Deck 18: Accounting and Reporting for Private Not-For-Profit Organizations

Question 1

Which of the following types of health care entities follow FASB Accounting Standards Codification for preparing financial statements?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Answer 1

A

Question 2

With respect to the donations received in 2019, what amount should be reported in the Statement of Activities as net increase to Net Assets with Donor Restrictions for the year 2019?

A) $ 3,000
B) $ 9,000
C) $15,000
D) $18,000
E) $21,000

Answer 2

B

Question 3

Which of the following is a voluntary health and welfare entity?

A) A charity raising money for underprivileged children.
B) A nursing home.
C) A private medical school.
D) A hospital.
E) A preschool.

Answer 3

A

Question 4

On a statement of functional expenses for a voluntary health and welfare entity, how are expenses classified?

A) Health services expenses and operating expenses.
B) Program services expenses and administrative services expenses.
C) Program services expenses and supporting services expenses.
D) Operating expenses and supporting services expenses.
E) Operating expenses and administrative expenses.

Question 5

What amount should be reclassified on the Statement of Activities for 2020 from the With Donor Restrictions column to the Without Donor Restrictions column?

A) $3,000.
B) $6,000.
C) $9,000.
D) $12,000.
E) $15,000.

Question 6

Unconditional promises to transfer cash or other resources to an entity in a voluntary nonreciprocal transaction is the GAAP definition of:

A) Miscellaneous revenues.
B) Contributions.
C) Unconditional promises to give.
D) Exchange transactions.
E) Pledges.

Question 7

On a Statement of Activities for a not-for-profit entity, what is the minimum required classification for categories of expenses?

A) Fund-raising expenses and operating expenses.
B) Program services expenses and administrative services expenses.
C) Program services expenses and supporting services expenses.
D) Operating expenses and supporting services expenses.
E) Operating expenses and administrative expenses.

Question 8

When individuals are considering whether to make a donation to a not-for-profit entity, the answer to which of the following questions is not typically sought?

A) Will donated funds be used effectively by the entity to accomplish its purpose?
B) Will the donated funds be wasted?
C) How much should this entity receive?
D) Is this entity profitable?
E) Is contributing to this charity a wise allocation of resources?

Question 9

Not-for-profit entities are required to present information about the nature and function of expenses and this information can be reported in which of the following?

A) Statement of Cash Flows, Statement of Functional Expenses, or Statement of Activities.
B) Statement of Activities, Statement of Functional Expenses, or notes to financial statements.
C) Statement of Financial Position, Statement of Functional Expenses, or Statement of Cash Flows.
D) Statement of Financial Position, Statement of Cash Flows, or notes to financial statements.
E) Statement of Activities, Statement of Budget to Actual, or Income Statement.

Question 10

What is the basis of accounting used in reporting the Statement of Activities?

A) Cash basis.
B) Modified accrual basis.
C) Accrual basis.
D) Either cash basis or accrual basis, depending on the type of revenue.
E) Either modified accrual basis or accrual basis, depending on the type of revenue.

Question 11

Unconditional transfers of cash or other resources to an entity in a voluntary nonreciprocal transaction is the GAAP definition of:

A) Miscellaneous revenues.
B) Contributions.
C) Unconditional promises to give.
D) Exchange transactions.
E) Pledges.

Question 12

With respect to the donations received in 2019, what total amount should be recorded as an increase to Net Assets with Donor Restrictions?

A) $ 3,000
B) $ 9,000
C) $15,000
D) $18,000
E) $21,000

Question 13

Which of the following types of health care entities recognize depreciation expense?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 14

When are unconditional promises to give recognized as revenues?

A) In the period the promise is received.
B) In the period the promise is collected.
C) In the period in which the conditions upon which they are contingent are substantially met.
D) In the period in which the conditions upon which they are contingent have begun to be met.
E) Unconditional promises from potential donors are not revenues.

Question 15

Which account should be credited to record a gift of cash which is from an outside party to an animal rescue agency and is used for expenses to care for the animals?

A) Non-Operating Gain - Special Revenues.
B) Contractual Adjustments.
C) Patient Service Revenues.
D) Drugs and Medicines.
E) Contributions Revenues - Without Donor Restrictions.

Question 16

Prior to ASU 2016-14, what are the three categories of net assets required by GAAP in reporting of a not-for-profit entity?

A) Unrestricted, Temporarily Restricted, and Permanently Restricted.
B) Unrestricted, Restricted, and Fund Balance.
C) Restricted, Permanently Restricted, and Fund Balance.
D) Unrestricted, Temporarily Restricted, and Fund Balance.
E) None of these answer choices are correct.

Question 17

On a Statement of Activities for a not-for-profit entity, what are the broad categories of supporting service costs required to be reported?

A) Fundraising expenses and operating expenses.
B) Program services expenses and administrative services expenses.
C) Fundraising expenses and supporting services expenses.
D) Fundraising expenses and administrative expenses.
E) Operating expenses and administrative expenses.

Question 18

Which one of the following financial statements is not required by GAAP regarding a voluntary health and welfare entity?

A) Statement of Financial Position.
B) Statement of Functional Expenses.
C) Statement of Activities.
D) Statement of Cash Flows.
E) Statement of Operations.

Question 19

Historically, what pattern of reporting was used by private not-for-profit entities?The same as used with respect to for-profit entities.Reporting that utilizes a fund accounting approach.A pattern of reporting that does not consider the entire entity.

A) 1 only.
B) 2 only.
C) 1 and 2 only.
D) 1, 2 and 3.
E) 2 and 3 only.

Question 20

In accruing patient charges for the current month, which one of the following accounts should a hospital credit?

A) Accounts Payable.
B) Deferred Revenue.
C) Public Support Revenue.
D) Patient Service Revenues.
E) Accounts Receivable.

Question 21

Not-for-profit entities that are eligible to obtain tax-exempt status under Internal Revenue Code section 501(c)(4) are

A) Those promoting literacy.
B) Those promoting scientific research.
C) Chambers of Commerce.
D) Professional sports leagues.
E) Those functioning exclusively to promote social welfare.

Question 22

Which entry would be the correct entry to record that a hospital has provided patient services for $200,000, of which 25% will be billed to a third party?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 23

If the total acquisition value of an acquired not-for-profit entity is greater than the fair value of all identifiable net assets of the entity, and that entity's revenues are not generated by rendering goods or services or from membership dues, then the excess of acquisition value over identifiable net assets is immediately reported:

A) As goodwill on the consolidated Statement of Position.
B) As a pro-rata increase to the identifiable assets and liabilities acquired.
C) As a direct reduction in unrestricted net assets on the Statement of Financial Position.
D) As a reduction in unrestricted net assets on the Statement of Activities.
E) As an increase in other assets on the Statement of Financial Position.

Question 24

Which entry would be the correct entry on the not-for-profit entity's books to record a donor's gift when the money is simply passing through the not-for-profit entity, it creates no direct benefit, and control of the assets has been relinquished by the donor?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 25

Which of the following is not a benefit of Internal Revenue Code Section 501(c)(3) status?

A) Exemption from paying federal taxes on most income.
B) Likely exemption from paying state taxes on most income.
C) Charitable donations to 501(c)(3) entities can reduce the donor's taxable income.
D) Can engage in political election campaign activity.
E) Can participate in lobbying.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
42) Give several examples, by name, of specific not-for-profit entities that are voluntary health and welfare entities.

Question 26

Which entry would be the correct entry on the donor's books when the donor retains control of an asset, such as cash, which it contributes to a not-for-profit entity?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 27

What is the appropriate account to credit when estimating a portion of health care entity's receivables that will prove to be uncollectible?

A) Provision for Bad Debts.
B) Allowance for Uncollectible and Reduced Accounts.
C) Patient Service Revenues.
D) Accounts Receivable.
E) Contractual Adjustments.

Question 28

Which entry would be the correct entry on the not-for-profit entity's books to record a donor's gift when the donor retains power over the assets?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 29

In not-for-profit accounting, an acquisition occurs when one not-for-profit entity obtains:

A) Significant influence over another not-for-profit entity.
B) More than 50% of another not-for-profit entity's fixed assets.
C) The right to collect more than 20% of pledged contributions.
D) Control over another not-for-profit entity.
E) None of these answer choices are correct. An acquisition can only occur for profit-oriented entities.

Question 30

When an acquisition occurs in not-for-profit accounting, recognition of goodwill depends on:

A) Whether control has been achieved by the acquiring not-for-profit entity.
B) Whether the acquired not-for-profit entity has the ability to generate significant amounts of revenue from providing goods or services or from membership fees, or whether it is expected to generate primarily contribution and investment revenue in the future.
C) Whether the acquired not-for-profit entity has the ability to generate significant amounts of revenues from goods or services or membership fees, as well as significant amounts of contribution revenues in the future.
D) Whether the acquired not-for-profit entity has a history of generating significant revenues of any type.
E) None of these answer choices are correct. Goodwill can only be recognized in an acquisition of a for-profit entity.

Question 31

Which statement below is not correct for financial statements of not-for-profit entities?

A) Pledged contributions are recognized in the accounting period in which pledged by donors.
B) A not-for-profit entity's Statement of Financial Position includes a section specifically for net assets.
C) Contributed assets are recognized by a not-for-profit entity as public support contribution revenue.
D) Depreciation expense is not recognized by not-for-profit entities.
E) Not-for-profit entities issue a Statement of Activities.

Question 32

Which entry would be the correct entry on the donor's books when the donor relinquishes control of an asset, such as cash, which it contributes to a not-for-profit entity?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 33

Which of the following topics are not included in the Form 990 which tax-exempt entities file to maintain their tax-exempt status?

A) Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent Contractors.
B) Donor Disclosure: Identification of Every Donor by Name, Contribution Value & Contribution Type.
C) Statement of Revenue.
D) Balance Sheet.
E) Statement of Functional Expenses.

Question 34

Which entry would be the correct entry to record pledges of $100,000 for a telethon event to raise money for a not-for-profit public television station? The public television entity estimates that 5% of the funds will be uncollectible.

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 35

Why did the FASB issue Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers?"

A) To bring consistency to the recognition of revenue.
B) To prohibit the use of bad debt expense.
C) To allow a wide array of revenue recognition methods based on industry preferences.
D) To encourage entities to be more forgiving of bad debt.
E) To give entities more flexibility in how and when they recognize revenue.

Question 36

What is the appropriate account to debit when reducing net patient service revenue as a result of arrangements with third party payors?

A) Contractual Adjustments.
B) Allowance for Uncollectible and Reduced Accounts.
C) Patient Service Revenues.
D) Account Receivable - Patients.
E) Accounts Receivable - Third Party.

Question 37

Which entry would be the correct entry to record that a not-for-profit entity collected $80,000 of amounts pledged and also wrote off $3,000 of amounts pledged that were previously estimated as amounts uncollectible?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 38

A gift to a not-for-profit school that is not restricted by the donor is recorded with a credit to:

A) Fund Balance.
B) Deferred Revenues.
C) Contribution Revenues.
D) Non-Operating Revenues.
E) Encumbrances.

Question 39

Which of the following is not true about a merger of two not-for-profit entities?

A) The two entities will continue to legally exist but there will be a new governing board.
B) Neither entity is considered to be acquired.
C) Identifiable assets and liabilities are not adjusted to their fair values at the date of the merger.
D) The two entities will together form an entirely new entity with a new governing board.
E) There will be no acquisition value or goodwill determination.

Question 40

How are investments in equity securities with readily determinable market values, and their related unrealized gains and losses, reported by a not-for-profit entity?

A) At lower of cost or market in the Statement of Financial Position, with unrealized losses in the Statement of Activities.
B) At fair value in the Statement of Financial Position, with unrealized gains and losses in the Statement of Activities.
C) At lower of cost or market in the Statement of Financial Position, with unrealized losses in Temporarily Restricted Net Assets.
D) At original cost in the Statement of Financial Position, with unrealized gains and losses in the Statement of Activities.
E) At original cost in the Statement of Financial Position, with unrealized gains and losses disclosed in the notes to the financial statements.

Question 41

What are third-party payors? Why are their interests important in accounting for health care entities?

Question 42

$540,000 of the $2,940,000 was expected to be uncollectible.Required:Prepare the necessary journal entry to record the anticipated uncollectible amount.

Question 43

What is the main source of financial support for most voluntary health and welfare entities?

Question 44

What are the objectives of accounting for a not-for-profit entity?

Question 45

What term is often used by voluntary health and welfare entities as a category for resources received from contributions, as opposed to those from providing goods or services?

Question 46

During 2020, the Clifford Humane Society, a voluntary health and welfare entity, received cash donations of $912,000 and membership dues of $68,000. A member of the Humane Society donated services valued at $8,500 that would otherwise have been performed by a paid staff member. A pet food manufacturer donated dog food valued at $17,200. The Humane Society received a gift of $150,000, to be used in building a new animal shelter. Also during 2020, investments held by the Humane Society earned interest of $2,500.Required:Prepare a schedule showing the amount that the Clifford Humane Society should have recorded for contributions from public support for 2020.

Question 47

For a not-for-profit entity, when is recognition of contributions of artworks and historical treasures not required?

Question 48

Prepare the necessary journal entry to record the revenue and receivables.

Question 49

What two classifications are used for the expenses incurred by voluntary health and welfare entities?

Question 50

What criteria must be met before a not-for-profit entity can recognize contributed services as a means of support?

Question 51

What financial statements would normally be prepared by a voluntary health and welfare entity?

Question 52

For November 2021, Harleytown Hospital's charges for patient services were $716,000, of which 85% was billed to third-party payors.Required:Prepare the journal entry to accrue patient charges for the month.

Question 53

How does a recipient not-for-profit entity record the receipt of a gift that will be transferred without restriction to another charitable entity? What if the donor retains the right to revoke or redirect the gift?

Question 54

How does a not-for-profit entity account for: 1) cash contributions, and 2) donated goods that are received for operating purposes? What types of revenues are recognized by voluntary health and welfare entities?

Question 55

In this month, there were several patients that had no health insurance and due to their low income level, the hospital decided that $96,000 of receivables would not be collectible.Required:Prepare the necessary journal entry to reflect the decision to consider the $96,000 as charity care.

Question 56

For not-for-profit entities, what is the difference in identification of "control" between a merger and an acquisition?

Question 57

The hospital estimated that contractual adjustments would reduce the amount collected from third-party payors to $1,790,000.Required:Prepare the necessary journal entry to record the contractual adjustments.

Question 58

What should Sterling Foundation report as program service expenses?

Question 59

What should Sterling Foundation report as supporting service expenses?

Question 60

For a not-for-profit entity, what are supporting services expenses?

Question 61

A not-for-profit entity receives a computer as a donation (valued at $3,000). Prepare the journal entry for the transaction.

Question 62

The Butler Center is a voluntary health and welfare entity. During 2020, unrestricted pledges of $880,000 were received by the Butler Center, sixty-five percent of which were fulfilled in 2020. Officials estimated that fifteen percent of the original amount of pledges will be uncollectible. The remainder of the amount expected to be collected from pledges will be received in 2021 (for use in 2021).Required:1) Show with appropriate amounts how the Butler Center would present the pledges on its Statement of Financial Position on the day the pledges are recorded in 2020.2) Show with appropriate amounts the effect on net assets the Butler Center would report for contributions for 2020.

Question 63

A local social worker, earning $14 per hour working for the state government, contributed 550 hours of time at no charge to the Sunrise Homeless Shelter, a voluntary health and welfare entity. If not for these donated services, an additional staff person would have been hired by the entity.Required:How should the Sunrise Homeless Shelter record the contributed services?

Question 64

Rainbow Childcare Agency is a private not-for-profit entity providing child care for a fee. The agency has a permanent endowment and the income may be used to sponsor families that are unable to pay for services but the principal must be preserved. In addition, various fundraising activities take place during the year.When the agency held its annual holiday fundraiser in 2020, pledges of $75,000 were received. The administration expected 6% of the pledges to be uncollectible.In addition, income of $12,500 was received from the permanent endowment to sponsor children to be placed with foster families.Prepare the journal entries for these transactions.

Question 65

What criteria did the FASB establish for not-for-profit entities to use in determining if a contribution is conditional?

Question 66

Record the journal entries that reflect all of this information.

Question 67

A local business donated medical supplies to Madison Home with a value of $45,000. Prepare the journal entry for the receipt of these supplies.

Question 68

Assume that the donor retains the right to revoke or redirect the gift.Prepare the journal entries for Charity A and Charity B. The entries should be for the gift when received by Charity A, and when the gift is distributed for Charity B.

Question 69

During 2021, the Tigger Humane Society, a voluntary health and welfare entity, received cash donations of $765,000 and membership dues of $54,000. A member of the Humane Society donated services valued at $5,000 that would otherwise have been performed by a paid staff member. A pet food manufacturer donated dog food valued at $13,200.The Humane Society received a gift of $125,000, to be used for building a new animal shelter. Also during 2021, investments held by the Humane Society earned interest of $1,200.Required:Prepare a schedule showing the amount that the Tigger Humane Society should have recorded for contributions from public support for 2021, according to ASU 2016-14.

Question 70

Manna House, a local not-for-profit, provides food assistance to those in need. Manna House recently received two donations:a) Cash donation of $25,000 that must be used to purchase a vehicle to be used to deliver food. If the money is not used to purchase a vehicle for that purpose, the money must be returned to the donor.b) Donated furniture that may be used for the Manna House office, sold, or put to any other use Manna House sees fit. The fair value of the furniture is $10,000.Required:Prepare the journal entries for the receipt of these donations.

Question 71

A not-for-profit entity provides the following information for the year 2020: Required:Prepare the journal entries for these transactions for the year 2020.

Question 72

What is the five-step progression that a health care entity must follow in recording revenues?