Deck 18: Accounting for Not-For-Profit Organizations

Question 1

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)Unearned Revenue.
D)Patient Service Revenues.
E)Accounts Receivable.

Answer 1

D

Question 2

Which of the following statements is required for voluntary health and welfare organizations,but not for other not-for-profit organizations?

A)Statement of Activities and Changes in Net Assets.
B)Statement of Functional Expenses.
C)Statement of Financial Position.
D)Statement of Cash Flows.
E)Statement of Budget to Actual.

Answer 2

B

Question 3

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 on which they depend are substantially met.
D)In the period in which the conditions on which they depend have begun to be met.
E)Unconditional promises from potential donors are not revenues.

Answer 3

A

Question 4

Which statement below is not correct?

A)The accounting period in which pledged revenues are recognized is dependent on donor specifications.
B)The permanently restricted section of a nonprofit organization's net assets is set aside by donor restrictions.
C)A contributed asset is recognized as revenue by a nonprofit organization.
D)Depreciation expense is not recognized by nonprofit organizations.
E)Nonprofit organizations issue a statement of activities.

Question 5

REFERENCE: 18_01
The following gifts are received in Year One by a not-for-profit organization:
I.$2,000 specified by the donor to be used to pay salaries.
II.$10,000 for new conference room furniture.
III.$5,000 to be held for one year before being expended.
The salaries are paid in Year Two and the conference room furniture is purchased in Year One.
How much should be shown as increases as Temporarily Restricted Net Assets in Year One?

A)$2,000
B)$7,000
C)$12,000
D)$15,000
E)$17,000

Question 6

Which one of the following financial statements is not required by SFAS 117 for a voluntary health and welfare organization?

A)Statement of Financial Position.
B)Statement of Functional Expense.
C)Statement of Activities and Changes in Net Assets.
D)Statement of Cash Flows.
E)Statement of Operations.

Question 7

Which of the following is not a question individuals ask of not-for-profit organizations in considering whether to make a contribution?

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

Question 8

REFERENCE: 18_01
The following gifts are received in Year One by a not-for-profit organization:
I.$2,000 specified by the donor to be used to pay salaries.
II.$10,000 for new conference room furniture.
III.$5,000 to be held for one year before being expended.
The salaries are paid in Year Two and the conference room furniture is purchased in Year One.
How much should be reclassified on the Statement of Activities in Year Two from the Temporarily Restricted column to the Unrestricted column?

A)$2,000.
B)$5,000.
C)$7,000.
D)$10,000.
E)$12,000.

Question 9

Which of the following types of health care organizations follow FASB statements?

A)Entry A.
B)Entry B.
C)Entry C.
D)Entry D.
E)Entry E.

Question 10

A gift to a nonprofit school that is not restricted by the donor is credited in the general fund to:

A)Fund Balance.
B)Deferred Revenues.
C)Contributions Revenues.
D)Nonoperating Revenues.
E)Encumbrances.

Question 11

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

A)Entry A.
B)Entry B.
C)Entry C.
D)Entry D.
E)Entry E.

Question 12

What is the basis used in reporting the Statement of Activities and Changes in Net Assets?

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 13

On a statement of functional expenses for a voluntary health and welfare organization,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 14

Which one of the following is a voluntary health and welfare organization?

A)Charity raising money for underprivileged children.
B)Nursing home.
C)Clinic.
D)Hospital.
E)Preschool.

Question 15

Unconditional transfers of cash or other resources to an entity in a voluntary nonreciprocal transaction is the SFAS 116 definition for

A)miscellaneous revenues.
B)contributions.
C)unconditional promises to give.
D)exchange transactions.
E)pledges.

Question 16

What are the three categories of net assets required by the FASB in reporting a not-for-profit organization?

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 the above.

Question 17

Reciprocal transfers where both parties give and receive something of value are

A)contributed services.
B)unconditional promises to give.
C)endowment transactions.
D)exchange transactions.
E)required contributions.

Question 18

Which account would be credited in recording a gift of medicine to a nursing home from an outside party?

A)Nonoperating Gain - Donations.
B)Contractual Adjustments.
C)Patient Service Revenues.
D)Drugs and Medicines.
E)Other Revenues - Donations.

Question 19

Historically,what was the pattern of reporting of not-for-profit organizations?
(1)Patterned after for-profit accounting
(2)Emphasis on separate fund types
(3)Disregard for 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

How are equity securities with determinable market values and their related unrealized gains and losses reported,according to SFAS 124?

A)Lower of cost or market,with unrealized losses in the Statement of Activities.
B)Fair value,with unrealized gains and losses in the Statement of Activities.
C)Lower of cost or market,with unrealized losses in Temporarily Restricted Net Assets.
D)Cost,with unrealized gains and losses in the Statement of Activities.

Question 21

What criteria must be met before a voluntary health and welfare organization can recognize donated services as a means of support?

Question 22

What term is used by voluntary health and welfare organizations for contributions?

Question 23

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

Question 24

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

A)debit expense-charitable contribution,credit cash.
B)debit refundable advance to charity,credit cash.
C)debit cash,credit liability to beneficiary.
D)debit cash,credit refundable advance.
E)debit cash,credit contribution revenue.

Question 25

How does a voluntary health and welfare organization account for donated goods and cash contributed for operating purposes? What revenues are recognized by voluntary health and welfare organizations?

Question 26

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

Question 27

What is the appropriate account to debit when reducing patient billings caused by 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 28

What are the objectives of accounting for a voluntary health and welfare organization?

Question 29

When is recognition of contributions of artworks and historical treasures not required?

Question 30

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

A)debit expense-charitable contribution,credit cash.
B)debit refundable advance to charity,credit cash.
C)debit cash,credit liability to beneficiary.
D)debit cash,credit refundable advance.
E)debit cash,credit contribution revenue.

Question 31

Which entry would be the correct entry to record pledges of $100,000 to a public television fundraiser? The public television organization estimates that 5% of the funds will be uncollectible.

A)debit Pledges Receivable $100,000,credit unrestricted net assets-contributions $100,000.
B)debit Cash $100,000,credit unrestricted net assets-contributions $100,000.
C)debit Pledges Receivable $100,000,credit unrestricted net assets-contributions $95,000,credit allowance for uncollectible pledges $5,000.
D)debit Pledges Receivable $95,000,debit allowance for uncollectible pledges $5,000,credit unrestricted net assets-contributions $100,000.
E)debit cash $95,000,debit allowance for uncollectible pledges $5,000,credit unrestricted net assets-contributions $100,000.

Question 32

What is the appropriate account to credit when estimating a portion of receivables that will prove to be uncollectible?

A)Bad Debt Expense.
B)Allowance for Uncollectible Accounts.
C)Patient Service Revenues.
D)Accounts Receivable.
E)Contractual Adjustments.

Question 33

Which entry would be the correct entry on the donor's books to record a gift to a not-for-profit organization when control of the assets is retained by the donor?

A)debit expense-charitable contribution,credit cash.
B)debit refundable advance to charity,credit cash.
C)debit charitable pledge,creditcash.
D)debit cash,creditliability to beneficiary. Edebit cash,credit refundable advance.

Question 34

Which entry would be the correct entry on the donor's books to record a gift to a not-for-profit organization whenthe donor relinquishes control of the asset?

A)debit expense-charitable contribution,credit cash.
B)debit refundable advance to charity,credit cash.
C)debit charitable pledge,creditcash.
D)debit cash,creditliability to beneficiary.
E)debit cash,credit refundable advance.

Question 35

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

A)debit Pledges Receivable $80,000,credit Cash $80,000.
B)debit Cash $80,000,credit Pledges Receivable $80,000.
C)debit Pledges Receivable $80,000,credit allowance for uncollectible pledges 3,000,credit Cash $83,000.
D)debit cash $80,000,debit allowance for uncollectible pledges $3,000,credit Pledges Receivable $83,000.
E)debit cash $80,000,debit allowance for uncollectible pledges $3,000,credit unrestricted net assets-contributions $83,000.

Question 36

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

Question 37

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

Question 38

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)debit Accounts Receivable-Patients $200,000,credit Patient Service Revenue $200,000.
B)debit Accounts Receivable-Patients $150,000,debit Accounts Receivable-Third Party $50,000,credit Patient Service Revenue $200,000.
C)debit Accounts Receivable-Patients $50,000,debit Accounts Receivable-Third Party $150,000,credit Patient Service Revenue $200,000.
D)debit Accounts Receivable-Patients $200,000,credit Patient Service Revenue $50,000,credit Patient Service Revenue $150,000.
E)debit Patient Service Revenue $200,000,credit Accounts Receivable-Patients $150,000,credit Accounts Receivable-Third Party $50,000.

Question 39

Give several examples of voluntary health and welfare organizations.

Question 40

For a voluntary health and welfare organization,what are supporting services expenses?

Question 41

Wakefield Home is a private not-for-profit healthcare organization offering services for a fee.The home has an 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 Home held its annual Holiday fund raiser,pledges of $50,000 were received.The administration expected 5% to be uncollectible.
In addition,income of $10,000 was received from the endowment to sponsor families.
Prepare the journal entries for these transactions.

Question 42

The hospital estimated that contractual adjustments would reduce the amount collected from third-party payors to $1,710,000.
Required:
Prepare the necessary journal entry to record the contractual adjustments.

Question 43

For May 2008,Carlington Hospital's charges for patient services were $608,000,of which 80% was billed to third-party payors.
Required:
Prepare the journal entry to accrue patient charges for the month.

Question 44

A local social worker,earning $12 per hour working for the state government,contributed 600 hours of time at no charge to the Yelton Center,a voluntary health and welfare organization.Except for these donated services,an additional staff person would have been hired by the organization.
Required:
How should the Yelton Center record the contributed services?

Question 45

The Home incurred the following liabilities: $110,000 salaries,$30,000 medical equipment,$10,000 utilities expense.
Prepare the journal entries for these transactions.

Question 46

According to FASB Statement 117,how are not-for-profits to utilize separate funds?

Question 47

REFERENCE: Ref.18_04
A not-for-profit organization (Charity A)raises money for other charitable organizations.Charity A receives $10,000 to distribute to Charity B.
Assume there are no donor rights to revoke or redirect the gift.
Prepare the journal entries for Charity A when the gift is received,and for Charity A and Charity B when the gift is distributed.

Question 48

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

Question 49

In this month,there were several patients that had no health insurance and due to their low income level,the hospital decided that $85,000 of receivables would not be collectible
Required:
Prepare the necessary journal entry to reflect the decision to consider the $85,000 as charity care.

Question 50

REFERENCE: Ref.18_05
Wakefield Home is a private not-for-profit healthcare organization offering services for a fee.In the first quarter of 2008,Wakefield Home rendered services of $300,000 to patients.Of this amount 75% will be paid by patients,and $25,000 will be adjusted based on estimated insurance agreements.The remaining amount is to be paid by third party insurance providers.
Record the journal entries that reflect all of this information.

Question 51

REFERENCE: Ref.18_02
For the month of December 2008,patient charges at Northfield Hospital (a not-for-profit hospital)were $2,720,000.Third-party payors were billed $1,800,000.
Prepare the necessary journal entry to record the revenue and receivables.

Question 52

A local business donated medical supplies to Wakefield with a value of $40,000.
Prepare the journal entry for the receipt of these supplies.

Question 53

During 2008,the Garfield Humane Society,a voluntary health and welfare organization,received cash donations of $892,000 and membership dues of $62,000.A member of the Humane Society donated services valued at $8,000 that would otherwise have been performed by a paid staff member.A pet food manufacturer donated dog food valued at $16,400.The Humane Society received a gift of $140,000,to be used in building a new animal shelter.Also during 2008,investments held by the Humane Society earned interest of $2,000.
Required:
Prepare a schedule showing the amount that the Garfield Humane Society should have recorded for public support for 2008.

Question 54

A not-for-profit organization receives a computer as a donation (valued at $2,000).Prepare the journal entry for the transaction.

Question 55

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

Question 56

The Yelton Center is a voluntary health and welfare organization.During 2008,unrestricted pledges of $780,000 were received by the center,sixty percent of which were payable in 2008,with the remainder payable in 2009 (for use in 2009).Officials estimated that fifteen percent of these pledges will be uncollectible.
Required:
How much should the Yelton Center report as revenue for 2008?

Question 57

$520,000 of the $2,720,000 was expected to be uncollectible.
Required:
Prepare the necessary journal entry to record the anticipated uncollectible amount.

Question 58

REFERENCE: Ref.18_03
Dura Foundation,a voluntary health and welfare organization dedicated to finding medical cures and supported by contributions from the general public,included the following costs in its Statement of Functional Expenses for the year ended December 31,2008:

What should Dura Foundation report as program service expenses?