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Homework 5
Homework 5
- The Jackson Foundation, a not-for-profit organization, received contributions in Year 1 as follows:
- Cash contributions of $500,000 without donor restrictions.
- Cash contributions donor restrictions with specific requirements relative to the acquisition of property
Jackson’s statement of cash flows in Year 1 should include which of the following amounts?
Operating Investing Financing
activities activities activities
$700,000 $0 $0
$500,000 $200,000 $0
$500,000 $0 $200,000
$0 $500,000 $200,000
- The Jupiter Children’s Center, a not-for-profit organization, receives State grants to fund its ongoing programming. Grants are annual contracts that are structured as cost reimbursement agreements requiring expenditure of grant funding before revenues are deemed to be earned. Assuming the Jupiter Children’s Center expended all grant funds in accordance with program requirements, the center would likely record grant revenues as:
Revenue with donor restrictions and a reclassification that decreases net assets donor restrictions and increases net assets without donor restrictions.
Support (contribution revenue) without donor restrictions. provided that the center discloses and consistently applies this accounting policy.
Conditional revenue with donor restrictions.
A refundable advance and a reclassification to support without restrictions.
- In hospital accounting, restricted funds are:
Not available unless the board of directors remove the restrictions.
Restricted as to use for board-designated purposes.
Not available for current operating use: however, the income generated by the funds is available for current operating use.
Restricted as to use by the donor, grantor, or other source of the resources.
- Zokro, a nongovernmental not-for-profit organization. uses the indirect method to prepare its statement of cash flows. In determining its net cash provided (used) by operating activities, Zokro must add back which of the following to the change in net assets?
Purchase of Equipment.
Payment on long-term debt.
Depreciation.
Decrease in accounts payable.
- In a statement of activity of a voluntary health and welfare organization, depreciation expense should:
Be included as an element of expense.
Be included as an element of other changes in a statement of activity.
Be included as an element of support.
Not be included.
- Zokro, a nongovernmental not-for-profit organization, uses the indirect method to prepare its statement of cash flows. In determining its net cash provided (used) by operating activities, Zokro must add back which of the following to the change in net assets?
Purchase of equipment.
Payment on long-term debt.
Depreciation.
Decrease in accounts payable.
- In Year 1, Citizens’ Health, a voluntary health and welfare organization. received a bequest of a $200,000 certificate of deposit maturing in Year 2. The testators only stipulations were that this certificate be held until maturity and that the interest revenue be used to finance salaries for an ongoing preschool program Interest revenue for Year 2 was $16,000. When the certificate matured and was redeemed, the board of trustees adopted a formal resolution designating $40,000 of the proceeds for the future purchase of equipment for the preschool program. What amount should Citizen disclose in its Year 2 year-end financial statements as board-designated net assets (for future expenditures)?
$0
$16,000
$40,000
$56,000
- How should a nongovernmental, not-for-profit organization report donor-restricted cash contributions for long-term-purposes its statement of cash flows?
Operating activity inflow.
Investing activity inflow.
Financing activity inflow.
As a noncash transaction.
- The Appleton Museum, a not-for-profit organization, sells a painting donated to its collection to a private investor. The museum plans to use the proceeds associated with the sale to purchase additional works of art for display. In its statement of cash flows, the museum typically would display proceeds from the sale as cash flows from:
Operating activities.
Investing activities.
Financing activities.
Donor-restricted resources. which are not displayed on the face of the statement of cash flows.
- In a not-for-profit organization, which of the following Should be included in total expenses?
Grants to other
Organizations Depreciation
Yes Yes
Yes No
No No
No Yes
- Settam, a nongovernmental not-for-profit organization, received a donation of stock with donor-stipulated requirements as follows:
- Shares valued at $8,000,000 are to be sold with the proceeds used for renovation.
- Shares valued at $2,000,000are to be retained with the dividends used to support current operations.
What amount should Settam include as net assets without donor restrictions as a result of this donation?
$0
$2,000,000
$8,000,000
$10,000,000
- A nongovernmental not-for-profit organization borrowed $5, 000. which it used to purchase a truck. In which section of the organization’s statement of cash flows should the transaction be reported?
In cash inflow and cash outflow from investing activities.
In cash inflow and cash outflow from financing activities.
In cash inflow from financing activities and cash outflow from investing activities.
In cash inflow from operating activities and cash outflow from investing activities.
- The purpose of a statement of financial position for a nongovernmental not-for-profit entity is to provide relevant information about:
The cash receipts and cash payments during a period in time.
The effects of transactions and other events and circumstances that change the amount and nature of net assets.
The assets, liabilities, and net assets, and about their relationships to one another at a moment in time.
The changes in net assets with and without donor restrictions.
- Which of the following would a nongovernmental not-for-profit educational institution report as program services?
Publicity costs.
Teacher salaries.
Management salaries.
Fundraising expenses.
- A statement of activities prepared by a nongovernmental not-for-profit organization is most similar to which of the following financial statements prepared by a for-profit entity?
Income statement
Balance sheet
Statement of cash flows
Statement of changes in stockholders’ equity
- A nongovernmental not-for-profit college has a portfolio of bond investments that had an original cost of $2,000,000. The college’s board of trustees voted to hold the principal of this fund intact in perpetuity and designated the earnings to reimburse faculty for travel to academic conferences. During the year, interest of $50,000 was earned in cash. The fair value of the bonds was $1,980,000. What amount should the college report as net assets with donor restrictions at year-end?
$0
$1,980,000
$2,000,000
$2,030,000
- A nongovernmental not-for-profit organization may report on which of the following basis and remain in compliance with generally accepted accounting principles (GAAP)?
Cash
Accrual
Modified cash
Modified accrual
- The following expenditures were made by Green Services, a society for the protection Of the environment:
Printing of the annual report $12,000
Unsolicited merchandise sent to encourage contributions 25,000
Cost Of an audit performed by a CPA firm 3,000
What amount should be classified as fundraising costs in the society’s statement of activities?
$37,000
$28,000
$25,000
$0
- Which of the following classifications is required for reporting of expenses by all not-for-profit organizations?
Natural classification in the statement of activities or notes to the financial statements.
Functional classification in the statement of activities or notes to the financial statements
Functional classification in the statement of activities and natural classification in a matrix format in a separate statement
Functional classification in the statement of activities and natural classification analyzed by function the notes to the financial statements.
- Guidance included in FASB ASC 958. Financial Statements of Not-for-Profit Organizations, focuses on:
Basic information for the organization as a whole.
Standardization of funds nomenclature.
Inherent differences of not-for-profit organizations that impact reporting presentations.
Distinctions between current fund and non-current fund presentations.
- In Year 1, Community Helpers. a private voluntary health and welfare organization, received a bequest of a $100,000 certificate of deposit maturing in Year 11. The testators only stipulations were that this certificate be held until maturity and that the interest revenue be used to finance salaries for a preschool program. Interest revenue for Year 11 was $8,000. When the certificate was redeemed. the board of trustees adopted a formal resolution designating S20.000 of the proceeds for the future purchase of equipment for the preschool program.
What should be reported as “contributions without donor restrictions- in the Year 11 statement of activity?
Investment income $8,000.
$20,000
$0
$108,000
- A donor gives $10,000 to a nongovernmental, not-for-profit organization with instructions that it must be used to fund the organization’s general operating expenses during the following fiscal year. The donation will increase the organization’s:
Net assets without donor restrictions
Net assets with donor restrictions
Board-designated net assets (for future expenditures)
Restricted retained earnings
- Which of the following costs should a nongovernmental not-for-profit organization report as a supporting service expense?
Salary paid to a program director.
Cost for the annual fund-raising dinner.
printing cost incurred to create educational fryers on the prevention of illness.
Cost incurred to advertise the programs of the organization.
- Kind Nurses Assoc. is a voluntary health and welfare organization. Nurses are paid to visit homes of elderly people and are reimbursed for mileage and supplies. Which of the following items should Kind record as a support activity in its disclosure of functional expenses?
Nurses’ mileage expense.
Payment for nurses’ employee benefits.
Payment for nurses’ supplies.
Fundraising costs.
- How should operating expenses for a nongovernmental not-for-profit organization be reported?
Change in net assets with donor restrictions.
Change in net assets without donor restrictions.
Change in Board designated net assets (for future expenditures).
Contra-account to associated revenues.
- The Appleton Museum was established in the current year as a not-for-profit organization. It operates as a privately-funded museum and curator of the historical and artistic treasures of the Town of Appleton. The museum received a $500,000 donation of securities from Uri Appleton with the stipulation that the donation would be kept intact but that earnings from the principal could be used for the museum’s art acquisition program. During the year. the museum received $50,000 in contributions without donor restrictions to fund operations. The donation of Mr. Appleton yielded S30,000 in dividends and the fair market value of the donation was $525,000 at year-end. The museum purchased local treasures for display in the museum valued at $38,000 during the year. What were the values of the net asset classes at the end of the year?
Without With
donor restrictions donor restrictions
$50,000 $517,000
$37,000 $530,000
$12,000 $555,000
$42,000 $525,000
- In its fiscal year ended June 30, Year 1, Barr College, a large, private institution, received $100,000 designated by the donor for scholarships for superior students. On July 26, Year 1, Barr selected the students and awarded the scholarships. How should the July 26 transaction be reported in Barr’s statement of activities for the year ended June 30. Year 2?
As both an increase and a decrease of $100,000 in net assets donor restrictions.
As a decrease only in net assets without donor restrictions.
By footnote disclosure only.
Not reported.
- Which of the following resources increases the net assets with donor restrictions of a nongovernmental, not-for-profit voluntary health and welfare organization?
Refundable advances for purchasing playground equipment.
Donor contributions to fund a resident camp program.
Membership fees to fund general operations.
Participants’ deposits for an entity-sponsored trip.
- The net asset reclassifications of a nongovernmental not-for-profit organization would be reported on which of the following?
Statement of financial position.
Statement of activities.
Statement of cash flows.
Statement of functional expenses.
- Arkin Corp. is a nongovernmental, not-for-profit organization involved in research. Arkin’s expenses classification in the notes to the financial statements should classify which of the following as support services?
Salaries of staff researchers involved in research
Salaries of fundraisers for funds used in research.
Costs of equipment involved in research.
Costs of laboratory supplies used in research.
- The Harrison School of Fine Arts is organized as a not-for-profit institution of higher learning. The Harrison School is required to produce which of the following financial statements?
Statement of Statement of Statement of Statement of
Financial Position Activities Cash Flows Functional Expenses
Yes Yes Yes Yes
Yes Yes No Yes
Yes Yes Yes No
Yes Yes No No
- In addition to the statement of activities, which of the following financial statements should not-for-profit hospitals prepare?
Balance sheet.
Balance sheet, and statement of changes in financial position
Balance sheet and statement of cash flows.
Statement of funds, statement of revenues and expenses, and statement of cash flows.
- Which of the following financial categories are used in a nongovernmental not-for-profit organization’s statement of financial position?
Net assets, income, and expenses.
Income, expenses, and net assets without donor restrictions.
Assets, liabilities, and net assets.
Changes in net assets without donor restrictions and with donor restrictions.
- Functional expenses recorded in the general ledger of ABC, a non-governmental not-for-profit organization, are as follows:
Soliciting prospective members $45,000
Printing membership benefits brochures 30,000
Soliciting membership dues 25,000
Maintaining donor list 10,000
What amount should ABC report as fund-raising expenses?
$10,000
$35,000
$70,000
$110,000
- In Year 1, Community Helpers, a private voluntary health and welfare organization. received a bequest of a $100,000 certificate of deposit maturing in Year 11. The testator’s only stipulations were that this certificate be held until maturity and that the interest revenue be used to finance salaries for a preschool program. Interest revenue for Year 11 was $8,000. When me certificate was redeemed, the board of trustees adopted a formal resolution designating 20,000 of the proceeds for the future purchase of equipment for the preschool program.
In regard to the certificate of deposit. what should be reported in the Year 11 statement of activities?
Legacies and bequests, $100,000.
Reclassification from net assets with donor restrictions of $100,000
Transfer to land, building, and equipment fund $20,000.
Revenues control, $100,000.
- Nongovernmental not-for-profit organizations are required to provide which of the following external financial statements?
Statement of financial position, statement of activities, statement of cash flows.
Statement of financial position, statement of comprehensive income, statement of cash flows.
Statement of comprehensive income, statement of cash flows, statement of gains and losses.
Statement of cash flows. statement of comprehensive income. statement of unrelated business income.
- A nongovernmental not-for-profit organization received a $2 million gift from a donor who specified it be used to create an endowment fund that would be invested in perpetuity at the end of the year. The income from the fund is to be used to support a specific program in the second year and beyond. An investment purchased the gift at the beginning of Year 2 earned $40,000. At the end of Year 2, the fair value of the investment was is the net effect on net assets with donor restrictions at the end of Year 2?
$0
$10,000 increase.
$40,000 increase.
$50,000 increase.
- Janna Association, a nongovernmental not-for-profit organization. received a cash gift with the stipulation that the principal be held for at least 20 years. How should the cash gift be reported?
An asset with donor restrictions
An endowment fund
An asset without donor restrictions
A conditional asset without donor restrictions
- At the beginning of the year. the Baker Fund. a nongovernmental not-for-profit corporation. received a $125,000 contribution restricted to youth activity programs. During the year. youth activities generated revenue of $89,000 and had program expenses of $95000. What amount should Baker report as net assets released from restrictions for the current year?
$0
$6,000
$95,000
$125,000
- Pann, a nongovernmental not-for-profit organization, provides food and shelter to the homeless. Pann received a $15,000 gift with the stipulation that the funds be used to buy beds. In which net asset class should Pann report the contribution?
Endowment
With donor restrictions
Board-designated net assets (for future expenditures)
Without donor restrictions
- Which of the following financial statements would provide information about the ongoing revenues and expenses associated a voluntary health and welfare organization?
The statement of activities.
The statement of cash flows.
The statement of comprehensive income.
The statement of financial position.
Scroll down to complete all parts of this task.
For each of the transactions in the table below, identify the net asset classification described by clicking in the associated cell end selecting the appropriate name from the list provided.
|
|
A |
B |
|
1 |
Transactions |
Net Asset Classification |
|
2
|
Earnings related to cash originally contributed unconditionally for the purpose of funding an endowment for not for-profit organizations. The principal of the contribution is to remain intact while earnings from the endowment must be used to fund the construction of e building. |
With donor restrictions |
|
3 |
A donor provides a deposit to a not-for-profit organization that Will ultimately fund the construction of a new facility contingent upon securing operating funding for the program which It is to house. |
Not classified as net assets |
|
4 |
A donor promises to contribute funds to defray construction costs of a new building contingent upon securing operating funding for the program which it is to house. |
Not classified as net assets |
|
5 |
A donor promises unconditionally to donate funds for the primary operating purpose of a not-for-profit organization over the next three years. |
With donor restrictions |
|
6 |
A donor contributes cash unconditionally for the purpose of carrying out the business of a not-for-profit organization. The recipient organization fully anticipates expending the funds before the end of the fiscal year. |
Without donor restrictions |
|
7 |
A donor provides an unconditional contribution to be used for the construction of a new facility whose purpose IS mission-based programs. |
With donor restrictions |
|
8 |
A donor contributes cash unconditionally for the purpose of developing new services central to the mission of a not-for-profit organization. |
With donor restrictions |
|
9 |
A donor contributes cash unconditionally for the purpose of funding an endowment for a not-for-profit organization. The principal of the contribution IS to remain intact while earnings from the endowment may be used for any purpose. |
With donor restrictions |
|
10 |
The board of governance sets aside monies for construction of a new building in a board-designated endowment fund. |
Without donor restrictions |
Row 2: With donor restrictions
Assets provided to a not-for-profit organization that are restricted for a purpose that can be met by the recipient organization are classified as with donor restrictions. The restriction for the purpose of asset construction is purely classified as net assets with donor restrictions.
Row 3: Not classified as net assets
Resources provided in conjunction with a conditional pledge represent a refundable advance that is recorded as a liability and is not a portion of net assets. There is no value to classify.
Row 4: Not classified as net assets
Conditional promises provided to a not-for-profit organization do not represent a receivable revenue or net assets until the conditions are met. The promise to provide funding contingent upon securing operating funding is conditional and would not be recorded.
Row 5: With donor restrictions
Unconditional promises to pay over a period of time are generally classified as with donor restrictions as to time until collection.
Row 6: Without donor restrictions
Cash received by a not-for-profit organization for any appropriate purpose within the context of the mission is deemed to be without donor restrictions.
Row 7: With donor restrictions
An unconditional donor restricted pledge whose restrictions can be satisfied by the actions of a not-for-profit organization are with donor restrictions.
Row 8: With donor restrictions
An unconditional donor restricted contribution whose restrictions can be satisfied by the actions of a not-for-profit organization are with donor restrictions.
Row 9: With donor restrictions
An unconditional donor restricted contribution whose use is restricted to the generation of revenue streams is classified as with donor restrictions. Although additional disclosures may be required for net assets whose restrictions are permanent in nature (endowment funds), the net asset classification will remain simply “with donor restrictions.”
Row 10: Without donor restriction
Board-designated endowment funds resulting from an internal designation of net assets without donor restrictions are classified as net assets without donor restrictions.
|
|
A |
B |
|
1 |
Line Item |
Amount |
|
2
|
Revenues without donor restrictions |
$0
|
|
3 |
Revenues with donor restrictions |
$60,000 |
|
4 |
Expenses without donor restrictions |
$30,000 |
|
5 |
Expenses with donor restrictions |
$0 |
|
6 |
Gain/(loss) on investment (without donor restriction) |
$0 |
|
7 |
Gain/(loss) on investment (with donor restriction) |
(100,000) |
|
8 |
Net assets with donor restrictions released from restrictions |
$30,000 |
|
9 |
Endowment funds released from restrictions |
$0 |
|
10 |
Net assets without donor restrictions |
$0 |
|
11 |
Net assets with donor restrictions |
($70,000) |
Row 2: $0
Revenues without donor restrictions would not be impacted by changes in the value of endowment investments or their related earnings. Earnings from endowment investments typically have donor restrictions. The changes in the value of endowment investments are treated in a manner that is consist with donor requirements. Cumulative losses on underwater endowments (fair value < carrying value) are absorbed by the endowment and are classified consistent with donor restrictions.
Row 3: $60,000
Earnings from endowment investments are revenues with donor restrictions for use in a manner consistent with the donor’s requirements.
Row 4: $30,000
All expenses are recognized as changes to net assets without donor restrictions. Earnings with donor restrictions used in a manner that satisfies the donor’s stipulations are reclassified out of net assets with donor restrictions into net assets without donor restrictions to fund the expense.
Row 5: $0
All expenses are changes to net assets without donor restrictions. No expense would be recognized to reduce net assets with donor restrictions as a result of the transaction described in this situation.
Row 6: $0
Losses displayed on the statement of activities used to arrive at changes in net assets without donor restrictions would not be impacted by changes in the value of endowment investments. Cumulative losses on underwater endowments (fair value < carrying value) are absorbed by the endowment and are classified consistent with donor restrictions.
Row 7: ($100,000)
Losses displayed on the statement of activities used to arrive at changes in net assets with donor restrictions include changes in the value of endowment investments. Cumulative losses on underwater endowments (fair value < carrying value) are absorbed by the endowment and are classified consistent with donor restrictions.
Row 8: $30,000
Net assets with donor restrictions used in conformity with a donor’s requirement to fund program expenses would result in reclassification from net assets with donor restrictions to net assets without donor restrictions on the face of the statement of activities. Juniper spent $30,000 as directed by the donor, resulting in a $30,000 net assets with donor restrictions released from restrictions.
Row 9: $0
No endowment fund monies were released from restrictions. Restrictions to endowment funds typically do not expire.
Row 10: $0
Net assets without donor restrictions would remain unchanged as a result of the transactions in the fact pattern. Juniper University spent $30,000 on programs, and those costs were defrayed by a reclassification of net assets with donor restrictions into net assets without donor restrictions in the same amount on the face of the statement of activities.
Row 11: ($70,000)
Net assets with donor restrictions would be reduced by $70,000. The earnings and losses on investments in combination with the reclassification in recognition of satisfaction of donor requirements would produce the following results:
Investment earnings $ 60,000
Unrealized investment losses (100,000)
Reclassification of net assets for satisfied donor restrictions ( 30,000)
Change in net assets with donor restrictions $(70,000)