Exam 9: Reporting for Not-For-Profit Organizations

Luv Pets (LP)is a NFP that operates an animal shelter and commenced operations in 2013. LP has a December 31 year end. In 2013, the organization received $1.5 million to build a new shelter which was completed in October 2013. The shelter is expected to have a useful life of 40 years. This was financed with $800,000 of private donations and $700,000 of government grants. In addition, $150,000 was provided in government grants on October 1, 2013 to fund two veterinarians for the next twelve months. Two veterinarians were hired October 1, 2013 at an annual salary of $120,000 each. The organization is expected to generate $1,250,000 in annual revenues. During the period October 1 to December 31, LP received donations of $275,000 and paid out operating expenses of $235,000. Required: Prepare a partial statement of financial position to capture the above transactions occurring during 2013. LP uses the deferral method and does not have a separate capital fund.

Under the deferral method, restricted contributions are recorded as revenue in the same period as the related expense is recorded.

Under the CICA Handbook, a large not-for-profit museum or art gallery ________.

What is Encumbrance Accounting?

A not-for-profit organization provides language training and homework assistance to immigrants. Most of the services are provided by volunteers and all the funds come from public donations. The primary objective in preparing financial statements for this organization is ________.

What type of not-for-profit organization may be allowed to use the restricted fund method?

When consolidated financial statements are prepared for a not-for-profit organization using fund accounting, these statements should show ________.

A restricted fund is a segregation of funds which are externally or internally restricted for a particular purpose.

When budgetary control accounts are first set up, actual revenues are debited and actual expenditures are credited.

Not-for-profit organizations basically follow the same criteria as profit-oriented companies with respect to the recognition and measurement of tangible capital assets and intangibles.

Recording the value of donated goods and services could result in inflated earnings.

For the 2013 fiscal year, The Benevolent Society, a not-for-profit organization, received $300,000 in unrestricted donations and $175,000 in donations designated specifically for bone marrow research. $200,000 of the unrestricted donations and $100,000 of the restricted donations were expended in 2013 for current operations and bone marrow research, respectively. The Society did not set up a separate fund for the restricted donation. How much of the donations should be reported as revenue in the statement of operations for the 2013 fiscal year?

A not-for-profit organization may disaggregate its financial statements into funds based on legal, contractual or voluntary actions of the entity.

In a not-for-profit organization, donated capital assets are recorded at what value?

The Xavier family contributed $300,000 to a local university to establish a scholarship fund in the name of their late mother. Scholarships will be provided from the fund earnings. This is BEST described as which kind of contribution?

In a not-for-profit organization, donated capital assets are recorded at fair market value.

Alfred House, a not-for-profit organization, received an externally restricted contribution. Alfred House does not have a separate restricted fund for the contribution. Under the restricted fund method, the contribution will be recognized as which of the following?

What are the financial statements of a not-for-profit organization?

With respect to the endowment fund, which of the following statements is TRUE?

Endowment contributions are recognized as revenue under the deferral method and as a direct increase to net assets under the restricted fund method.