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48. The following events are for the Public Health Agency, a voluntary health and welfare organization that
conducts two programs: public health research and public health education:
a.
The agency received a donation of capital stock with a market value of $200,000, with the stipulation that the income and principal may be
used only for additions to plant.
b.
An adjoining building and land were purchased at a cost of $600,000. A 10% cash down payment was made. A mortgage note for the
remainder was signed.
c.
Unused sterilizers with a cost of $15,000 and a book value of $5,000 were sold for $3,000 cash.
d.
New sterilizers costing $28,000 were purchased.
e.
A payment of $90,000 was made to cover semiannual mortgage interest of $20,000 and reduction of principal of $70,000.
f.
Annual depreciation of $180,000 was recorded.
g.
The directors approved the following percentages for allocating all expenses (but not losses):
Public health research program
30%
Public health education program
40%
Management and general services
10%
Fund-raising services
20%
Total
100%
Required:
Prepare the journal entries for the events.
49. The following events are for the Public Health Agency, a voluntary health and welfare organization that
conducts two programs: public health research and public health education:
a.
The agency received its first contribution, consisting of 1,000 shares of Parker House common stock valued at $60,000. The
stock was donated by Ron Wolf, a local financier, who specified that earnings from the permanent endowment would not be
subject to any restrictions.
b.
Dianne Stein, a widow who was a volunteer for the Public Health Agency, died. Her will established a cash endowment of
$200,000 and stipulated that gains on the sale of any investments purchased with these funds should increase the permanent
endowment. However, earnings should be used for the purchase of equipment. The cash was accepted under the terms in the
will.
c.
Investments were made from the Stein endowment fund. Utility bonds with a face value of $100,000 and a contract rate of
12% were purchased at par, plus $2,000 of accrued interest for 2 months on May 1, 20X7. The bonds mature in 40 months.
On the same date, $90,000 was invested in money market certificates yielding 7%.
d.
The following revenue was received on September 1, 20X7:
Dividends on the Parker House common stock
$3,000
Semiannual interest on the utility bonds
$6,000
e.
The Parker House common stock is sold at a net price of $67 per share on October 1, 20X7.
f.
The $67,000 proceeds from the sale of Parker House common stock were invested in 10% industrial bonds with a face
value of $70,000 and a market value of $67,000 on an interest payment date. The bonds mature in 60 months. This
transaction had the approval of Wolf, who recommended that only the cash flow be available for operations. The board
agreed that this was preferable.
g.
At year end, accrued interest for four months on the utility bonds was $4,000; accrued interest for three months on the
industrial bonds was $1,750 and amortization of the discount was $150. The interest on money market certificates was
accrued.
Required:
Prepare journal entries for the year ended December 31, 20X7:
50. The Elder Citizens Agency is a voluntary health and welfare organization. The following events occur:
a.
This year's fund drive resulted in unrestricted pledges totaling $130,000. Pledges of $25,000 were received for a special hot meal program.
b.
Cash collected from pledges: unrestricted, $100,000; restricted, $18,000.
c.
A philanthropist, who is an attorney, contributed a painting valued at $4,000, which is to be auctioned off at a Thanksgiving supper
organized to raise funds for a legal assistance program for the elderly. The event was an unexpected success. The painting was sold for
$7,800. Additional gross cash revenues were $4,900. Direct costs paid were $1,700.
d.
The agency received $11,000 from the local division of United Way for general support.
e.
Salaries amounted to $70,000, payroll taxes were $6,000, and other employee benefits amounted to $10,000. Of these items, $5,000 is
unpaid.
f.
Arrangements have been made to have a local catering firm bring in a hot lunch. Senior citizens are charged $0.75 per meal. To date,
payments to the catering service are $2,300. Cash collections from the meal program service totaled $900.
g.
It is estimated that 10% of the remaining unrestricted pledges and 5% of the remaining restricted pledges will prove uncollectible.
h.
At the end of the previous year, $10,000 of the balance of the Unrestricted Net Assets had been designated for a special program for
handicapped elderly persons. The program was to be conducted during the current year if sufficient support could be generated. The idea
was abandoned this year for lack of interest. The governing board authorizes the reclassification of the amount as undesignated.
i.
The Elder Citizens Agency had budgeted $500 per month to rent space to conduct its general activities. A generous citizen permits the
agency to occupy equivalent space at a nominal fee of $100 per year. The annual fee is paid, and the appropriate expense for the year is
recorded.
Required:
Prepare journal entries to record the events.
51. The Community Drug Clinic is a voluntary health and welfare organization that conducts two programs:
drug abuse research and drug abuse education. An inexperienced accountant recorded the following entries:
a.
Pledges Receivable
200,000
Income
200,000
To record signed pledges received. Of the total,
20% must be used for a special local college
program. It is estimated that 5% of the
unrestricted pledges will prove uncollectible.
b.
Cash
100,000
Income
100,000
Received money from a successful business
person, formerly a drug addict. Amount must
be used to acquire a building for the clinic's
program
c.
Building, etc
100,000
Cash
100,000
To record down payment on land,
building, and equipment with funds
received in step (b). A mortgage note
was signed for an additional $150,000.
d.
Cash
15,000
Income
15,000
To record amount received for general
operations from the will of the
former mayor, who died.
e.
Cash
120,000
Pledges Write-Off Expense
5,000
Pledges Receivable
125,000
To record collection of all pledges
for special college program (step a)
and partial collection and some
write-offs for remaining pledges.
f.
Equipment
20,000
Cash
20,000
To record purchase of equipment from
unrestricted funds.
g.
Operating Expenses
100,000
Cash
100,000
To record payment of expenses, 80% of
which are related to unrestricted activity
and the remainder to restricted.
h.
Depreciation Expense
4,000
Accumulated Depreciation
4,000
To record annual depreciation provision.
Required:
Omitting explanations, prepare the correct entries, including the entry to assign expenses to programs and services. Assume that the incorrect entries
of the previous accountant are reversed prior to your entries.
52. The Good Health Agency is a voluntary health and welfare organization that conducts two programs: public
health research and public health education. Activities for the year ended December 31, 20X2 were as follows:
a.
Public support for general activities consisted of the following:
Cash
$ 60,000
Gross pledges (20% are for the 20X3 fund drive)
295,000
Estimated uncollectible pledges
15,000
b.
During the year, several rummage sales were held to raise funds for general operations. Gross cash proceeds were
$17,000, with $4,000 of direct costs paid in cash.
c.
Terry Well, a former nurse, died. Her will provided $50,000 to be used as the board of directors saw fit.
d.
Investments in the permanently restricted fund increased in value $22,000. The donor had requested that
unrealized gains and losses remain with the original principal of the gift; however the dividends, which were
$13,000, are to be used for developing materials for educational programs.
e.
Income from certificate of deposits in permanently restricted net assets for the year totaled $11,800. Income is
unrestricted.
f.
A health club was formed by the agency. Its members could use various facilities of the agency. Cash received
from membership dues was $1,700.
g.
The following expenses were vouchered:
Salaries and related expenses
$171,900
Professional fees and expenses
75,600
Administrative expenses
35,000
Rent expense
19,700
Conference and meeting expenses
16,900
Printing and distribution expenses
34,200
Transportation expenses
17,700
Total
$371,000
h.
Len Duke, a member of the Board of Trustees, donated 1,000 shares of Bank Three stock on December 31. He
had purchased the shares for $25 each, but they were trading for $30 on December 31. The gift is permanently
restricted, but the income will be unrestricted.
i.
An analysis of the above expenses was prepared and showed the following allocations:
Programs:
Public health research
$118,300
Public health education *
140,800
Supporting Services:
Management and general
59,500
Fund-raising
52,400
Total
$371,000
* including materials meeting conditions of the endowment gift in d.
j.
Trish Dyer, CPA, performed the agency’s audit on a pro bono basis. The value of the audit was estimated to be $4,000, and was accrued
after the end of the year.
k.
The net assets at December 31, 20X1 were:
Unrestricted
$320,000
Temporarily restricted
104,000
Permanently restricted
575,000
Required:
Prepare a statement of activities for Good Health Agency for the year ended December 31, 20X2.
53. By placing a check mark in the appropriate column, indicate in which fund of a voluntary health and welfare
organization the following events normally would be recorded. (Note: An event may require entries in more
than one fund.)
Current Funds
Plant
Endowment
Event
Unrestricted
Restricted
Fund
Fund
a.
Receipt of donated securities, revenue
from which is to be used for both
unrestricted and specified current
activities
_______
_______
_______
_______
b.
Receipt of revenue from donated
securities in step (a)
_______
_______
_______
_______
c.
Receipt of donated fixed assets
_______
_______
_______
_______
d.
Recording of depreciation
_______
_______
_______
_______
e.
Appropriation of the unrestricted net
assets by the board of directors
_______
_______
_______
_______
54. Senior Wellness Center is a voluntary health and welfare organization devoted to health education for the
elderly. It has investments in its Restricted Fund, its Plant Fund, and its Endowment Fund. There are no
restrictions on investment income or gains and losses in the endowment fund. On January 2, the organization
decided to pool the investments of the three funds, and thereafter to maintain all investment account balances at
market value.
a.
On January 2, when investments were pooled, the following data applied:
Investments
Market
Original
Values
Fund
Basis
January 2
Restricted
$ 55,000
$ 75,000
Plant
70,000
75,000
Endowment
125,000
100,000
Total
$250,000
$250,000
b.
On March 31, the end of the first quarter, the pool reports sales of investments carried at
$70,000 for $90,000. Realized gains and other realized income are allocated to funds upon
realization. Percentages of equity may be rounded to the nearest tenth of one percent. Total
cash and market value of pooled investments on March 31 is $275,000.
c.
The second-quarter report as of June 30 shows sales of investments for $90,000 which
were carried at $100,000. Total cash and market value of pooled investments on June 30 is
$260,000.
Required:
Prepare a schedule of equities in pooled investments for the three funds at the end of the first two quarters.
55.
a.
Describe the basic accounting for private
not-for-profit groups promoted by the
FASB including a brief description of
the three net asset classes.
b.
Indicate in which of the net asset classes
the following transactions belong:
1.
Donor makes a cash gift to not-for profit which must be invested and maintained in perpetuity
2.
Income Earned on donation noted in item #1 is restricted to certain program expenditures
3.
Gains/Losses, both realized and unrealized, on donation noted in item #1. Not stipulated in donor
agreement or by the law
4.
Expenses paid out for programs stipulated in donor agreement relating to donation made in item
#1.
56. Describe the circumstances that must be true in order for donated, personal services to be recorded as
revenue (contributions) in a not-for-profit organization.
57. How do you differentiate between a voluntary health and welfare organization and another not-for-profit
organization?
58. What are the two major categories of resources obtained by voluntary health and welfare organizations, and
how do they differ?
