Question 1

In 20X1,Ellen College,a private not-for-profit institution,received a $100,000 grant for faculty research.The grant money was not spent until 20X2.For 20X1,Ellen College should report the contribution as:

Accepted Answer

The grant money was received in 20X1 but not spent until 20X2. Therefore, as of December 31, 20X1, the grant money should be reported as a temporarily restricted asset. It is important to note that the grant may have specific restrictions or conditions placed on it by the donor, which would also influence the reporting treatment.

Question 2

Unrestricted current funds of a private university designated by the governing board for a specific future purpose should be reported as part of:

Accepted Answer

Unrestricted current funds designated by the governing board for a specific purpose are still considered unrestricted net assets because the designation is internal and can be changed by the board.

Question 3

Bridger Hospital,which is operated by a religious organization,provides charity care for the indigent living in the region served by the hospital.How should Bridger report the amount of its charity care on its financial statements?

Accepted Answer

Charity care is not recognized as revenue or expense in the financial statements but is disclosed in the notes to the financial statements.

Question 4

A private not-for-profit university generally must depreciate all tangible fixed assets,except:
I.works of art and other historical treasures.
II.administration buildings.

Accepted Answer

Works of art and other historical treasures are considered intangible assets and do not need to be depreciated. However, administration buildings are tangible assets and must be depreciated over their useful lives.

Question 5

For the year ended June 30,20X9,a private college received contributions from alumni which were restricted for faculty research stipends to be awarded during the next fiscal year.For the year ended June 30,20X9,these contributions should be disclosed on the statement of activities of the private college as an increase in:

Accepted Answer

The contributions from alumni are restricted for faculty research stipends to be awarded during the next fiscal year, which means that they are temporarily restricted net assets until they are spent or fulfilled. Therefore, the increase in contributions should be disclosed as an increase in temporarily restricted net assets on the statement of activities.

Question 6

The governing board of Samaritan Hospital,which is operated by a religious organization,designated $500,000 of cash for future expansion of the hospital.On the hospital's balance sheet,the cash designated for future plant expansion would be disclosed in which of the following classes of net assets?

Accepted Answer

The cash designated by the governing board for future expansion is considered unrestricted net assets because it is an internal designation, not a donor-imposed restriction.

Question 7

Net assets restricted as to time or purpose should be classified as:
I.temporarily restricted.
II.permanently restricted.

Accepted Answer

Net assets restricted as to time or purpose should be classified as temporarily restricted until the time or purpose restriction is met. These restrictions may be either donor-imposed or legally imposed by external factors, such as government regulations. Permanently restricted net assets are those that are restricted by the donor to remain intact and invested, with only the income from the assets available for use by the organization.

Question 8

A private,not-for-profit university should prepare which of the following financial statements?

Accepted Answer

A private, not-for-profit university should prepare the following financial statements:

I. Statement of Financial Position (Balance Sheet)
II. Statement of Activities (Income Statement)
IV. Statement of Cash Flows

The Statement of Financial Position (Balance Sheet) provides information about an organization's assets, liabilities, and net assets. The Statement of Activities (Income Statement) reports the changes in net assets that have occurred during the reporting period. The Statement of Cash Flows provides information about the inflows and outflows of cash and cash equivalents during a reporting period.

Therefore, options A, B, and D are incorrect.

Question 9

A private,not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds.The hospital's revenues from nursing programs and gift shops should be accounted for in the:

Accepted Answer

Nursing program and gift shop revenues are considered operating revenues which are accounted for in the general fund. The restricted donor funds are separately accounted for as they have specific restrictions and purposes.

Question 10

The statement of financial position for a private not-for-profit college should show separate dollar amounts for

Accepted Answer

Private not-for-profit colleges should show separate dollar amounts for unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets in their statement of financial position. This is important for transparency and accountability, as it allows stakeholders to see how much of the college's resources are available for general use versus those that are restricted for specific purposes. Option B is incorrect as not all accounts in the equity section need to be separately reported. Option C is also incorrect as it does not provide enough information. Option D is not ideal as it does not differentiate between temporarily and permanently restricted assets.

Question 11

A private college received an offer from a CPA who is an alumnus to teach a one-semester advanced accounting course at no cost.ASC 958 prescribes that this contribution of service:

Accepted Answer

ASC 958 requires that contributed services be recognized as revenue and an expense (or asset, if the service creates or enhances a nonfinancial asset) if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Teaching an advanced accounting course requires specialized skills and would typically be a service the college would have to purchase if not donated, thus it should be recorded as revenue with an equivalent amount recorded as an expense.

Question 12

A not-for-profit private college in Virginia created a separate foundation responsible for obtaining financial support from alumni and others.Foundation assets are used for the benefit of the college.Donations made to the foundation and subsequently transferred to the college should be:

Accepted Answer

The answer of A not-for-profit private college in Virginia created...

Question 13

Clay University,a not-for-profit university,earned $300,000 from bookstore revenue and spent $100,000 for faculty research in 20X1.The $100,000 for faculty research came from a $150,000 research grant received in the previous year.What is the effect of these events on unrestricted net assets in 20X1?

Accepted Answer

The unrestricted net assets increase by the $300,000 earned from bookstore revenue, as the research grant was restricted and does not affect unrestricted net assets.

Question 14

In accordance with ASC 958,contributions from donors which are to be permanently invested should be disclosed on the statement of activities of a private university as an increase in:

Accepted Answer

According to ASC 958, contributions from donors which are to be permanently invested should be disclosed on the statement of activities of a private university as an increase in permanently restricted net assets. This is because these contributions can only be used for specific purposes and cannot be expended by the university. Therefore, they are classified as permanently restricted net assets.

Question 15

On the statement of operations prepared for a private,not-for-profit hospital,patient service revenue earned during the year is reported net of amounts for which of the following items?
I.Contractual adjustments
II.Bad debts expense

Accepted Answer

Patient service revenue earned during the year is reported net of contractual adjustments, which represent the difference between the hospital’s standard charges and the lower amounts negotiated with third-party payers. Bad debts expense, on the other hand, is considered a separate operating expense and is not included in patient service revenue.

Question 16

Sayer University,a not-for-profit university,earned $750,000 from bookstore revenue and spent $250,000 for faculty research in 20X8.The $250,000 for faculty research came from a $400,000 research grant received in the previous year.What is the effect of these events on unrestricted net assets in 20X8?

Accepted Answer

The answer of Sayer University,a not-for-profit university,earned $750,000 from bookstore...

Question 17

Unrestricted gifts and endowment income of a private university are reported as

Accepted Answer

Unrestricted gifts and endowment income are reported as unrestricted revenues on the statement of activities for a private university, reflecting their availability for general use without donor-imposed restrictions.

Question 18

A private,not-for-profit hospital received contributions of $50,000 from donors on June 15,20X9.The donors stipulated that their contributions be used to purchase equipment for the hospital.As of June 30,20X9,the end of the hospital's fiscal year,$12,000 of the contributions had been spent on equipment acquisitions.In the hospital's general fund,what account would be credited to recognize the release of the restrictions on the temporarily restricted contributions used to acquire equipment?

Accepted Answer

The account that would be credited to recognize the release of the restrictions on the temporarily restricted contributions used to acquire equipment would be the "Net assets released from equipment acquisition restriction" account. This is because when the restricted contributions are used to purchase equipment, the funds are temporarily restricted until the equipment is acquired. Once the equipment is acquired, the restrictions are released and the funds become unrestricted, which is reflected in the "Net assets released from equipment acquisition restriction" account. Options A and B are incorrect because revenue and financing sources do not accurately reflect the nature of the transaction. Option D is also incorrect because it only reflects the release of unrestricted net assets, whereas the contributions were previously restricted.

Question 19

A private,not-for-profit hospital received a cash contribution of $100,000 from Samantha Hicks on November 14,20X8.Ms.Hicks specified the money be used to acquire equipment.On December 31,20X8,the hospital had not expended any of Ms.Hicks' contribution.On the statement of changes in net assets for the year ended December 31,20X8,the hospital should report the contribution as a $100,000 increase in

Accepted Answer

Since Ms. Hicks specified that the contribution should be used for acquiring equipment, the contribution is considered to be temporarily restricted until the equipment is acquired. Therefore, the hospital should report the contribution as a $100,000 increase in temporarily restricted net assets on the statement of changes in net assets for the year ended December 31, 20X8.

Question 20

Good Care Hospital,which is operated by a religious organization,received contributions of $1,000,000 from donors who stipulated that the cash be used to construct an addition to the hospital.As of the balance sheet date,none of the contributions had been expended for construction.On the hospital's balance sheet,the cash contributions would be disclosed in which of the following classes of net assets?

Accepted Answer

The cash contributions are restricted by the donors for a specific purpose (construction of an addition to the hospital), but the hospital has not yet spent the funds for that purpose. Therefore, these funds are considered temporarily restricted until they are used for the intended purpose, at which point they will be reclassified as unrestricted net assets.

Quiz 19: Not-For-Profit Entities