FAR 66 - Not for profit Acct & Reporting 2 - Support, Revenues, Contributions and Net Assets Flashcards Preview

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Flashcards in FAR 66 - Not for profit Acct & Reporting 2 - Support, Revenues, Contributions and Net Assets Deck (27):

When a donation is received by a non-gvmt NPO, and some type of benefit (merchandise, tickets, etc) are given to the donor, what amount of Revenue would be recorded? What amount of donation would be recorded?

Revenue would be recorded at the equivalent value of the goods or services provided.
The donation would deduct the value of the goods or services exchanged from the total amount received/contributed to arrive at the amount to be recognized as a charitable contribution.


How should a nongovernmental not-for-profit organization report depreciation expense in its Statement of Activities?
A. It should not be included.
B. It should be included as a decrease in unrestricted net assets.
C. It should be included as an increase in temporarily restricted net assets.
D. It should be reclassified from unrestricted net assets to temporarily restricted net assets, depending on donor-imposed restrictions on the assets.

B. It should be included as a decrease in unrestricted net assets. SFAS No. 93 requires depreciation of capital assets by not-for-profit organizations. Depreciation expense is allocated to programs and therefore is a decrease in unrestricted net assets. The first answer is incorrect because SFAS No. 93 requires depreciation. The third and fourth answers are incorrect choices that are based on the option for a not-for-profit organization to adopt a policy of an implied time restriction on gifts of long-term assets. The question does not indicate that the capital assets were donated, and it does not mention that such a policy was adopted. Even if those two conditions exist, the third and fourth choices are still incorrect because the implied time restriction will result in depreciation reported in unrestricted assets and a reclassification of net assets to decrease temporarily restricted net assets and to increase unrestricted net assets for an amount equal to depreciation on the donated fixed assets.


Pica, a nongovernmental not-for-profit organization, received unconditional promises of $100,000 expected to be collected within 1 year. Pica received $10,000 prior to year end.
Pica anticipates collecting 90% of the contributions and has a June 30 fiscal year end.
What amount should Pica record as contribution revenue as of June 30?

FASB Statement No. 116 requires that unconditional promises to give ("pledges") be recognized on the accrual basis net of the estimate of uncollectible pledges.
As long as the contributions have been pledged for the current period, the receipt of cash does not impact revenue recognition.
In this instance, the $100,000 in pledges is reduced by the estimated uncollectible pledges of $10,000 (10% x $100,000), or $90,000.


Whitestone, a nongovernmental not-for-profit organization, received a contribution in December year 1. The donor restricted use of the contribution until March year 2. How should Whitestone record the contribution?
A. Footnote the contribution in year 1 and record as income when it becomes available in year 2.
B. No entry is required in year 1 and record as income in year 2 when it becomes available.
C. Report as income in year 1.
D. Report as deferred income in year 1.

C. The contribution has a time restriction and will be recognized contribution revenue in the temporarily restricted net asset category for year 1. When the time restriction is met in year 2, the amount will be recorded as a decrease in temporarily restricted net assets and as an increase in unrestricted net assets - essentially a reclassification of net assets.


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. The income from the fund is to be used to support a specific program in the second year and beyond. An investment purchased with the gift earned $40,000 during the first year. At the end of the first year, the fair value of the investment was $2,010,000. What is the net effect on temporarily restricted net assets at year end?

$50,000 increase
The $2,000,000 gift is permanently invested and will be reported as part of permanently restricted net assets. The income is dedicated to a specific program starting in year 2. Therefore, in year 1 all the income and the change in fair value of the investment are temporarily restricted as to time, so $50,000 is temporarily restricted.


What are the 3 conditions that must exist in order for donated services to be recognized as contributions to a NPO?

(1) the services require specialized skills, (2) the persons providing the services possess those skills, and (3) the services would have been purchased if they had not been donated.


Belle, a nongovernmental not-for-profit organization, received funds during its annual campaign that were specifically pledged by the donor to another nongovernmental not-for-profit health organization. How should Belle record these funds?
A. Increase in assets and increase in liabilities.
B. Increase in assets and increase in revenue.
C. Increase in assets and increase in deferred revenue.
D. Decrease in assets and decrease in fund balance.

A. Belle is acting as an "intermediary" in this situation and should record the pledge as an increase in both assets and liabilities. If Belle had the ability to re-direct the donation to another party, which is referred to as "variance power," then the pledge would have been an increase in assets and revenue.


Super Seniors is a not-for-profit organization that provides services to senior citizens.
Super employs a full-time staff of 10 people at an annual cost of $150,000. In addition, two volunteers work as part-time secretaries replacing last year's full-time secretary who earned $10,000. Services performed by other volunteers for special events had an estimated value of $15,000.
These volunteers were employees of local businesses and received small-value items for their participation.

What amount should Super report for salary and wage expenses related to the above items?

The $150,000 that is paid to the full-time staff should be included in salary and wage expenses. The two volunteers who are replacing a full-time secretary are providing specialized secretarial skills that would have been purchased if not donated; therefore, the criteria for recognizing donated services set by FASB Statement No. 116 are met.
The $10,000 should be included in salary and wage expenses. The entry to record these donated services would be the following:

Expenses - salary and wages 10,000
Revenues - contributions 10,000

The $15,000 of services provided by the other volunteers does not meet the criteria for revenue recognition under FASB Statement No. 116. This amount should not be included in salary and wage expenses. The total amount that should be reported as wage and salary expenses is $150,000 + $10,000 = $160,000.


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 recorded?

A. A temporarily restricted asset
B. A permanently restricted asset
C. An unrestricted asset
D. A temporary liability

A. Since the resources must be retained for 20 years, they must be reported under a restricted classification of net assets. However, because they are not permanently restricted but may ultimately be expended, they should be recorded as a temporarily restricted asset rather than a permanently restricted asset.


Gridiron University is a private university. A successful alumnus has recently donated $1,000,000 to Gridiron for the purpose of funding a "center for the study of sports ethics." This donation is conditional upon the university raising matching funds within the next 12 months. The university administrators estimate that they have a 50% chance of raising the additional money. How should this donation be accounted for?
A. As a temporarily restricted support.
B. As unrestricted support.
C. As a refundable advance.
D. As a memorandum entry reported in the footnotes.

C. Contributions are unconditional transfers, voluntarily made, nonreciprocal, and made by an entity acting other than as an owner. The donation described in this question is conditioned upon a match in which there is considerable uncertainty. Therefore, the donation should be accounted for as a refundable advance until the matching condition is met [FASB Code Section 958-605-25-13]. The first answer, temporarily restricted support, is incorrect because that is used for contribution revenue recognized that contain a use or time restriction. The second answer, unrestricted support, is incorrect because it is used to recognized unconditional and unrestricted contributions. The fourth answer, a memorandum entry, is incorrect because the $1,000,000 in cash was donated. Had the amount be pledged rather than donated, a memorandum entry would have been appropriate.
Journal Entry:
Cash 1,000,000
Refundable Advance (Liability) 1,000,000


T/F: Donated fixed assets are recorded at FMV at date of donation. These assets are generally not subject to depreciation.

They are recorded at FMV at date of donation. And ARE generally subject to depreciation.


T/F: Promises that depend on a specific event occurring in the future should still be recognized as contributions as of the date of the gift.

When the pledge depends on other factors occurring, the donation is accounted for as a refundable advance until the dependent factors are met.


T/F: Fixed assets are normally considered to be restricted, so contribution revenue related to the donation is usually recognized as Permanently Restricted.

Temporarily restricted


T/F: NFP organizations sometimes receive resources that are restricted by the donor to specific recipients. These contributions may actually be liabilities of the NFP organization. ASC 958-605-45 (Statement #136) addresses these recognition issues.



Dee City's community hospital, which uses Enterprise Fund reporting, normally includes proceeds from the sale of cafeteria meals in:
A. Patient Service Revenues.
B. Other Revenues.
C. Ancillary Service Revenues.
D. Deductions from Dietary Service Expenses.

B. Hospital revenues are classified broadly into three major categories:
1.Patient Service Revenues,
2.Premium Fees, and
3.Other Revenues.

Other Revenues are revenues that are earned from ongoing activities of the hospital other than patient services and Premium Fees. Included in this class of revenues are proceeds from the sale of cafeteria meals.


Which of the following normally would be included in Other Operating Revenues of a hospital?
* Revenues from educational programs
* Unrestricted gifts

Yes, no
Government hospitals classify revenues into three broad categories: Patient Service Revenues, Premium Fees, and Other Revenues. The Other Revenues category includes revenues generated by ongoing activities of the hospital other than patient care. Revenues from educational programs are included in this category.
Government hospitals record unrestricted gifts as Nonoperating Gains in the General Fund.

If we assume that the hospital is not a government entity, then it must conform with FASB Statement No. 116. The revenues from educational programs would still be classified as Other Operating Revenues. The unrestricted gifts would be classified as Revenues from Contributions.


T/F: Depreciation expense is reported by a hospital as a Non-Operating Loss.

reported as an operating expense


T/F: An unrestricted bequest is reported by a hospital as a Non-Operating Gain.



T/F: Ancillary Services are reported by a hospital as Other Operating Revenue.

reported as an Operating Expense and a Non-Operating Gain.


T/F: Net Patient Services Revenue is reported net of the provision for bad debts.



T/F: Revenues related to charity patients are included in Patient Service Revenue.

included in Other Revenue.


T/F: A federal grant to support research in cancer treatments is reported as part of Net Patient Services Revenue.

part of Other Revenue.


How should state appropriations to a state university choosing to report as engaged only in business-type activities be reported in its Statement of Revenues, Expenses, and Changes in Net Position?
A. Operating Revenues.
B. Nonoperating Revenues.
C. Capital Contributions.
D. Other Financing Sources.

B. A state university is an example of a special purpose government. Since it is engaged only in business-type activities, it should report the financial statements required for Enterprise Funds. In that case, state appropriations to the university are Nonoperating Revenues.


During the year, Public College received the following: •an unrestricted $50,000 pledge to be paid the following year,
•a $25,000 cash gift restricted for scholarships,
•and a notice from a recent graduate that the college is named as a beneficiary of $10,000 in that graduate's will.

What amount of contribution revenue should Public College report in its Statement of Activities?

$75,000. Both the $50,000 pledge, which is not to be paid until the following year, and the $25,000 cash gift, which is restricted for scholarships, should be recognized as Revenue, albeit "Temporarily Restricted Revenue." The $50,000 pledge is restricted due to "Time Restrictions" (e.g. the money will not be received until a later time). The $25,000 gift is subject to a "Purpose Restriction." The $10,000 bequest is not recognized as revenue. It may be disclosed in the notes but should not be recognized as revenue until the amount is distributable.


T/F: Auxiliary enterprise revenues and expenditures are netted together and reported as a single line item in the financial statements of a college or university.

They are aggregated and reported as a single line item in the Revenues section.


T/F: Tuition revenues and instructional expenditures for an academic period encompassing two fiscal periods are prorated to each fiscal year in accordance with the amount of service provided during each of the periods.



T/F: Revenues from university housing services are included with Tuition and Fees Revenues.


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