Question 1

Nongovernment not-for profit organizations that wish to follow generally accepted accounting principles in the preparation of their financial statements should follow

Accepted Answer

Nongovernment not-for-profit organizations should follow FASB (Financial Accounting Standards Board) standards to adhere to generally accepted accounting principles (GAAP) in the preparation of their financial statements.

Question 2

$\underline{\text{ Transactions:  }}$ The following selected transactions occurred for a nongovernmental, not-for-profit organization. All amounts are in thousands of dollars.
1. Unrestricted cash contributions received during the year, $300.
2. Restricted cash contributions were received during the year for the following: (a) Education programs, $43; (b) Building fund, $202; and (c) Endowment, $1,000.
3. Pledges received during the year were as follows: Unrestricted, $3,000; (b) Building fund, $5,000; and (c) Endowment, $20,000. 10% of pledges receivable typically prove uncollectible. Pledges expect to be collected early in the next year.
4. A benefit concert was held to raise resources for the building fund. Receipts totaled $1,400 and direct costs incurred totaled $850.
5. Salary expenses incurred for the education programs were paid, $14.
6. Materials were purchased on account for the education programs, $25.
7. Fees paid to an architect for design of the building during the year were $92. Additionally, payments to the building contractor during the year were $110.
8. Earnings on endowment fund investments are restricted to the entity's education programs. The earnings for the year were $13.
9. Cost of materials used for education programs during the year, $32
10. Earnings on building fund investments were not restricted by donors but the board requires that they be used to finance the building. The earnings on those investments for the year were $25.
$\underline{\text{ Requirement:  }}$ Prepare the journal entries for the above transactions.

Accepted Answer

$\begin{array}{|c|l|c|c|}
\hline \text { \# } & \text { Accounts } & \text { Debit } & \text { Credit } \
\hline 8 & \text { Cash } & 13 & \
\hline & \text { Investment Income with Donor Restrictions - Education } & & 13 \
\hline 9 a & \text { Expenses - Education } & 32 & \
\hline & \text { Materials Inventory } & & 32 \
\hline 9 b & \text { Reclassifications to Net Assets without Donor Restrictions } & 32 & \
\hline & \text { Reclassifications from Net Assets with Donor Restrictions } & & 32 \
\hline 10 \mathrm{a} & \text { Cash } & 25 & \
\hline & \text { Investment Income without Donor Restrictions } & & 25 \
\hline 10 b & \text { Net Assets without Donor Restrictions } & 25 & \
\hline & \begin{array}{l}
\text { Net Assets without Donor Restrictions - Designated for } \
\text { Building }
\end{array} & & 25 \
\hline
\end{array}$

Question 3

Statement of Activity for a Nongovernmental, Not-for-Profit Organization
Selected information from the accounts of the Weinstein Musical Society, a nongovernment, not-for-profit organization for the year ended December 31, 20X5 is presented below. (All amounts are in thousands of dollars and all accounts have a normal balance):

All expenses of the Maestro and the Classical Music Appreciation Programs are payable from donor restricted resources.

$\underline{\text{ Requirement:  }}$ Prepare the Statement of Activity for the Society

Accepted Answer

Solution assumes that depreciation does not satisfy any restrictions on resources use.

Question 4

A nongovernment voluntary health and welfare organization received unrestricted cash donations of $23,000 for the current year, $30,000 of pledges to be received in and used for general purposes in the following year, and a $100,000 donation to establish a permanent investment endowment. The organization should report

Accepted Answer

The $23,000 unrestricted cash donation is reported as revenues without donor restrictions. The $30,000 pledges for the following year and the $100,000 endowment are reported as revenues with donor restrictions, totaling $130,000.

Question 5

Fund-raising expenses are classified as

Accepted Answer

Fund-raising expenses are considered supporting services expenses because they support the organization's overall operations and are not directly related to program services. Program services expenses are those that directly relate to the organization's mission and activities, while management and general expenses are those associated with the overall administration and management of the organization. Nonoperating expenses are those that are unrelated to the organization's regular activities, such as gains or losses from the sale of investments.

Question 6

Membership dues of nongovernment, not-for-profit organizations are

Accepted Answer

Membership dues for nongovernment, not-for-profit organizations are reported as contribution revenues if the members do not receive significant benefits in return, indicating a contribution rather than an exchange transaction.

Question 7

A nongovernment, not-for-profit organization provides the following information and asks you to determine how much revenue should be reported in each of its changes in net assets categories. All pledges are unconditional $$\begin{array} { | l | r | } 
\hline \text { Cash contributions restricted to specific proprarns } & \$ 200,000 \
\hline \text { Cash contributions restricted to endownent } & \$ 1,000,000 \
\hline \begin{array} { l } 
\text { Net realizable value of pledges to a buildirg prograrn } \
\text { resulting fron current year furdd raising efforts }
\end{array} & \$450,000\
\hline \begin{array} { l } 
\text { Net realizable value of unconditional pledges resulting } \
\text { from curtent year fund raising efforts }
\end{array} & \$150,000 \
\hline
\end{array}$$  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Changes in }$
$\begin{array}{rrr}
& \text { Net Assets } & \text { Net Assets } \
&\text { without } & \text { With } \
&\text { Donor Restrictions } & \text { Donor Restrictio }\
\text { A. } & \$ 0 & \$ 1,755,000 \
\text { B. } & \$ 0 & \$ 755,000 \
\text { C. } & \$ 105,000 & \$ 1,650,000 \
\text { D. } & \$ 305,000 & \$ 1,450,000
\end{array}$

Accepted Answer

The answer of A nongovernment, not-for-profit organization provides the following...

Question 8

A not-for-profit organization was the recipient of a significant fixed asset donation. The assets, a building valued at $82,000, and one acre of land, valued at $210,000, are going to be used by the organization for office space and parking. The donor's net book value of the building was $22,000, and of the land, $65,000. The not-for-profit organization should record the assets at a total value of

Accepted Answer

The correct answer is to record the assets at their fair market value at the time of donation, which is $82,000 for the building and $210,000 for the land, totaling $292,000. The donor's net book value is not relevant for the recipient's accounting.

Question 9

Other not-for-profit organizations include

Accepted Answer

The answer of Other not-for-profit organizations include
...

Question 10

$\underline{\text{ Transactions:  }}$ The following selected transactions occurred for a nongovernment, not-for-profit organization. All amounts are in thousands of dollars.

1. Received a contribution of stock to establish an endowment fund. The income from the endowment is unrestricted. The donor had acquired the stock for $23 about 20 years earlier. Its estimated fair value when donated was $250. 
2. Pledges receivable at year end were $100, all from pledges received during the year. The pledges are unrestricted and 5% of the pledges are estimated to be uncollectible. The pledges expect to be collected early next year.

For questions 3-5, assume that the organization has adopted a policy that restrictions on donations made for capital purposes are met when the capital item is purchased.

3. A cash gift of $200 was received restricted for the purchase of equipment.
4. Equipment of $80 was purchased from the gift restricted for this purpose.
5. Depreciation expense for the year on the equipment purchased is $10.

$\underline{\text{ Requirement: }}$  Prepare the journal entries for the above transactions.

Accepted Answer

The answer of $\underline{\text{ Transactions:  }}$ The following selected...

Question 11

A not-for-profit organization receives donated supplies valued at $40,000 in June. As of the fiscal year end December, 31, 20X3, the organization had used 25% of the materials. The organization should report

Accepted Answer

The organization should report the full value of the donated supplies as unrestricted contributions ($40,000) since there's no indication they were restricted by the donor. They should also report expenses of $10,000, which represents the 25% of the materials used by the fiscal year end.

Question 12

Nongovernment not-for-profit organizations are required to report their financial statements on

Accepted Answer

Non-governmental not-for-profit organizations are required to report their financial statements using an economic resources measurement focus. This means that their financial statements should reflect the organization's total assets, liabilities, and net assets, rather than just their cash flow. The economic resources measurement focus takes into account all resources available to the organization, including non-cash assets like equipment and property, and it provides a more comprehensive view of the organization's financial health.

Question 13

A private school is given $40,000 to permanently endow one of its education programs. A debit of $40,000 should be made to

Accepted Answer

The $40,000 is specifically designated to permanently endow one of the school's education programs, therefore it should be recorded as Cash restricted for endowment. This ensures that the funds are not used for any other purpose and are set aside for the designated program in perpetuity.

Question 14

The line item, net assets released from restrictions, may be reported in a nongovernment, not-for-profit organization's statement of activities in which classifications?

Accepted Answer

Net assets released from restrictions are reported as increases in net assets without donor restrictions and decreases in net assets with donor restrictions, reflecting the satisfaction of the restrictions by the organization.

Question 15

Reporting for Not-for-Profit Organizations
$\underline{\text{  Requirements: }}$  Explain the way a nongovernmental, not-for-profit organization must report the following items in its statement of activities:

A. Receipt of unrestricted contributions
B. Pledges restricted to a specific program
C. Collections, in a subsequent year, of pledges restricted to a specific purpose
D. Pledges restricted to fixed asset construction
E. Earnings on restricted investments

Accepted Answer

The answer of  Reporting for Not-for-Profit Organizations
\(\underline{\text{  Requirements:...

Question 16

A nongovernment not-for-profit organization received donated services from a local volunteer. The volunteer works as a receptionist for the organization. The market value of service is $5,000. How should this activity be reported be in the statement of activities?

Accepted Answer

Donated services are recognized if they create or enhance non-financial assets or require specialized skills. Receptionist services do not meet these criteria, so they are not reported.

Question 17

Listed below are two transactions for an alcohol rehabilitation treatment program. All amounts are in thousands of dollars.
$\underline{\text{Transactions:  }}$ 
1. Received pledges of $300 and cash gifts of $100 during the year to be used only for alcohol rehabilitation treatment programs.
2. Incurred expenses of $220 for its alcohol rehabilitation program but paid the expenses from unrestricted resources, not from available restricted resources.
$\underline{\text{ Requirement: }}$  Prepare the journal entries for these transactions.

Accepted Answer

The answer of Listed below are two transactions for an...

Question 18

The statement of net assets for a nongovernment nonprofit organization would report the following components of net assets

Accepted Answer

The correct components of net assets for a nongovernment nonprofit organization are "net assets without donor restrictions" and "net assets with donor restrictions," reflecting the current terminology used in nonprofit financial reporting.

Question 19

A not-for-profit entity that receives a donation restricted for a specific purpose and meets the use restriction in the same reporting period reports

Accepted Answer

When a not-for-profit entity receives a donation that is restricted for a specific purpose and meets the use restriction within the same reporting period, it can report the transaction in two ways: as revenues without donor restrictions, since the funds were used for their intended purpose within the period, or as revenues with donor restrictions initially and then recognize net assets released from restrictions when the funds are used for the specified purpose. Both approaches accurately reflect the fulfillment of the restriction within the same reporting period.

Question 20

Special fund-raising events of a nongovernment, not-for-profit organization

Accepted Answer

Special fund-raising events of a nongovernment, not-for-profit organization must be reported as revenues at gross amounts unless the event is incidental or peripheral. This means that if the event is a major or significant one, it should be reported as revenue at the full gross amount. However, if the event is a small, insignificant one, it may not need to be reported at the full gross amount.

Quiz 16: Non-Slg Not-For-Profit Organizations