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20. B (This transaction is an acquisition and the acquired entity is not supported
predominantly by contributions or investment income. Thus, the difference
23.C
24.C (The charity care work should not be recorded in any way because the entity
has no expectation of collection. That reduction drops the reported amount
25.B (Use of the money is limited to the donor’s specified purpose.)
tax-exempt organization.)
29.D (These volunteer services, although important, do not meet the criteria for
recognition. They do not require a specialized skill that would be otherwise
purchased. They do not enhance a nonfinancial asset.)
32.B
33.A (The fundraising costs and administrative salaries are supporting service
expenses.)
36.(10 minutes) (Reporting of various account balances by a not-for-profit health
care entity)
Donated medicines = an asset is reported as well as an increase in
unrestricted net assets because of the contribution
Donated services (replacing salaried workers) = the fair value of the services
contributed causes an increase in unrestricted net assets along with an
accompanying decrease in unrestricted net assets because the expense is
also recognized
37. (15 Minutes) (Series of questions about the reporting of health care entities)
a. A third-party payor is an entity (such as Medicare or an insurance company)
that pays a portion, or all, of a patient's medical expenses. They are common
principles and reliable accounting systems.
b. A contractual adjustment is a reduction to patient service revenues created
when a lesser amount is paid by a third-party payor than the billed amount but
is still accepted as payment in full by a health care entity. These outside
parties often establish contractual arrangements whereby the health care
entity agrees to accept a lower amount for a service if the third party
c. At the time that materials are donated to a health care entity (or any private
not-for-profit entity), the asset is recorded at fair value. Because of the
unrestricted net assets each period equal to depreciation expense.
Donated services are recorded as a contribution increasing unrestricted net
assets and as salary expense also within unrestricted net assets. FASB
requires private not-for-profit entities to recognize donated services but only if
38.(6 Minutes) (Reporting of various accounts by a not-for-profit entity)
Only $7.6 million is reported as patient service revenues. Charity care of $1.4
million is not recorded because no attempt at collection is anticipated. Then,
39. a). (8 Minutes) (Recording donations by a voluntary health and welfare
entity)
Pledges ............................................................................ $600,000
Anticipated Amount Deemed to be Uncollectible (15%) (90 ,000)
Net Pledge Balance..................................................... $510 ,000
40.(65 Minutes) (Preparation of statements for a private not-for-profit entity)
a. Statement of Activities
Unrestricted
Net Assets
Temporarily Restricted
Net Assets
Permanently Restricted
Net Assets
Public Support
a. Contributions $210,000 $78,000
b. Contribution—Interest 3,000
Revenue
restriction 72 ,000 (72 ,000)
Total Public Support and
Revenue $315,900 $18,100
Expenses
Total (135 ,500)
Supporting service expenses
– General and administrative
i. Salaries (32,000)
j. Depreciation (2 ,000)
Total (30 ,500)
Total Expenses (200 ,000)
Change in Net Assets $115,900 $18,100 -0-
Net Assets - Beginning
40. (continued)
Explanation of Balances
a. Contributions. The balances to be reported are the unrestricted gifts
($210,000) plus present value of unrestricted pledge ($78,000). Pledge is
b. Contribution-Interest. The pledge is recorded at its present value of $78,000.
Interest that is recognized to raise the balance to the pledge amount is
reported as a contribution.
f. Salaries. During the period, $24,000 in salaries were paid (30 percent of
$80,000 was assigned here) and another $2,500 was owed at the end of the
year (50 percent of year-end accrual).
g. Depreciation. Of the total expense ($20,000) for the period, 80 percent was
allocated to program service expenses because that amount of the equipment
was used for that purpose.
m. Depreciation. Of the total for the period ($20,000), 10 percent was allocated to
fundraising expenses.
40. (continued)
b.
Statement of Financial Position
Assets
a. Cash $738,000
d. Accumulated Depreciation (20 ,000) 280,000
Total Assets $1 ,099,000
Liabilities
Net Assets (see Statement of Activities)
Unrestricted $515,900
Temporarily Restricted 218,100
Explanation of Balances:
a. Cash. The final balance is the beginning cash figure of $700,000 plus $210,000
in contributions, less $80,000 for salaries, less $50,000 for equipment, plus
c. Equipment. Entity acquired $300,000 of equipment during the year.
d. Accumulated Depreciation. The $20,000 amount of depreciation recorded for
this initial year of ownership.
41.(50 Minutes) (Effect of various transactions on unrestricted and restricted net
assets)
a. Investments—Internally Restricted ............................... 160,000
Cash........................................................................ 160,000
Cash........................................................................ 25,000
Reclassification—Temporarily
Accumulated Depreciation................................... 38,000
f. Cash................................................................................... 15,000
Interest Revenue—
Unrestricted Net Assets (internally restricted) 15,000
g. Provision for Bad Debts................................................... 20,000
Allowance for Uncollectible
41.(continued)
h. Supplies Expense ............................................................ 25,000
Inventory of Medicines.......................................... 25,000
i. Cash .................................................................................. 172,000
41. (continued)
Calculation of Changes in Net Assets
Unrestricted Temporarily Restricted Permanently Restricted
Net Assets Net Assets Net Assets
a. No change
Services 600,000
e. Depreciation (38,000)
f. Interest 15,000
Stipulation
Met—Reclas-
sification 25,000 (25,000)
42. (70 minutes) (Produce journal entries for a private university as well as a
statement of activities)
a. Tuition Receivable 1,200,000
Tuition Revenues 1,200,000
b. Investments 300,000
Contributions—Permanently
Restricted Net Assets 300,000
e. Salary Expenses 310,000
Cash 310,000
f. Salary Expense 80,000
Contributed Support—
Unrestricted Net Assets 80,000
i. Cash 9,000
Dividend Revenue—Unrestricted
Net Assets 9,000
42. (continued)
l. Pledge Receivable 7,000
Contribution—Temporarily
Restricted Net Assets 7,000
