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# Accounts Debit Credit
1 Cash 300
# Accounts Debit Credit
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Problem 2 – Accounting for Restricted Gifts
Listed below are two transactions for an alcohol rehabilitation treatment program. All amounts
are in thousands of dollars.
Transactions:
1. Received pledges of $300 and cash gifts of $100 during the year to be used only for
alcohol rehabilitation treatment programs.
2. Incurred expenses of $220 for its alcohol rehabilitation program but paid the expenses
from unrestricted resources, not from available restricted resources.
Requirement: Prepare the journal entries for these transactions.
Answers:
# Accounts Debit Credit
Note that the FASB considers the restrictions met if restricted resources could have been used for
the expenses—even if they were not used.
Problem 3 – Reporting for Not-for-Profit Organizations
Requirements: Explain the way a nongovernmental, not-for-profit organization must report the
following items in its statement of activities:
A. Receipt of unrestricted contributions
B. Pledges restricted to a specific program
C. Collections, in a subsequent year, of pledges restricted to a specific purpose
D. Pledges restricted to fixed asset construction
E. Earnings on restricted investments
Answers:
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A. Unrestricted contributions received in cash are reported as revenues in the changes in
unrestricted net assets section of the statement of activities in the period received. If the
B. Pledges restricted to a specific program are reported as contributions in the changes in
The depreciation expense and the net assets released from restrictions are not necessarily
equal in amount. For instance, while they may be recognized over the same period,
residual value would not be taken into account in computing the net assets released from
restrictions—even if the same time period is appropriate.
Problem 4 – Statement of Activity for a Nongovernmental, Not-for-Profit Organization
Selected accounts of the Weinstein Musical Society, a nongovernment, not-for-profit
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organization for the year ended December 31, 20X5 is presented below in alphabetical order (all
amounts are in thousands of dollars and all accounts have a normal balance):
Administrative salaries..................................................................................................... $45
Cash contributions restricted for Classical Music Appreciation Program....................... 250
Collections of unrestricted pledges from prior year........................................................ 300
Depreciation—Office Equipment.................................................................................... 2
Depreciation—Equipment—Classical Music Appreciation Program............................. 12
Depreciation—Maestro Program..................................................................................... 5
Fundraising expenses....................................................................................................... 75
Investment Income........................................................................................................... 100
Materials and supplies used—Maestro Program............................................................. 330
Payment of interest on note.............................................................................................. 22
Payment to retire long-term note that matured during the year....................................... 250
Pledges during year (and outstanding at year end) to support Maestro Program............ 1,200
Rent—Performance Halls—Professional Program.......................................................... 500
Salaries—Professional Program...................................................................................... 379
Teacher salaries—Classical Music Appreciation Program.............................................. 23
Teacher salaries—Maestro Program................................................................................ 77
Temporarily restricted net assets, January 1, 20X5......................................................... 1,100
Ticket sales—Performances of Musicians in the Professional Program......................... 150
Unrestricted cash contributions........................................................................................ 800
Unrestricted net assets, January 1, 20X5......................................................................... 320
Unrestricted pledges during year (and outstanding at year end)...................................... 540
Unrestricted earnings on investments of temporarily restricted investments.................. 58
All expenses of the Maestro and the Classical Music Appreciation Programs are payable from
donor restricted resources.
Requirement: Prepare the Statement of Activity for the Society
Answer:
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Weinstein Musical Society
Statement of Activities
For the Year Ended December 31, 20X5
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Problem 5 – Additional Journal Entries for a Nongovernmental, Not-for-Profit Organization
Transactions: The following selected transactions occurred for a nongovernment, not-for-profit
organization. All amounts are in thousands of dollars.
1. Received a contribution of stock to establish an endowment fund. The income from the
endowment is unrestricted. The donor had acquired the stock for $23 about 20 years
earlier. Its estimated fair value when donated was $250.
2. Pledges receivable at year end were $100, all from pledges received during the year. The
pledges are unrestricted and 5% percent of the pledges are estimated to be uncollectible.
The pledges expect to be collected early next year.
For questions 3-5, assume that the organization has adopted a policy that restrictions on
donations made for capital purposes are met when the capital item is purchased.
3. A cash gift of $200 was received restricted for the purchase of equipment.
4. Equipment of $80 was purchased from the gift restricted for this purpose.
5. Depreciation expense for the year on the equipment purchased is $10.
For questions 6-8, assume that the organization has adopted a policy that restrictions on
donations made for capital purposes are not met when the capital item is purchased.
6. A cash gift of $200 was received restricted for the purchase of equipment.
7. Equipment of $80 was purchased from the gift restricted for this purpose.
8. Depreciation expense for the year on the equipment purchased is $10.
Requirement: Prepare the journal entries for the above transactions.
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Answers:
# Accounts Debit Credit
1 Investments 250
Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman)
Problems – Chapter 17
Problem 1 – Government College Journal Entries
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Below are selected transactions for the Lake County Community College (LCCC). LCCC
reports as a special government engaged only in business-type activities. All amounts are in
thousands of dollars.
Transactions:
1. Tuition and fees charged for the fall 20X3 semester totaled $2,800. Of this, $98 was
waived as a result of scholarship allowances, and another $15 is expected to be
uncollectible.
2. For the winter 20X4 semester LCCC collected a general student fee of $18. The full
amount of this fee is restricted for the purchase of computer equipment and software
needed to establish computer labs at the college.
3. The college received a reimbursement grant restricted to research on composite materials,
$300.
4. Salaries paid to researchers in the Composite Materials Lab of $40 qualified under the
research grant received.
5. The college purchased equipment for use in its building and grounds maintenance
department at a cost of $35. Unrestricted resources were used for this purpose.
6. The college paid $30 interest and $15 principal on one of its mortgages.
Requirement: Prepare the necessary journal entries to record these transactions.
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Answers:
# Accounts Debit Credit
1 Accounts Receivable 2,702
Revenue Deduction - Scholarship Allowances 98
Problem 2 – Governmental University Journal Entries
Selected transactions of Shelbyville State University are listed below. The university reports as a
special purpose government engaged in only business-type activities. All amounts are in
thousands of dollars.
Transactions:
1. Tuition and fees assessed total $4,500; 70% is collected immediately; scholarships
allowances are granted for $120; and $45 is expected to prove uncollectible.
2. Revenues collected from sales and services of the university bookstore, an auxiliary
enterprise, were $275.
3. Salaries and wages paid, $1,500; $62 of this was for employees of the university
bookstore.
4. Tuition remissions were granted in the amount of $35 for employees.
5. Mortgage payments totaled $520; $290 of this was for interest.
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6. Restricted contributions for the Master of Accountancy (MAcc) program were received,
$250.
7. Expenditures for the MAcc program were incurred and paid, $230.
8. Equipment was purchased from unrestricted resources, $34.
Requirement: Prepare the necessary journal entries to record these transactions.
Answers:
# Accounts Debit Credit
1 Cash (4,500 x 70%) 3,150
Accounts Receivable 1,230
Revenue Deduction - Scholarship Allowances 120
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