Chapter 13 – Accounting for Not-for-Profit Organizations
13–16
Ch. 13, Solutions, 13-18 (Cont’d)
• Expenses are reported in the temporarily restricted net asset column.
Expenses can only be reported in the unrestricted column. If the
• By definition permanently restricted net assets cannot be spent; therefore,
there should be no expenses reported for permanently restricted net
• The statement correctly reports the program function expenses separate
b. Since the ECE’s financial statements are not fairly presented in conformity
with GAAP the auditor would need to issue an adverse opinion unless the
Chapter 13 – Accounting for Not-for-Profit Organizations
13–17
Ch. 13, Solutions, 13-18 (Cont’d)
General Problem Information: Identify departures from GAAP
Learning Objective: 13-4
Topic: Financial Reporting
Bloom’s Taxonomy: Evaluate
Accreditation Skills tag: AACSB: Analytical Thinking, AICPA: FN: Reporting
Level of Difficulty: Hard
13-19.
a. No. The presented statement is not in proper form for a statement of
1. Were there no fund-raising expenses related to the solicitation of
$111,400 in contributions?
2. Were the contributions of $50,000 for the Abstract Exhibit temporarily
c. The directors should apply for grants or solicit contributions of at least
Chapter 13 – Accounting for Not-for-Profit Organizations
13–18
Ch. 13, Solutions, 13-19 (Cont’d)
General Problem Information: Statement of activities
Learning Objective: 13-3
Topic: Financial Reporting
Bloom’s Taxonomy: Evaluate
Accreditation Skills tag: AACSB: Analytical Thinking, AICPA: FN: Decision Making
Level of Difficulty: Hard
13-20. THE SHANNON COMMUNITY KITCHEN
GENERAL JOURNAL
Debits Credits
1. CASH 28,000
Chapter 13 – Accounting for Not-for-Profit Organizations
13–19
Ch. 13, Solutions, 13-20 (Cont’d)
THE SHANNON COMMUNITY KITCHEN
GENERAL JOURNAL
Debits Credits
4. CASH 5,000
CONTRIBUTIONS—TEMPORARILY RESTRICTED 5,000
NET ASSETS RELEASED—SATISFACTION OF
PURPOSE RESTRICTION—TEMPORARILY
General Problem Information: Recording revenue and expense transactions
Learning Objective: 13-3
Topic: Financial Reporting
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN: Reporting
Level of Difficulty: Hard
13–21.
a. INVOLVE
GENERAL JOURNAL
Debits Credits
1. RENT EXPENSE 35,000
CONTRIBUTIONS—UNRESTRICTED 35,000
Chapter 13 – Accounting for Not-for-Profit Organizations
13–20
Ch. 13, Solutions, 13–21 (Cont’d)
INVOLVE
GENERAL JOURNAL
Debits Credits
3. SALARIES & BENEFITS EXPENSE 224,560
4. CONTRIBUTIONS RECEIVABLE 100,000
5. EQUIPMENT & FURNITURE 21,600
6. TELEPHONE EXPENSE 5,200
PRINTING & POSTAGE EXPENSE 12,000
7. NO TRANSACTION IS RECORDED – NO SPECIALIZED SKILL IS
REQUIRED.
8. PROVISION FOR UNCOLLECTIBLE PLEDGES 10,000
ALLOWANCE FOR UNCOLLECTIBLE PLEDGES—
Chapter 13 – Accounting for Not-for-Profit Organizations
13–21
Ch. 13, Solutions, 13–21 (Cont’d)
INVOLVE
GENERAL JOURNAL
Debits Credits
9. PUBLIC HEALTH EDUCATION PROGRAM 105,952
COMMUNITY SERVICE PROGRAM 90,816
MANAGEMENT & GENERAL 60,544
FUND-RAISING 45,408
ALLOCATION OF NATURAL EXPENSES TO FUNCTIONS
Public Health
Education
Community
Service
Management
& General
Fund-raising
Total
Salary & Benefits Expense
$78,596
$67,368
$44,912
$33,684
$224,560
Rent Expense
12,250
10,500
7,000
5,250
35,000
Telephone Expense
1,820
1,560
1,040
780
5,200
Printing & Postage Expense
4,200
3,600
2,400
1,800
12,000
Utilities
2,905
2,490
1,660
1,245
8,300
Supplies Expense
1,505
1,290
860
645
4,300
Provision for Uncollectible
Pledges
3,500
3,000
2,000
1,500
10,000
Depreciation Expense
1,176
1,008
672
504
3,360
Total
$105,952
$90,816
$60,544
$45,408
$302,720
Chapter 13 – Accounting for Not-for-Profit Organizations
13–22
Ch. 13, Solutions, 13–21 (Cont’d)
INVOLVE
GENERAL JOURNAL
Debits Credits
10. NET ASSETS RELEASED—SATISFACTION OF
PURPOSE RESTRICTION—TEMPORARILY
11. CONTRIBUTIONS—UNRESTRICTED 229,600
(trans. 1, 2 and 5)
UNRESTRICTED NET ASSETS 73,120
NET ASSETS RELEASED—SATISFACTION OF
PURPOSE RESTRICTION—TEMPORARILY
NET ASSETS RELEASED—SATISFACTION OF
Chapter 13 – Accounting for Not-for-Profit Organizations
13–23
Ch. 13, Solutions, 13–21 (Cont’d)
b. INVOLVE
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2017
TEMPORARILY
UNRESTRICTED RESTRICTED TOTAL
REVENUE & OTHER
SUPPORT:
CONTRIBUTIONS $229,600 $344,260 $573,860
NET ASSETS RELEASED
FROM RESTRICTION
SATISFACTION OF PURPOSE 105,952 (105,952) _______
Chapter 13 – Accounting for Not-for-Profit Organizations
13–24
Ch. 13, Solutions, 13–21 (Cont’d)
c. INVOLVE
STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2017
ASSETS:
CASH $ 88,240
CONTRIBUTIONS RECEIVABLE (less allowance for
Uncollectible accounts of $10,000 and discount on
contributions receivable of $5,740) 184,260
EQUIPMENT & FURNITURE (less allowance
Chapter 13 – Accounting for Not-for-Profit Organizations
13–25
Ch. 13, Solutions, 13–21 (Cont’d)
d. INVOLVE
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
CASH RECEIVED FROM CONTRIBUTIONS $335,000
CASH PAID TO EMPLOYEES (208,560)
RECONCILIATION OF CHANGES IN NET ASSETS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
CHANGE IN NET ASSETS $271,140
ADJUSTMENTS TO RECONCILE CHANGES IN NET ASSETS
TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION 3,360
Chapter 13 – Accounting for Not-for-Profit Organizations
13–26
Ch. 13, Solutions, 13–21 (Cont’d)
e. INVOLVE
STATEMENT OF FUNCTIONAL EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2017
PROGRAM SERVICES
SUPPORT SERVICES
Public
Health
Education
Community
Service
Management
& General
Fund–
raising
TOTAL
Salary & Benefit
Expense
$ 78,596
$ 67,368
$ 44,912
$ 33,684
$224,560
Rent Expense
12,250
10,500
7,000
5,250
35,000
Telephone Expense
1,820
1,560
1,040
780
5,200
Printing & Postage
Expense
4,200
3,600
2,400
1,800
12,000
Utilities
2,905
2,490
1,660
1,245
8,300
Supplies Expense
1,505
1,290
860
645
4,300
Provision for
Uncollectible Accounts
3,500
3,000
2,000
1,500
10,000
Depreciation
Expense
1,176
1,008
672
504
3,360
TOTAL
$ 105,952
$ 90,816
$ 60,544
$ 45,408
$302,720
General Problem Information: Recording and reporting transactions
Learning Objective: 13-3
Learning Objective: 13-4
Topic: Financial Reporting
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN: Reporting
Level of Difficulty: Hard
Chapter 13 – Accounting for Not-for-Profit Organizations
13–27
Ch. 13, Solutions (Cont’d)
13–22.
a. For the volunteers’ time to be recorded as a contribution and related expense
the activities performed by the volunteers would (1) require specialized skill,
b. ART LEAGUE
GENERAL JOURNAL
Debits Credits
1. CASH 60,730
CONTRIBUTIONS—UNRESTRICTED 20,861
2. CASH 1,955
3. GRANTS RECEIVABLE 5,020