Chapter 19 – Not-for-Profit Entities
C19-6 An Analysis of the Financial Statements for the American Red Cross, a
Voluntary Health and Welfare Organization
The consolidated financial statements can be found by clicking on the “Publications” link at
the top of the ARC’s home page. The financials are located at the bottom of the page.
a. Read the independent auditor’s report of the U. S. Army Audit Agency that is
threshold recommended by the Better Business Bureau.
c. Read the revenue recognition note. In this note to the financial statement, the ARC
reports that “Contributions, which include unconditional promises to give (pledges)
are recognized as revenues in the period received or promised.” To answer the
question on the amount of temporarily restricted contributions receivable as of the
unrestricted net assets due to satisfaction of purpose and/or time restrictions.
f. Look at the statement of functional expenses for the most recent year. In past years,
Biomedical has had the highest total cost for salaries and wages and employee
benefits.
g. Read the note on organization and basis of presentation. In this note, temporarily
restricted net assets are those “net assets subject to donor-imposed restrictions on
time.”
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1.
a –
1,700,000 – 150,000 – 5,000 = 1,500,000
2.
c –
The university records revenue for the graduate student’s tuition at the
standard rate and then records the tuition remission as an expense of the
year in which the graduate student is a teaching assistant
3.
a –
2,300,000 – 50,000 – 10,000 – 140,000 = 2,100,000
4.
c –
$7,500,000 assets – $4,500,000 liabilities
5.
d –
$550,000 unrestricted + $330,000 of restricted
6.
b –
$200,000 for fair value of donated services. Travel is an additional cost of
the services provided by the university.
Expenses
218,000
Contribution Revenue
200,000
Cash
18,000
E19-2 Multiple-Choice Questions on Hospital Accounting [AICPA Adapted]
1.
a –
Net patient service revenue represents total billings less contractual
adjustments.
2.
c –
When goods are donated revenue is recognized in the Statement of
Operations if the goods are unrestricted.
(a) incorrect. Donations received never decrease an expense account
(b) incorrect. This donation results in an increase of net assets.
(d) incorrect. There must be record of the increase in assets on a financial
statement.
3.
d –
All of the assets would be in the unrestricted fund unless otherwise
restricted.
4.
a –
When goods are donated revenue is recognized in the Statement of
Operations if the goods are unrestricted.
(b) incorrect. The medicine won’t be expensed until used.
(c) incorrect. The debit will be to the corresponding inventory account
(d) incorrect. The revenue should be recognized when the product is
received.
5.
d –
All of the options are income items to a not-for-profit hospital.
