Question 1

A voluntary health and welfare organization received a $300,000 contribution on April 15,20X9,from a donor who stipulated the donation be invested permanently in stocks and bonds.The donor further stipulated earnings from the investments be spent according to the wishes of the governing board of the voluntary health and welfare organization.Earnings from the investments for the year ended June 30,20X9,amounted to $6,000.How would the voluntary health and welfare organization report this information for the year ended June 30,20X9?

Accepted Answer

The answer of A voluntary health and welfare organization received...

Question 2

Which financial statement is (are)required for a voluntary health and welfare organization which is not required for a private,not-for-profit hospital?
I.A statement of operations.
II.A statement of functional expenses.

Accepted Answer

The answer of Which financial statement is (are)required for a...

Question 3

Local Services,a voluntary health and welfare organization had the following classes of net assets on July 1,20X8,the beginning of its fiscal year:
During the year ended June 30,20X9,the following events occurred:
(1)It purchased equipment,costing $100,000,with contributions restricted for this purpose.The contributions had been received from donors during June of 20X8.
(2)It received $130,000 of cash donations which were restricted for research activities.During the year ended June 30,20X9,$90,000 of the contributions were expended on research.
(3)It sold investments classified in the permanently restricted class for a loss of $40,000.Dividends and interest income earned on the investments amounted to $70,000.There were no restrictions on how investment income was to be used.
(4)It received cash contributions of $200,000 from donors who did not place either time or use restrictions upon their donations.
(5)Expenses,excluding depreciation expense,for program services and supporting services incurred during the year ended June 30,20X9,amounted to $260,000.
(6)Depreciation expense for the year ended June 30,20X9,was $80,000.
 
-Refer to the above information.On the statement of activities for the year ended June 30,20X9,reclassifications would be reported at

Accepted Answer

The answer of Local Services,a voluntary health and welfare organization...

Question 4

The transactions listed in the following questions occurred in a private,not-for-profit hospital during 20X8.For each transaction,indicate its effect on the hospital's statement of operations for the year ended December 31,20X8.
-Transaction: Received tuition revenue from hospital nursing program and cash from sales of goods in the hospital gift shop.
Effect on Statement of Operations:

Accepted Answer

Both tuition revenue and cash from sales of goods in the gift shop are considered operating revenue and will increase operating income.

Question 5

On the statement of functional expenses prepared for a voluntary health and welfare organization,depreciation expense is allocated to
I.expenses for program services.
II.expenses for supporting services.

Accepted Answer

Depreciation expense is allocated to both program services and supporting services in a voluntary health and welfare organization's statement of functional expenses. This allocation reflects the use of assets in both direct program activities and activities that support these programs, such as management and fundraising.

Question 6

FASB 117 (ASC 958)requires that an "other not-for-profit entity" (ONPO)provide three financial statements.Which of the following is NOT one among them?

Accepted Answer

A statement of functional expenses is not required for all not-for-profit entities under FASB 117 (ASC 958); it is specifically required for voluntary health and welfare organizations. The three required statements are the statement of financial position, statement of activities, and statement of cash flows.

Question 7

The disclosure,"net assets released from restrictions," is reported on which of the following financial statements for a voluntary health and welfare organization?
I.The statement of cash flows.
II.The statement of activities.

Accepted Answer

Net assets released from restrictions are reported on the statement of activities for voluntary health and welfare organizations. The statement of cash flows would only report information on cash inflows and outflows, not changes in net assets.

Question 8

During the fiscal year ended June 30,20X9,Global Charities,a voluntary health and welfare organization,received unrestricted cash contributions of $500,000 and temporarily restricted cash contributions of $300,000.All of the temporarily restricted contributions were restricted by the donors for equipment acquisitions.During the year ended June 30,20X9,equipment costing $250,000 was acquired with the restricted contributions.As a result of these two contributions,Global Charities' statement of cash flows,prepared for the year ended June 30,20X9,would report an increase in net cash provided by operating activities of:

Accepted Answer

The increase in net cash provided by operating activities would be $500,000, which represents the unrestricted cash contributions. Temporarily restricted contributions are not considered operating activities but rather financing or investing activities, depending on how they are used.

Question 9

Local Services,a voluntary health and welfare organization had the following classes of net assets on July 1,20X8,the beginning of its fiscal year:
During the year ended June 30,20X9,the following events occurred:
(1)It purchased equipment,costing $100,000,with contributions restricted for this purpose.The contributions had been received from donors during June of 20X8.
(2)It received $130,000 of cash donations which were restricted for research activities.During the year ended June 30,20X9,$90,000 of the contributions were expended on research.
(3)It sold investments classified in the permanently restricted class for a loss of $40,000.Dividends and interest income earned on the investments amounted to $70,000.There were no restrictions on how investment income was to be used.
(4)It received cash contributions of $200,000 from donors who did not place either time or use restrictions upon their donations.
(5)Expenses,excluding depreciation expense,for program services and supporting services incurred during the year ended June 30,20X9,amounted to $260,000.
(6)Depreciation expense for the year ended June 30,20X9,was $80,000.
 
-Refer to the above information.On the statement of activities for the year ended June 30,20X9,temporarily restricted net assets:

Accepted Answer

The answer of Local Services,a voluntary health and welfare organization...

Question 10

A voluntary health and welfare organization received $200,000 of pledges from donors on February 15,20X9.The donors did not place either time or use restrictions on the amount pledged.The governing board estimated that 10 percent of the pledges would be uncollectible.During the remainder of fiscal 20X9,cash received from pledges amounted to $184,000.For the year ended June 30,20X9,what amount should the voluntary health and welfare organization report as Contributions-Unrestricted?

Accepted Answer

Contributions-Unrestricted are recognized when the donor places no restrictions on the donation. Since the donors did not place any restrictions on the $200,000 pledged, the organization should recognize the entire amount as Contributions-Unrestricted. However, because the governing board estimated 10% of the pledges to be uncollectible, the organization must adjust the amount it recognizes. Therefore, the organization should report $180,000 ($200,000 - 10%*$200,000) as Contributions-Unrestricted. The cash received from pledges during the remainder of fiscal 20X9 of $184,000 is consistent with this amount and therefore, applicable as Contributions-Unrestricted.

Question 11

On June 30,20X9,a voluntary health and welfare organization received pledges from donors amounting to $50,000.The donors did not place any time or use restrictions on the amount pledged.It was estimated that 10 percent of the pledges would not be collected.How should the voluntary health and welfare organization report these pledges on its financial statements prepared at the end of its fiscal year,June 30,20X9?

Accepted Answer

The organization should report the pledges as contribution revenue-unrestricted for $45,000 because it is estimated that 10% of the pledges ($5,000) will not be collected. Since there are no time or use restrictions on the pledges, they should be reported as unrestricted revenue. Reporting the pledges as fund balance or fund balance unrestricted would not be accurate as they represent assets or net assets rather than revenue.

Question 12

Local Services,a voluntary health and welfare organization had the following classes of net assets on July 1,20X8,the beginning of its fiscal year:
During the year ended June 30,20X9,the following events occurred:
(1)It purchased equipment,costing $100,000,with contributions restricted for this purpose.The contributions had been received from donors during June of 20X8.
(2)It received $130,000 of cash donations which were restricted for research activities.During the year ended June 30,20X9,$90,000 of the contributions were expended on research.
(3)It sold investments classified in the permanently restricted class for a loss of $40,000.Dividends and interest income earned on the investments amounted to $70,000.There were no restrictions on how investment income was to be used.
(4)It received cash contributions of $200,000 from donors who did not place either time or use restrictions upon their donations.
(5)Expenses,excluding depreciation expense,for program services and supporting services incurred during the year ended June 30,20X9,amounted to $260,000.
(6)Depreciation expense for the year ended June 30,20X9,was $80,000.
 
-Refer to the above information.At June 30,20X9,the amount of permanently restricted net assets reported on the statement of financial position would be:

Accepted Answer

Permanently restricted net assets do not include any gains, losses or expenses. Therefore, the net loss of $40,000 on the sale of investments is not included in this class of net assets. The $100,000 of restricted contributions for equipment and the $70,000 of investment income in permanently restricted class are added together to get a total of $170,000. This amount is added to the beginning balance of $790,000 to get the ending balance of $960,000.

Question 13

A voluntary health and welfare organization received unrestricted cash donations of $20,000 from donors who attended a dinner held for the benefit of the organization.The costs of the dinner,including room rental,and other expenses,amounted to $7,000.On the statement of activities prepared for the voluntary health and welfare organization,the expenses of the dinner should be:

Accepted Answer

The costs of the dinner should be reported as fund raising costs because the purpose of the dinner was to raise funds for the organization.

Question 14

In accordance with FASB 116 (ASC 958),pledges,which are temporarily restricted by donors,are reported as increases in temporarily restricted net assets on the statement of activities of a voluntary health and welfare organization when the

Accepted Answer

Pledges that are temporarily restricted by donors are recognized as increases in temporarily restricted net assets when the pledges are made, according to FASB 116 (ASC 958).

Question 15

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization.The donor did not place any use restrictions on the amount pledged.The stream of the payments is discounted at 6 percent.The first payment of $5,000 is received at the end of the first year.The present value factor for a five-payment annuity due on June 30,20X9,at 6 percent is 4.2124.
-Based on the preceding information,the journal entry to recognize present value at the time the pledge is received includes:

Accepted Answer

The present value of the pledge is $21,062 ($5,000 x 4.2124). Since the donor did not place any use restrictions on the amount pledged, the funds are temporarily restricted until the organization fulfills the obligation related to the pledge. Therefore, the journal entry to recognize present value at the time the pledge is received includes a debit to Pledges Receivable-Temporarily Restricted for $21,062, which represents the present value of the pledge, and a credit to Contribution Revenue-Temporarily Restricted for the same amount.

Question 16

A voluntary health and welfare organization reports pledges receivable on its statement of financial position at the present value of the future cash collections.How is the increase in the present value of the pledges receivable,which is due to the passage of time,reported on the voluntary health and welfare organization's statement of activities?

Accepted Answer

The answer of A voluntary health and welfare organization reports...

Question 17

Local Services,a voluntary health and welfare organization had the following classes of net assets on July 1,20X8,the beginning of its fiscal year:
During the year ended June 30,20X9,the following events occurred:
(1)It purchased equipment,costing $100,000,with contributions restricted for this purpose.The contributions had been received from donors during June of 20X8.
(2)It received $130,000 of cash donations which were restricted for research activities.During the year ended June 30,20X9,$90,000 of the contributions were expended on research.
(3)It sold investments classified in the permanently restricted class for a loss of $40,000.Dividends and interest income earned on the investments amounted to $70,000.There were no restrictions on how investment income was to be used.
(4)It received cash contributions of $200,000 from donors who did not place either time or use restrictions upon their donations.
(5)Expenses,excluding depreciation expense,for program services and supporting services incurred during the year ended June 30,20X9,amounted to $260,000.
(6)Depreciation expense for the year ended June 30,20X9,was $80,000.
 
-Refer to the above information.Which of the following statements is (are)correct about the program and supporting expenses that would be reported on the statement of activities for the year ended June 30,20X9?
I.Program and supporting expenses should be reported at $340,000.
II.All of the program and supporting expenses should be reported as a deduction from unrestricted revenues and other support.

Accepted Answer

The answer of Local Services,a voluntary health and welfare organization...

Question 18

A voluntary health and welfare organization developed and printed informational materials which were intended to both educate the public about how its resources are used to help people in need and to also appeal to the public for much needed support.In this situation,the cost of the informational materials should be

Accepted Answer

The cost of the informational materials should be allocated between expenses for program services and fund-raising expense because the materials serve both purposes of educating the public and appealing for support. Therefore, it is appropriate to allocate the cost proportionally between the two purposes.

Question 19

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization.The donor did not place any use restrictions on the amount pledged.The stream of the payments is discounted at 6 percent.The first payment of $5,000 is received at the end of the first year.The present value factor for a five-payment annuity due on June 30,20X9,at 6 percent is 4.2124.
-Based on the preceding information,the increase in present value of the contributions receivable recognized at the end of the first year equals:

Accepted Answer

To find the increase in present value of the contributions receivable recognized at the end of the first year, we need to compare the present value of the annuity with and without the first payment ($5,000) at the end of the first year.
 
Present value of annuity with first payment = $5,000 x 4.2124 = $21,062 
Present value of annuity without first payment = $5,000 x 3.4651 = $17,326

The difference between the two present values is $21,062 - $17,326 = $3,736. This is the present value of the first payment discounted for 4 years at 6%. To get the present value of the first payment discounted for only 1 year at 6%, we divide $3,736 by the present value factor for a 4-year annuity due:

$3,736 ÷ 3.4651 = $1,078

Therefore, the increase in present value of the contributions receivable recognized at the end of the first year is $5,000 - $1,078 = $3,922 (rounded to the nearest dollar). However, the question is asking for the increase in present value, not the present value itself. To find the increase, we need to subtract the present value of the annuity without the first payment from the present value of the annuity with the first payment:

$21,062 - $17,326 = $3,736

Therefore, the increase in present value of the contributions receivable recognized at the end of the first year is $3,736.

This is not one of the answer choices, but $3,922 is the correct present value of the first payment at the end of the first year.

Question 20

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization.The donor did not place any use restrictions on the amount pledged.The stream of the payments is discounted at 6 percent.The first payment of $5,000 is received at the end of the first year.The present value factor for a five-payment annuity due on June 30,20X9,at 6 percent is 4.2124.
-Based on the preceding information,at the end of the first year,the pledge increased unrestricted net assets by:

Accepted Answer

The first payment of $5,000 is received at the end of the first year, so it increases unrestricted net assets by $5,000. The question specifically asks for the increase in unrestricted net assets at the end of the first year, so we do not need to calculate the present value or use the present value factor.

Quiz 19: Not-For-Profit Entities

Which financial statement is (are) required for a voluntary health and welfare organization which is not required for a private,not-for-profit hospital? I.A statement of operations. II.A statement of functional expenses.

On the statement of functional expenses prepared for a voluntary health and welfare organization,depreciation expense is allocated to I.expenses for program services. II.expenses for supporting services.

FASB 117 (ASC 958) requires that an "other not-for-profit entity" (ONPO) provide three financial statements.Which of the following is NOT one among them?

The disclosure,"net assets released from restrictions," is reported on which of the following financial statements for a voluntary health and welfare organization? I.The statement of cash flows. II.The statement of activities.

In accordance with FASB 116 (ASC 958) ,pledges,which are temporarily restricted by donors,are reported as increases in temporarily restricted net assets on the statement of activities of a voluntary health and welfare organization when the