for that purpose.
LO6
Exercise 8
A private, not-for-profit university received donations of $2,000,000
in 2005 that were restricted to certain research projects on zero
gravity material science. The university incurred $1,150,000 of
expenses on this research in 2005.
In 2005, an alumnus contributed a $1,000,000 endowment for genetic
research with all endowment income restricted for that purpose. Income
totaled $50,000 for the year and zero gravity research expenses were
$44,000.
Required:
Prepare the appropriate journal entries for the university.
LO6
Exercise 9
The following information is available about the operations for a
private, not-for-profit university.
1. The university sold $9,000,000 of 8% 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 $2,500,000 in alumni donations for the new
business school building.
3. The building was constructed at a total cost of $10,500,000 and the
contractor was paid in full.
4. Interest was paid on the bonds.
5. Depreciation on the new building was $525,000.
Required:
Prepare the appropriate journal entries for the university.
LO6
Exercise 10
A private, not-for-profit university received donations of $500,000 in
2005 that were restricted to capital improvements of the football
stadium. The university spent $650,000 on capital improvements for the
stadium in 2005 and recorded depreciation of $51,000.
In 2005, an alumnus contributed a $2,500,000 endowment for football
scholarships with all endowment income restricted for that purpose.
Income totaled $201,000 for the year and scholarship awards were
$299,000.
Required:
Prepare the appropriate journal entries for the university.
SOLUTIONS
Multiple Choice Questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Exercise 1
Astronomy Foundation
Statement of Activities
For the Year Ended December 31, 2005
Changes in Unrestricted Net Assets
Revenues and Gains
Contributions...........................
Membership dues.........................
Investment Income.......................
Total revenues and gains.............
Net assets released from restrictions
Increase in unrestricted net assets
Expenses:
Program Services:
Research................................
Supporting Services:
Management and General..................
Fund Raising............................
Total Supporting Services............
Total Expenses.......................
Net increase in unrestricted net assets
$5,000,000
600,000
96,000
5,696,000
1,300,000
6,996,000
3,200,000
300,000
700,000
1,000,000
4,200,000
2,796,000
600,000
50,000
9,000
(1,300,000)
( 641,000)
60,000
60,000
2,215,000
6,550,000
$8,765,000
Exercise 2
Archive Foundation
Statement of Activities
For the Year Ended June 30, 2006
Changes in Unrestricted Net Assets
Revenues and Gains
Contributions...........................
Membership dues.........................
Investment Income.......................
Total revenues and gains.............
Net assets released from restrictions
Increase in unrestricted net assets
Expenses:
Program Services:
Research................................
Supporting Services:
Management and General..................
Fund Raising............................
Total Supporting Services............
Total Expenses.......................
Net increase in unrestricted net assets
Changes in Temporarily Restricted Net Assets
Contributions...........................
Investment Income.......................
Gain on Sale of investments.............
Net assets released from restriction....
Decrease in temporarily restricted net assets
Changes in Permanently Restricted Net Assets
Contributions...........................
Increase in permanently restricted net assets
Increase in net assets.....................
Net assets, July 1, 2005...................
Net assets, June 30,2006...................
$3,000,000
700,000
76,000
3,776,000
800,000
4,576,000
2,200,000
500,000
400,000
900,000
3,100,000
1,476,000
600,000
40,000
19,000
(800,000)
(141,000)
70,000
70,000
1,405,000
2,610,000
$4,015,000
Exercise 3
1. Temporarily restricted net assets reclassifications out............
Unrestricted net assets reclassifications in..............
20,000
20,000
2. Pledges receivable......................
Cash
.................................
Allowance for uncollectible pledges. .
Unrestricted support - contributions.
40,000
25,000
101,500
15,000
45,000
2,500
5. Pledges receivable......................
Temporarily restricted support contributions.....................
250,000
2,000
63,000
1,500
100,000
62,500
250,000
Exercise 4
1. Temporarily restricted net assets reclassifications out...................
Unrestricted net assets reclassifications in.................
40,000
40,000
2. Pledges receivable......................
Cash
.................................
Allowance for uncollectible pledges. .
Unrestricted support - contributions.
400,000
200,000
3. Cash....................................
Unrestricted revenues - sales........
16,000
110,000
10,000
60,000
12,000
5. Marketable securities...................
Temporarily restricted support contributions........................
520,000
8,000
584,000
16,000
192,000
520,000
Exercise 5
1.
Accounts receivable.....................
Patient service revenues-unrestricted
4,000,000
125,000
350,000
10,000
150,000
Cash....................................
Premium revenue - unrestricted.......
125,000
Supplies inventory......................
Accounts payable.....................
40,000
Accounts payable........................
Cash.................................
36,000
Cash....................................
Temporarily restricted support.......
1,100,000
6. Construction in progress................
Cash.................................
275,000
2.
3.
4,000,000
485,000
150,000
125,000
4.
5.
40,000
36,000
1,100,000
275,000
275,000
275,000
Exercise 6
1.
Accounts receivable.....................
Patient service revenues-unrestricted
4,500,000
165,000
400,000
14,000
3. Marketable securities...................
Temporarily restricted support.......
115,000
4. Cash....................................
Marketable securities................
Temporarily restricted support investment income....................
124,000
Equipment...............................
Cash.................................
138,000
2.
4,500,000
579,000
115,000
115,000
9,000
138,000
124,000
124,000
5. Cash....................................
Other operating revenue unrestricted .......................
191,000
1,000,000
500,000
191,000
1,500,000
Exercise 7
1.
Accounts receivable.....................
Revenues - educational and general...
10,000,000
800,000
400,000
10,000,000
Cash....................................
Accounts receivable..................
2009 Pearson Education, Inc. publishing as Prentice Hall
21-18
800,000
400,000
8,500,000
8,500,000
2.
Cash....................................
Revenues - auxiliary enterprises.....
1,000,000
4,800,000
200,000
Cash....................................
Grant funds held for students........
500,000
500,000
Cash
.................................
Contributions receivable................
Unrestricted revenues - contributions
Temporarily restricted revenues contributions....................
250,000
25,000
Equipment...............................
Cash.................................
35,000
1,000,000
3.
4.
5,000,000
500,000
500,000
5.
6.
200,000
75,000
35,000
35,000
35,000
Exercise 8
Cash....................................
2,000,000
Temporarily restricted revenues-research
2,000,000
Expenses - research.....................
Cash/Payables........................
1,150,000
1,150,000
1,150,000
1,150,000
Cash....................................
Permanently restricted revenues endowment contribution...............
1,000,000
Cash....................................
Temporarily restricted revenues endowment income.....................
50,000
Expenses-research.......................
Cash/Payables........................
44,000
1,000,000
50,000
44,000
44,000
44,000
Exercise 9
1. Cash
.................................
Bonds payable........................
9,000,000
2. Cash....................................
Temporarily restricted revenues Contributions.......................
2,500,000
3. Building................................
Cash.................................
10,500,000
9,000,000
2,500,000
10,500,000
10,500,000
10,500,000
4. Expenses - interest.....................
Cash.................................
720,000
5. Expenses depreciation.................
525,000
720,000
Accumulated depreciation.............
525,000
Exercise 10
Cash....................................
Temporarily restricted revenues-stadium
500,000
Buildings - stadium.....................
Cash.................................
650,000
500,000
650,000
650,000
650,000
Expenses - depreciation.................
Accumulated depreciation.............
51,000
Cash....................................
Permanently restricted revenues endowment contribution...............
2,500,000
Cash....................................
Temporarily restricted revenues endowment income.....................
201,000
299,000
51,000
2,500,000
201,000
299,000
299,000
299,000