Nonprofit Accounting LJ
Nonprofit Accounting LJ
Nonprofit Accounting LJ
Nonprofit Accounting
Nonprofit Accounting
NONPROFIT ORGANIZATIONS
A.
B.
Nonprofit Organizations:
1.
2.
3.
4.
Any Other Nonprofit Organization (labor union, research foundation, church, etc.)
2.
3.
4.
5.
6.
7.
xed assets
Notes:
outside
party).
Nonprofit Accounting
DONATED MONEY
Nonprofits use normal accrual accounting, so restricted money is recorded as revenue
immediately when either:
A.
Collected or
B.
Pledged (promised)
100,000
100,000
100,000
100,000
100,000
100,000
B/S
I/S
a(n)
B/S=Balance Sheet
I/S=Income Statement
100,000
100,000
account.
account.
Nonprofit Accounting
Pledges --- Record as revenue at fair market value, net of uncollectibility, in the year
the pledge is made.
Example: Nonprofit Hospital has a pledge drive. $200,000 in pledges have some kind of
restriction. Based on past experience, they expect to collect 100% of the restricted pledges but
$50,000 on the unrestricted pledges will not be collected.
Pledges receivable
650,000
50,000
Unrestricted revenue
400,000
200,000
Donated Services
are met:
1.
2.
Services donated would have been paid for otherwise by the nonprofit, or
3.
xxx expense
50,000
xxx revenue
(Notice: both a
revenue
and an
full disclosure
expense
50,000
are recorded,
).
Nonprofit Accounting
XXXX
Liabilities
XXX
Net Assets:
Unrestricted
Temporarily Restricted
Permanently Restricted
XXX
XXX
XXX
B.
XXXX
Statement of Activities
Revenues (restricted and unrestricted)
Plus Net Assets Released From Restrictions
XXXX
XX
XXXX
Less Expenses
(XXX)
Net Change:
Net Assets: Unrestricted
Net Assets: Temporarily Restricted
Net Assets: Permanently Restricted
Notes:
XXX
XXX
XXX
Nonprofit Accounting
2.
3.
Cash Flow From Financing Activities (includes interest or dividend income restricted for
long-term purposes and contributions restricted for long-term purposes)
XXXX
(XXX)
(XXX)
XX
XXXX
XXXX
XX
XXXX
XXXX
(XXX)
XXX
XX
XXXX
XXXX
XXXX
XXXX
Nonprofit Accounting
MULTIPLE-CHOICE QUESTIONS 1 - 15
1. In the preparation of the statement of activities for a nongovernmental not-for-profit
organization, all expenses are reported as decreases in which of the following net assets
classes?
a.
b.
c.
d.
(8327)
3. Famous, a nongovernmental not-for-profit art museum, has elected not to capitalize its
permanent collections. In the previous year, a bronze statue was stolen. The statue was not
recovered and insurance proceeds of $35,000 ware paid to Famous in the current year. This
transaction would be reported in
I.
II.
a.
b.
c.
d.
I only
II only
Both I and II
Neither I nor II
(6812)
(8605)
Nonprofit Accounting
(8112)
b.
Operating activities
Investing activities
c. Financial activities
d. Capital and related financing activities
(7746)
$0
$2,000,000
$5,000,000
$7,000,000
(5475)
$0
$6,000
$95,000
$125,000
Nonprofit Accounting
$0
b. $840
c. $1,560
d. $2,400
(8352)
10. Oz, a nongovernmental not-for-profit organization, received $50,000 from Ame Company to
sponsor a play given by Oz at the local theater. Oz gave Ame 25 tickets, which generally cost
$100 each. Ame received no other benefits. What amount of ticket sales revenue should Oz
record?
a.
b.
c.
d.
$0
$2,500
$47,500
$50,000
Cash 50,000
Ticket Rev
2,500
Contribution Rev 47,500
(7066)
$400,000
300,000
All pledges are legally enforceable. However, Communitys experience indicates that 5% of
all pledges prove to be uncollectible. What amount should Community report as pledges
receivable, net of any required allowance account?
a.
b.
c.
d.
$700,000
$665,000
$380,000
$285,000
35,000
(7747)
Nonprofit Accounting
b.
A freezer costing $150,000 for storing food for the soup kitchen
Building costs of $500,000 for construction in progress for senior citizen housing
c. Land valued at $1 million being used as the site of the new senior citizen home
d. A bulk purchase of $20,000 of linens for its nursing home
(8110)
b.
$0
$ 2,000,000
c. $ 8,000,000
d. $10,000,000
(8580)
14. Janna Association, a nongovernmental not-for-profit organization, received a cash gift with
the stipulation that the principal be held for at least 20 years. How should the cash gift be
recorded?
a.
b.
(8113)
b.
(8578)
Nonprofit Accounting
HOSPITALS
A.
B.
unrestricted
restriction or is it a
1.
restricted
permanent restriction?
. If it is
, is it a
restricted
temporarily
unrestricted
permanent restricted
, temporarily
restricted,
Donor-Restricted Funds:
a. Specific Purpose Fund
(1)
(2)
temporary
(2)
temporary
c. Endowment Funds
(1)
(2)
(3)
permanently
10
&
temporarily
Nonprofit Accounting
3.
C.
Patient service revenue (Gross Patient Service Revenue less Charity Care equals
Patient Service Revenue less 3rd Party Contractual Adjustments equals Net Patient
Service Revenue)
2.
3.
Nonoperating gains/losses
Unrestricted gifts, bequests
Gains/losses on sales of assets
Unrestricted endowment income
Unrestricted interest/dividend income
11
Nonprofit Accounting
MULTIPLE-CHOICE QUESTIONS 16 - 18
16. Under Abbey Hospitals established rate structure, the hospital would have earned patient
service revenue of $6,000,000 for the year. However, Abbey did not expect to collect this
amount because of charity care of $1,000,000 and discounts of $500,000 to third-party
payors. How much should Abbey record as patient service revenue for the year?
a.
b.
c.
d.
$6,000,000
$5,500,000
$5,000,000
$4,500,000
6,000,000-1,000,000=5,000,000
(1422)
17. Hospital, Inc., a not-for-profit organization with no governmental affiliation, reported the
following in its accounts for the current year ended December 31:
Gross patient services revenue from all services provided at
the established billing rates of the hospital (note that this
figure includes charity care of $25,000)
$775,000
15,000
70,000
What amount would the hospital report as net patient service revenue in its statement of
operations for the current year ended December 31?
a.
b.
$680,000
$690,000
c. $705,000
d. $735,000
(7790)
18. A not-for-profit hospital issued long-term tax exempt bonds for the hospitals benefit. The
hospital is responsible for the liability. Which fund may the hospital use to account for this
liability?
a.
b.
c.
d.
Enterprise
Specific purpose
General
General long-term debt account group
(4663)
12
Nonprofit Accounting
COLLEGES
A.
B.
2.
3.
Agency Fund
4.
Loan Fund
5.
6.
Endowment Funds
a. Pure (net assets permanently restricted)
b. Term (net assets temporarily restricted)
c. Quasi (board-designated assets; net assets unrestricted)
7.
Plant Funds:
a. Unexpended Plant (net assets temporarily restricted to capital additions)
b. Investment in Plant (net assets unrestricted)
c. Retirement of Indebtedness (net assets temporarily restricted to service debt)
d. Renewal & Replacement (net assets temporarily restricted for major repairs)
C.
2.
Statement of Cash Flows (FASB format --- see page 5. State or city college would
follow GASB format.)
13
Nonprofit Accounting
3.
Statement of Activities
a. Tuition Waivers --- Expenditures, not revenue reductions:
(1)
Scholarships
(2)
Fellowships
(3)
(2)
(3)
14
Nonprofit Accounting
MULTIPLE-CHOICE QUESTIONS 19 - 23
19. During the year, Public College received the following:
An unrestricted $50,000 pledge to be paid the following year
A $25,000 cash gift restricted for scholarships
A notice that the college is named as a beneficiary of $10,000 in a recent graduates will
What amount of contribution revenue should Public College report in its statement of
activities?
a.
b.
c.
d.
$25,000
$35,000
$75,000
$85,000
(8077)
20. For the summer session, Unity University assessed its students $3,000,000 for tuition and
fees. However, the net amount realized was only $2,900,000 because of the following
reductions:
Tuition remissions granted to faculty members families
Class cancellation refunds
$30,000
70,000
How much unrestricted current funds revenues from tuition and fees should Unity report for
the period?
a.
b.
c.
d.
$2,900,000
$2,930,000
$2,970,000
$3,000,000
2,9000,000+30,000=2,930,000
(1406)
21. For the fall semester, Ames University assessed its students $3,000,000 for tuition and fees.
The net amount realized was only $2,500,000 because scholar-ships of $400,000 were
granted to students, and tuition remissions of $100,000 were allowed to faculty members
children attending Ames. What amount should Ames report for the period as unrestricted
current fund gross revenues from tuition and fees?
a.
b.
c.
d.
$2,500,000
$2,600,000
$2,900,000
$3,000,000
(4140)
15
Nonprofit Accounting
22. What describes a private nonprofit universitys internally designated asset , the income from
which will be used for a specified purpose?
a.
b.
c.
d.
Endowment
Term endowment
Quasi-endowment
Restricted
(9096)
23. A colleges plant funds group includes which of the following subgroups?
I.
II.
III.
a.
b.
I and II
I and III
c. II and III
d. I only
(2102)
Notes:
16
Nonprofit Accounting
B.
2.
3.
4.
5.
Loan Fund
6.
7.
Endowment Funds:
a. Pure (net assets permanently restricted)
b. Term (net assets temporarily restricted)
c. Quasi (board-designated assets; net assets unrestricted)
C.
2.
3.
Statement of Activities
a. Revenue
(1)
Program Revenue
(2)
Membership Dues
(3)
(4)
17
Nonprofit Accounting
4.
Research
(2)
Education
(3)
Health
b. Support Expenses
(1)
Fund Raising
(2)
Management
(3)
Notes:
18
Nonprofit Accounting
MULTIPLE-CHOICE QUESTIONS 24 - 27
24. A non-for-profit voluntary health and welfare organization should report a contribution for the
construction of a new building as cash flows from which of the following in the statement of
cash flows?
a.
b.
c.
d.
Operating activities
Financing activities
Capital financing activities
Investing activities
(7767)
25. A voluntary health and welfare organization received a cash donation in 2001 from a donor
specifying that the amount donated be used in 2003. The cash donation should be
accounted for as
a.
Revenue in 2001
b. Revenue in 2001, and 2002,and 2003, and as a deferred credit in the balance sheet at
the end of 2001 and 2002
c. Revenue in 2003, and no deferred credit in the balance sheet at the end of 2001 and
2002
d. Revenue in 2003, and as a deferred credit in the balance sheet at the end of 2001 and
2002
(4602)
$500,000
100,000
50,000
200,000
In the statement of activity, what amount should be reported under the classification of
program services?
a.
b.
c.
d.
$850,000
$600,000
$550,000
$500,000
(1362)
19
Nonprofit Accounting
27. During the current year, a voluntary health and welfare organization receives $300,000 in
unrestricted pledges. Of this amount, $100,000 has been designated by donors for use next
year to support operations. If 15% of the unrestricted pledges are expected to be
uncollectible, what amount of unrestricted support should the organization recognize in its
current-year financial statement?
a.
b.
c.
d.
$300,000
$270,000
$200,000
$170,000
Notes:
20
Nonprofit Accounting
NONPROFIT AS TRUSTEE
A.
Application
Donor transfers assets to nonprofit organization as trustee for beneficiary; nonprofit is
middleman holding the money temporarily until it goes to the beneficiary.
B.
Treatment
Nonprofit organization treats such assets as:
1.
Refundable advance --- if ANY of the four following conditions are met:
a. Donor retains right to direct the assets
b. Donor controls the nonprofit / recipient
c. Donor may revoke donation / gift
d. Donor specifies itself or affiliate as beneficiary, and it is not an equity transaction
Cash
3,000
Liability
3,000
3,000
Revenue
21
3,000
Nonprofit Accounting
3.
Equity transaction --- ALL of the following three conditions are met:
a. Donor specifies itself or affiliate as beneficiary; AND
b. Donor & nonprofit are financially interrelated; AND
c. Its not refundable.
Cash
3,000
Net Assets
3,000
Notes:
22
Nonprofit Accounting
MULTIPLE-CHOICE QUESTIONS 28 - 30
28. Arkin Corp. is a nongovernmental non-for-profit organization involved in research. Arkins
statement of functional expenses should classify which of the following as support services?
a.
b.
c.
d.
(8775)
29. During the current year, Mill Foundation, a nongovernment non-for profit organization,
received $100,000 in unrestricted contributions from the general public. Mills board of
directors stipulated that $75,000 of these contributions would be used to create an
endowment. At the end of the current year, how should Mill report the $75,000 in the net
assets section of the statement of financial position?
a.
b.
c.
d.
Permanently restricted
Unrestricted
Temporarily restricted
Donor restricted
(7762)
30. Gridiron University is a private university. A successful alumnus has recently donated
$1,000,000 to Gridiron for the purpose of funding a center for the study of sports ethics.
This donation is conditional upon the university raising matching funds within the next 12
months. The university administrators estimate that they have a 50% chance of raising the
additional money. How should this donation be accounted for?
a.
b.
c.
d.
23
(8787)
Nonprofit Accounting
SIMULATION QUESTIONS
SIMULATION: Nonprofit Promise Transactions
Community Service, Inc. is a nongovernment not-for-profit voluntary health and welfare calendar-year
organization that began operations on January 1, year 1. It performs voluntary services and derives its
revenue primarily from voluntary contributions from the general public. Community implies a time
restriction on all promises to contribute cash in future periods. However, no such policy exists with respect
to gifts of long-lived assets.
Items 1 through 4 are based on the following selected transactions that occurred during Communitys
year 2 calendar year:
Written promises to contribute cash restricted to use for community college scholarships
(year 1 and year 2)
10,000 2
20,000 2
12,000 1, 4
Written promises to contribute $25,000 if matching funds are raised for the capital
campaign during year 2
--- Cash received in year 2 from contributor as a good faith advance
--- Matching funds received in year 2
25,000
0
Cash amount of $37,000 received in year 1 with donors only stipulation that a bus
be purchased
37,000 2
Items 1 through 4 represent the year 2 amounts that Community reported for selected financial
statement elements in its December 31, year 2, statement of financial position and year 2 statement of
activities. For each item, indicate whether the amount was Overstated, Understated, or Correctly stated.
Item
Choice
1.
28,000+12,000
Understated
2.
Understated
3.
Correct
4.
Overstated
(6656)
4. 28,000+12,000=40,000
24
Nonprofit Accounting
Debt security endowment received in year 2 income to be used for community service
--- Face value
$90,000
--- Fair value at time of receipt
88,000 1, 3
--- Fair value at December 31, year 2
87,000 3
--- Interest earned in year 2
9,000 3
2,000
10,000
12,000
1,000
5,000
14,000
4,000
Reading Material donated to Area Help and distributed to the children in year 2
--- Fair market value
30,000
26,000 4
60,000
40,000
50,000 4
20,000 4
2,000 5
1,000
20,000
8,000 4
For Items 1 through 7, enter the appropriate amount for each of the following financial statement
elements in the year 2 statement of activities. Round all amounts to the nearest whole dollar.
1.
2.
3.
4.
5.
6.
7.
Item
Contributions --- permanently restricted Fair value at time of receipt
Revenues --- fees
Admission fee
Investment income --- debt securities 9,000-(88,000-87,000)=8,000
Program expenses 8,000+26,000+50,000+20,000x75%=99,000
General fundraising expenses (excludes special events) Printing & mailing
Income on long-term investments --- unrestricted
Contributed voluntary services
Amounts
88,000
5,000
8,000
99,000
2,000
0
0
(6674)
25