Nonprofit Accounting Flashcards
(27 cards)
What are the four statements that represent for a private sector not-for-profit hospital?
Statement of Financial Position (B/S)
Statement of Operations (Activities)
Statement of Changes in Net Assets (Equity)
Statement of Cash Flow
What are the 3 basic financial statements for a non-profit organization?
Statement of Financial Position
Statement of Activities
Statement of Cash Flows
What is the cash contributions of $200,000 restricted by the donor to the acquisition of property in the Statement of C/F?
Financing Activities
Explanation: Contributions that are designated by the donor for the funding of a long-term project is considered an inflow from financing activities.
What is the cash expenditures of $200,000 to acquire property with the donation from the restricted fund in the Statement of C/F?
Investing Activities (200,000) Explanation: When the funds are used for the acquisition of property since property is a capital asset, the expenditure would be an outflow for investing activities.
Shares valued at $2,000,000 are to be retained, with the dividends used to support current operations. which accounts in the statement of financial position should we record this in the case of NPO?
Permanently Restricted.
Explanation: The shares are to be retained with no provision for their sale or other disposal. As a result, they are permanently restricted.
The Jone family lost its home in a fire. On Dec 25, 20x3, a philanthropist sent money to the Amer Society, a NPO, to purchase furniture for the Jones family. During Jan, 20X4, Amer purchased this furniture for the Jones family. How should Amer report the receipt of the money in its 20x3 F/S?
As a liability
Explanation: When the recipient of funds has little or no discretion as to how funds will be used, the funds are received by the NPO in the capacity of an agent. They are recognised as a liability, not as revenue, until such time as they are disbursed according to the donor’s instructions.
A NPO receives $150 from a donor. The donor receives two tickets to a theatre show and an acknowledgment in the theatre program. The tickets have a fair market value of $100. What amour is recorded as contribution revenue?
Ans $50
When a NPO receives contributions and provides goods or services in exchange, the amount received in excess of the FV of the goods or services is recognised as revenues. Of the $150 received, $100 was for the FV of the tickets and $500 was contributions revenue.
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
A donor contributed $100,000 and stipulated that it be invested permanently.
Increases permanently restricted net asset
Increases CF from financing activities
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
Donors contributed $500,000 for the acquisition of equipment.
Increases temporarily restricted
Increases CF from financing activities
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
* This entity uses the direct method of reporting its CF from operating activities.
Depreciation expense of $750,000 was recorded for 20x3.
Decreases unrestricted net assets
Transaction reported in the schedule reconciling change in net assets to net cash provided from operating activities
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
$3,000,000 was received, representing tuition for the spring, summer, and fall semesters.
Increases unrestricted net assets
Increases CF from operating activities
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
Investments of $100,000 were acquired with the cash received from the donor in transaction below.
A donor contributed $100,000 and stipulated that it be invested permanently.
Transaction not reported on the statement of activities
The purchase of securities represents the use of one permanently restricted asset, cash, to acquire another permanently restricted asset, investments. As a result, there is no change in permanently restricted net assets.
Decreases CF from investing activities
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
Interest and dividends of $8,000 were received from the investments acquired in transaction below. The donor stipulated that earnings be used for student scholarships in 20x3.
Investments of $100,000 were acquired with the cash received from the donor in transaction below.
A donor contributed $100,000 and stipulated that it be invested permanently.
Increases in temporarily restricted
Increases CF in operating activities
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
$75,000 was received from donors in 20x3 who had pledged that amount in 20x2. The cash will be used to pay for a marketing campaign that aimed at increasing enrolment. The marketing cost was incurred in 20x3 and will be paid in 20x4.
Decreases temporarily restricted net assets
Increases CF from operating activities
The amounts pledged from donors were recognised as revenues when received in 20x2, increasing temporarily restricted net assets at that time. In 20x3, the costs were actually incurred, and the funds became unrestricted, resulting in a decrease in temporarily restricted funds and an increase in unrestricted net assets. At the same time, the expense is recognised, which decreases unrestricted net assets resulting in no net change. The reclassification of the cash from temporarily restricted to unrestricted is considered an inflow of unrestricted cash and as a result, an inflow from operating activities.
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
$900,000 was paid to faculty for salaries incurred during the year.
Decreases unrestricted net assets
Decreases CF from operating activities
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
$25,000 was given to the faculty for summer research grants. The grants came from donations made by alumni in 20X2.
Decreases temporarily restricted net assets
Decreases CF from operating activities
How does it affect changes in unrestricted, temporarily restricted and permanently restricted net asset on its statement of activities? In addition, how does it effect a statement of C/F?
$40,000 of donations were received from alumni who did not stipulate how their donations where to be used.
Increases unrestricted net assets
Increases CF from operating activities
A not-for-profit voluntary health and welfare org. received a $500,000 permanent endowment. The donor stipulated that the income must be used for a mental health program. The endowment fund reported $60,000 net decrease in market value and $30,000 investment income. The org. spent $45,000 on the mental health program during the year. What amount of change in temporarily restricted net assets should the org. report?
“0”
Temporarily restricted net assets would be increased by the investment income and reduced by the same amount to cover a portion of the total expenses for the mental health program resulting in a zero change in net assets ($30,000 - $30,000 = 0) Endowments are considered permanently restricted assets and the capital gains and losses are treated as adjustments to these assets, and not spendable income, so gains and losses remain permanently restrict net assets and do not show as a change in temporarily restricted net assets.
Which of the following financial statements of a private, nonprofit hospital reports the changes in unrestricted, temporarily restricted, and permanently restricted net assets for a time period?
The statement of changes in net assets reports the changes in the hospital’s unrestricted, temporarily restricted, and permanently restricted net assets for a time period.
The statement of operations discloses only the changes in unrestricted net assets for a time period, while the balance sheet discloses the amounts of unrestricted, temporarily restricted, and permanently restricted net assets as of a specific date. Therefore, neither the balance sheet nor the statement of operations discloses the changes in unrestricted, temporarily restricted, and permanently restricted net assets for a time period.
For the year 1 fall semester, Brook University assessed its students $4,000,000 (net of refunds), covering tuition and fees for educational and general purposes. However, only $3,700,000 was expected to be realized because tuition remissions of $80,000 were allowed to faculty members’ children attending Brook and scholarships totaling $220,000 were granted to students who were not required to perform services for the student aid. What amount should Brook include in educational and general current funds revenues from student tuition and fees?
3,780,000
Scholarships, for which no services are required, are to be recorded as a reduction in revenue. Tuition remissions for faculty children are considered expenses (compensation).
For a private, not-for-profit organization, when is a donor’s conditional promise to give considered to be unconditional?
A conditional promise to give is considered unconditional if the possibility that the condition will not be met is remote.
On the statement of operations for a nonprofit, nongovernmental hospital, which of the items below is included in the amount reported for “revenue and gains over expenses and losses” (the performance indicator)?
I. Unrealized loss on other than trading securities. The securities are included in unrestricted net assets.
II. Contribution received from a donor which cannot be used until next year.
Neither I nor II.
According to the AICPA Audit and Accounting Guide, Health Care Organizations, unrealized gains and losses from other than trading securities, which are not restricted by donors, are reported after the performance indicator on the statement of operations. Therefore, the unrealized loss in item I is reported on the statement of operations, but it is not included in the amount reported for revenue and gains over expenses and losses, the performance indicator. The donor contribution which cannot be used until next year is not reported on the statement of operations. The contribution represents an increase in temporarily restricted net assets and is reported on the statement of changes in net assets.
Mary Egbart promised Columbus College, a private, not-for-profit college, that she would provide 80% of the funds needed to construct a new performing arts center, if the college could get the remaining 20% of the funds needed from other donors by July 1, year 2. The promise was made in year 1. At December 31, year 1, the governing board of the college had received donations from other donors for approximately 15% of the cost of the new center and believed that the probability of not getting the remaining 5% of the necessary funds was remote. For the year ended December 31, year 1, Ms. Egbart’s promise would
Be reported as an increase in temporarily restricted net assets on the statement of activities.
A conditional promise to give is considered unconditional if the possibility that the condition will not be met is remote. At December 31, year 1, Ms. Egbart’s promise would be considered unconditional. This means that the college should report the funds that Ms. Egbart promised as an increase in temporarily restricted net assets on its statement of activities prepared for the year ended December 31, year 1.
Simmons Hospital, a nonprofit hospital affiliated with a religious group, received the following cash contributions from donors during the year ended December 31, year 1:
• For capital acquisitions $500,000
• For permanent endowments 250,000
The cash received for capital acquisitions was used to acquire assets in year 2, while the cash received for the permanent endowment was used to acquire investments during year 1. What effect did these cash contributions have on the amounts reported for cash flows from investing activities and cash flows from financing activities on the statement of cash flows for the year ended December 31, year 1?
Cash flows from investing activities
Decrease $750,000
Cash flows from financing activities
Increase $750,000
Cash contributions that are donor-restricted for long-term purposes are reported as financing activities on the statement of cash flows. Applying this to Simmons Hospital, the hospital should report the sum of the cash received for the capital acquisition and for the permanent endowment as an increase of $750,000 in cash flows from financing activities on the statement of cash flows. According to the AICPA Audit and Accounting Guide, Health Care Organizations, cash received which is restricted as to withdrawal or use for other than current operations or is designated for expenditure in the acquisition or construction of noncurrent assets is excluded from cash and cash equivalents disclosed in current assets. This means that cash received for long-term financing is not part of the change in cash and cash equivalents which is explained on the statement of cash flows. For the statement of cash flows to reconcile to the change in cash and cash equivalents reported in current assets, cash flows reported in the investing activities section has to equal the amount reported in the financing section. The amount reported in investing activities has to be opposite in sign to the cash flows reported in the financing activities section. For Simmons Hospital, this translates to reporting a decrease of $750,000 in the investing activities section. Note that this amount is reported whether the $750,000 of cash received was actually spent or not during year 1. If the cash was not spent, as was the case with the $500,000 received for capital acquisitions, the investing activities section would report the decrease using a caption such as “purchase of assets restricted to investment in property and equipment.”
