Deck 19: Accounting for Not-For-Profit Colleges and Universities and Health Care Organizations

Question 1

Which of the following receipts should be recorded in the current restricted fund of a public university?

A)endowment income the Board of Trustees has decided to designate for faculty travel.
B)a cash donation to provide loans to students
C)a cash donation designated by the donor to provide scholarships
D)a term endowment

Answer 1

C
Donor-restricted donations would be recorded in the current restricted fund of a public university.

Question 2

What is the basis of accounting used in accounting for not-for-profit universities?

A)fund accounting
B)accrual basis
C)modified accrual basis
D)cash basis

Answer 2

B
Private not-for-profit universities use the accrual basis of accounting as outlined in chapter 18.

Question 3

A contribution is given without donor restrictions. Under which fund group would this be recorded?

A)Current unrestricted funds
B)Current restricted funds
C)Loan fund
D)Endowment fund

Answer 3

A
Contributions having no donor restrictions are recorded in the current unrestricted fund.

Question 4

Which university fund is most similar to the governmental general fund?

A)Agency
B)Annuity and Life income
C)Current unrestricted
D)Loan

Question 5

Which of the following represents an area where accounting for contributions may differ between public and private colleges and universities?

A)Works of art and historic treasures
B)Donated services
C)Conditional pledges
D)None of the above

Question 6

A contribution is a(n)

A)conditional transfer of cash.
B)unconditional transfer of cash.
C)donation of services which would not be purchased otherwise.
D)donation of unskilled services which you might purchase.

Question 7

Which of the following is not an example of one of the major categories of funds for a college or university?

A)current funds
B)proprietary funds
C)plant funds
D)trust and agency funds

Question 8

In a private college, as expenses are made in compliance with donor restrictions on previously made contributions, what type of journal entry must be made to record the transaction from the aspect of the current, unrestricted fund?

Question 9

Endowment income was restricted to student aid activities. Cash is paid for all activities. Which is the credit necessary for classification?

A)Reclassification In--unrestricted, satisfaction of program restrictions
B)Reclassification Out--unrestricted, satisfaction of program restrictions
C)Reclassification In--temporarily restricted, satisfaction of program restrictions
D)Reclassification Out--temporarily restricted, satisfaction of program restrictions.

Question 10

Which of the following is not an example of Educational and General Revenue in a college or university?

A)student athletic fees
B)room and board fees received by the dormitory
C)governmental grants
D)endowment income

Question 11

Al Alumni donates $5,000,000 to Great University for a new Women's Studies program. Al wants the principal to remain intact but the investment earnings can be expended to support the Women's Studies Program. This donation would be accounted for in the

A)Quasi-Endowment Fund.
B)Endowment Fund.
C)Term Endowment Fund.
D)Agency Fund.

Question 12

Grants that require performance by a private college or university are recorded as:

A)contribution revenue.
B)increases in unrestricted assets.
C)restricted revenue.
D)agency income.

Question 13

Government grants which are essentially a pass-through of financial aid to students are accounted for as:

A)agency transactions.
B)restricted revenue.
C)increases in unrestricted assets.
D)annuity income.

Question 14

The loan fund would account for loans

A)to hospital patients.
B)to purchase assets.
C)to university students.
D)due to another fund.

Question 15

Which of the following is not an example of general and educational expenses recorded by a college or university?

A)purchase of sweatshirts for sale in the college bookstore
B)expenses paid for instructors in the continuing education, non-degree program
C)consultant fees paid for a report on increasing the enrollment
D)salary of the football coach

Question 16

How is a government grant accounted for at a public university?

Question 17

A collection of first editions is donated to the university for its library. Which is the correct credit?

A)Net investment in Plant
B)No entry is required
C)Revenues, temporarily unrestricted contributions
D)Fund Balance, restricted

Question 18

With the adoption of GASB statement #35 in 1999, public colleges and universities are required to report their activities in a manner more like a(n):

A)general fund
B)special revenue fund
C)enterprise fund
D)fiduciary fund

Question 19

Where should a university using fund accounting record an alumnus contribution of $10,000 to pay for scholarships for international study-abroad?

A)Scholarship Fund
B)Current Unrestricted Fund
C)Current Restricted Fund
D)Loan Fund

Question 20

A federal grant was received for research. Which is the correct credit?

A)Deferred Revenue--U.S. Government grants
B)Revenues--U.S. Government grants
C)U.S. Government grants refundable
D)Revenues, Temporarily restricted

Question 21

Kelsey Nicholas contributes $80,000 to Wagner University requesting that she receive $5,000 annually for the rest of her life, after which, the university may spend the funds as it sees fit. The journal entry to record this gift would include:

A)a debit to Annuity Expense for the present value of the expected payments over Kelsey's lifetime.
B)a credit to Annuities Payable for $80,000.
C)a credit to Revenues - Temporarily Restricted Contribution for $80,000.
D)A credit to Annuities Payable for the present value of the expected payments over Kelsey's lifetime.

Question 22

Income earned on restricted endowment resources should

A)remain in the endowment fund.
B)be transferred and recorded directly in the unrestricted fund.
C)be recorded in the endowment fund with a liability established for future transfer to an unrestricted fund.
D)transferred immediately and recorded directly to the fund the donor designate to receive the income/benefit.

Question 23

Government grants, like Pell Grants, which are essentially pass through financial aid to students are accounted for as

A)temporary restricted funds
B)unrestricted funds
C)loan funds
D)agency transactions

Question 24

In the Statement of Cash Flow for a private not-for-profit college, endowment contributions are included in cash flows provided by (used for) ____________ activities.

A)operating
B)financing
C)noncapital financing
D)investing

Question 25

A life income fund is used when:

A)resources are accepted with a stipulation that periodic payments will be made to the donor for a specified number of years
B)endowments are made to the college or university
C)resources are accepted with a stipulation that periodic payments will be made to the donor for the lifetime of the donor
D)All income earned on donated assets is to be paid to the donor over their lifetime.

Question 26

The quasi-endowment fund of a university would account for funds set aside by

A)the governing board of the university for a future purpose.
B)a donor who is uncertain how they want the funds spent.
C)a legal restriction on an endowment which may change.
D)a trustee who makes the donation contingent upon a future event.

Question 27

With the adoption of GASB statement #35 in 1999, governmental health care organizations are required to report their activities in a manner more like a(n):

A)general fund
B)special revenue fund
C)enterprise fund
D)fiduciary fund

Question 28

What is the basis of accounting used in accounting for not-for-profit health care organizations?

A)fund accounting
B)accrual basis
C)modified accrual basis
D)cash basis

Question 29

Westwood College is a small private college while neighboring Bridgetown University is a public institution. How is each to report its investments?

Question 30

A public college or university would provide which of the following combinations of financial statements to their users?

A)Statement of Activities; Statement of Financial Position; Statement of Cash Flows
B)Statement of Net Assets; Statement of Revenue, Expenses, and Change in Net Assets; Statement of Cash Flows
C)Statement of Activities; Statement of Net Assets; Statement of Cash Flows
D)Statement of Net Assets; Statement of Functional Expenses; Statement of Cash Flows

Question 31

Which of the following financial statements is required for the annual financial reports of public colleges and universities?

A)statement of revenues, expenses, and changes in net assets
B)statement of activities
C)single audit report
D)statement of changes in fund balances

Question 32

Frank Bowers decides to contribute $1,000,000 to his alma mater. Cape University agrees to pay Frank a fixed amount every month for the next 20 years in exchange for the donation. Frank's donation would be accounted for in the

A)Annuity Fund.
B)Endowment Fund.
C)Restricted Current Fund.
D)Agency Fund.

Question 33

A public university's long-term bonds issued to build dormitories would be recorded in the

A)Current Unrestricted Fund.
B)Agency Fund.
C)Loan Fund.
D)Plant Fund.

Question 34

Currently, which organization has jurisdiction over accounting and reporting standards for private colleges and universities?

A)National Association of College and University Business Officers
B)the Governmental Accounting Standards Board
C)the Financial Accounting Standards Board
D)the U.S. Department of Education

Question 35

In the Statement of Cash Flow for a public college or university, endowment contributions are included in cash flows provided by (used for) ____________ activities.

A)operating
B)financing
C)noncapital financing
D)investing

Question 36

A private not-for-profit college or university would provide which of the following combinations of financial statements to their users?

A)Statement of Activities; Statement of Financial Position; Statement of Cash Flows
B)Statement of Net Assets; Statement of Revenue, Expenses, and Change in Net Assets; Statement of Cash Flows
C)Statement of Activities; Statement of Financial Position; Statement of Cash Flows
D)Statement of Net Assets; Statement of Functional Expenses; Statement of Cash Flows

Question 37

In which of the plant fund subgroups would you find the following transaction: A bond principal payment is made on a bond that was issued with the proceeds being designated for construction of a new athletic facility?

A)Unexpended plant fund
B)Investment in plant asset
C)Plant fund for retirement of indebtedness
D)Plant fund for renewals

Question 38

Farley College budgets funds for the maintenance and repair of its buildings. Where would these funds be accounted for?

A)Unexpended Plant Fund
B)Renewal and Replacement
C)Retirement of Indebtedness
D)Investment in Plant

Question 39

Which of the following is a category of health care entity?

A)Proprietary entity.
B)Voluntary not-for-profit entity.
C)Public entity.
D)All of the above.

Question 40

The Great Gap University issues long-term debt to build a bridge over the gap between its two main campuses. The debt would be accounted for in the

A)Unexpended Plant Fund.
B)Plant Fund for Renewals and Replacement.
C)Plant Fund for Retirement of Indebtedness.
D)Investment in Plant.

Question 41

A private not-for-profit health care organization would provide which of the following combinations of financial statements to their users?

A)Statement of Activities; Statement of Financial Position; Statement of Cash Flows
B)Statement of Financial Position; Statement of Revenue, Expenses, and Change in Net Assets; Statement of Cash Flows
C)Statement of Activities; Statement of Net Assets; Statement of Cash Flows
D)Statement of Net Assets; Statement of Functional Expenses; Statement of Cash Flows

Question 42

Under the Medicare DRG system, hospitals:

A)receive payments to reimburse them for costs incurred in treating patients.
B)receive fees based upon diagnoses.
C)receive a monthly premium based upon the number of participants in an HMO.
D)agree to take a percentage of the usual charge.

Question 43

The following selected transactions affected the Current Unrestricted Fund of Franklin State (public) University during the current fiscal year:
a.Student tuition and fees billed for the year for $8,000,000, which was used for educational and general purposes. Prior experience shows $100,000 will be uncollectible.
b.$7,200,000 of the billings in part (a) were collected.
c.Unrestricted income from endowment funds amounted to $185,000.
d.Auxiliary enterprise included $175,000 from student residence halls; $200,000 from cafeterias; and $750,000 from the college store sales. All amounts have been collected.
e.$300,000 of Term Endowments funds are now available for unrestricted use.f. Operating Expenses are paid as follows: Instruction $300,000; Research $150,000; Academic Support $50,000; Student Services $25,000; Institutional Support $120,000 g. University's student aid committee granted student tuition and fee reductions of $200,000. h. Expenses from auxiliary enterprises amounted to $750,000

Question 44

The account, Cash--Limited in Use Under Malpractice Funding Arrangement, would be found in the:

A)Trust Account for self-insurance.
B)Specific-Purpose Funds.
C)Annuity Funds.
D)Endowment Funds.

Question 45

Alice makes a cash gift which has no strings attached to a not-for-profit hospital. It is recorded as:

A)Patient Service Revenue.
B)Other Operating Revenue--Unrestricted Contribution.
C)Nonoperating Revenue--Unrestricted Contribution.
D)an increase in the fund balance of the General Fund.

Question 46

Carlton (private) University received the following pledges during 20X5:
a.Jane Baker pledges $30,000 to be used for student scholarships.
b.As a result of a pledge drive, $400,000 is pledged to be paid by the end of the accounting year. Ten percent of pledges in the past have been shown to be uncollectible. These pledges are unrestricted.Required:Make the journal entries necessary to record the pledges.

Question 47

Malpractice claims recorded as IBNR claims represent

A)an estimated amount of current lawsuits pending in court
B)claims asserted and filed, but not settled on the balance sheet date
C)estimated claims for incidents occurring prior to the balance sheet date for which no claim has yet been filed
D)estimated amount of malpractice loss not covered by physician's malpractice insurance

Question 48

Charity care services provided by a hospital:

A)are not reported as revenues in the financial statements.
B)are written off to bad debts expense.
C)represent the difference between the amounts billed by the hospital and the amounts expected to be collected by the insurance company.
D)None of the above.

Question 49

Under capitation agreements, hospitals:

A)receive payments to reimburse them for costs incurred in treating patients.
B)receive fees based upon diagnoses.
C)receive a monthly premium based upon the number of participants in an HMO.
D)agree to take a percentage of the usual charge.

Question 50

Sister Nancy Ann is a registered nurse who works at St. Thomas Hospital, which is run by a religious order of nuns. Her salary is $10,000 annually, although the other nurses are paid $50,000. The following entry should be made to record the payment to Sister Nancy Ann:

Question 51

Which of the following accounts would not typically be found on a health care organization's operating statement if that organization prepares it financial statements using functional presentation?

A)Nursing services expense
B)Salaries expense
C)Malpractice insurance expense
D)Other professional services expense

Question 52

Jordan Phillips volunteers at Sayler Park Nursing Facility, a private not-for-profit nursing home, reading to patients for ten hours a week. Minimum wage is $7.00 per hour. At the end of the week, the following entry should be made to record Jordan's services:

Question 53

Southern Coast (private) University received the following pledges during 20X4:
a.Joy Dance pledges $60,000 to be paid over a three-year period beginning at the end of this year. Southern Coast discounts this contribution at 10%. The present value is $49,737.
b.As a result of a pledge drive, $500,000 is pledged to be paid by the end of the accounting year. Ten percent of pledges in the past have been shown to be uncollectible.Required:Make the necessary journal entries to record the pledges.

Question 54

At the end of a private not-for-profit hospital's fiscal year, the account Reclassifications In - Unrestricted - Satisfaction of Equipment Acquisition Restrictions would be closed to:

A)Unrestricted Net Assets
B)Restricted Net Assets
C)Retained Earnings
D)Fund Balance - Unrestricted

Question 55

A public or governmental healthcare organization would provide which of the following combinations of financial statements to their users?

A)Statement of Activities; Statement of Financial Position; Statement of Cash Flows
B)Statement of Net Assets; Statement of Revenue, Expenses, and Change in Net Assets; Statement of Cash Flows
C)Statement of Activities; Statement of Net Assets; Statement of Cash Flows
D)Statement of Net Assets; Statement of Functional Expenses; Statement of Cash Flows

Question 56

Atlee makes a cash gift to a not-for-profit hospital which is restricted by the donor to buy toys for the pediatric ward. It should be recorded in the:

A)General Fund.
B)Specific-Purpose Fund.
C)Endowment Fund.
D)Enterprise Fund.

Question 57

The following selected transactions affected the Current Unrestricted Funds of Tiger State University (public) during the current fiscal year:
a.The Board of Control approved a budget estimating $10,000,000 in revenues and expenses of $9,850,000.
b.Student tuition assessed during the year was $4,000,000, of which $3,700,000 had been collected, with 3% considered uncollectible.
c.Student aid included $500,000 in cash scholarships and $75,000 in tuition remission.
d.Salary and wages during the year included $5,500,000 for instruction, $500,000 for academic support, and $700,000 for institutional support.
e.A grant received of $10,000 in cash was restricted to use for laser technology research.Required:Make the journal entries necessary to record the selected transactions.

Question 58

In a health care organization, Other Operating Revenue includes:

A)revenues from outpatient surgery.
B)revenues from educational programs.
C)revenue from nursing services for post-operative care.
D)revenue from radiology services.

Question 59

In a private health care organization, plant replacement and expansion funds account for:

A)property improvements.
B)issuance of long-term debt.
C)payments on long-term debt.
D)none of the above

Question 60

A hospital's contractual adjustments:

A)are deducted from gross patient revenues.
B)are usually based on predetermined amounts.
C)represent the difference between the amounts billed by the hospital and the amounts expected to be collected by the insurance company.
D)All of the above.

Question 61

Consider the following unrestricted donations to a not-for-profit health care facility:
a.Donation of property and equipment.
b.Donation of substantial amount of medical supplies.
c.Donation of resources to endow a fund.
d.Donation of cash to be used to conduct cancer research.
e.Volunteer provision of services by local high school students involving visiting and reading to patients.Required:Using the following format, indicate what entries would be recorded:EventJournal Entry

Question 62

Consider the following transactions for the University of Northland (private):
a.On January 1st a gift of $100,000 was received from an alumnus. She requested one half be used for student loans and the other as a pure endowment contribution.
b.Loans totaling $25,000 are made to students. Collections from other loans made to students total $30,000 plus $3,000 interest.
c.During the year, investments of $20,000 were sold for $30,000. Any gain is restricted for improvements in classroom instruction.
d.During the year, interest charges of $5,000 were earned and collected on late student fee payments.
e.A student loan of $500 is deemed uncollectible.f. During the year, operating expenses of $150,000 were recorded. At the end of the year, $25,000 remains unpaid.

Question 63

The following events occurred as part of operations in Hard Knocks (private) University:
a.To construct a new computer center, the University floated at par a $10,000,000 10% serial bond issued on January 1, paying interest December 31 and June 30.
b.$100,000 for computer equipment was donated by a wealthy alumnus.
c.Payments for construction to date total $5,000,000.
d.Interest payments are made on June 30th.
e.Construction of the center is completed at an additional cost of $7,000,000 and it is paid in full.f. On December 31, the first serial bond of $2,000,000 is paid along with the regular interest payment. g. A building valued at $100,000 is received as a gift on the condition the university assumes the $50,000 mortgage and uses the building for classroom purposes only. The University elects to "release" the restriction over the useful life of the building. h. Depreciation on the building totaled $10,000.Required:Prepare journal entries for the above events.

Question 64

Prepare the journal entries to record the following events for Cost (private) University:
a.A federal grant of $100,000 was received for research.
b.Expenses for the research project totaled $50,000 to date.
c.Endowment income of $10,000 is restricted to student aid activities.
d.Incurred $10,000 of expenses for student aid of which all but $2,000 of expenses are paid.

Question 65

A not-for-profit hospital uses three revenue-controlling accounts: Patient Service Revenue, Other Operating Revenue, and Nonoperating Revenue.
Required:
Indicate which of the three revenue accounts would be credited to record the following transactions, or None if none of the accounts is appropriate.
a.Snack bar sales_______________________
b.Dividends from unrestricted investments_______________________
c.Operating room fees_______________________
d.Pharmacy sales to patients_______________________
e.Fees for educational programf. Proceeds from bond sale g. Gains on sale of unrestricted investments h. Contributions for a term endowment i. Cash transfers from matured term endowments for use in operations j. Cafeteria sales to visitorsoffered to nurses_______________________

Question 66

Are not-for-profit universities required to use fund accounting?

Question 67

How has the adoption of GASB Statement No. 35 changed the reporting standards for colleges and universities.

Question 68

The post-closing trial balance for Blakely Hospital as of January 1, 20X5, is as follows:
The following events occurred during 20X5:
Required:
Using the following format, prepare journal entries for the events. Expense data are recorded based on types of services provided.
Event
Journal Entry

Question 69

Consider the following events for Chase Private University:
a.Unrestricted contributions are pledged in the amount of $500,000.
b.Purchase of material and supplies totaling $100,000 of which $25,000 is not yet paid.
c.Endowment income of $8,000 is restricted to student aid activities.
d.A federal grant for $200,000 was awarded for research.
d. totaled $100,000 to date.f. Federal government monies of $50,000 restricted for student loans are received. g. Expenses for the research project in d. totaled $100,000 to date. h. Term endowments expire, making $10,000 cash available. i. Cash of $10,000 from Life Income Fund Investments is received. j. Stock with a market value of $45,000 is received from an art patron to finance art gallery improvements. The donor's cost basis is $20,000. k. Federal grants for student awards through the Pell Grant program are received in the amount of $175,000. l. Bills went out for dormitory fees of which $250,000 is paid and $50,000 is still not received. m. Payment of $100,000 is made on the mortgage. n. Depreciation on all assets total $125,000. Of this depreciation charge, $25,000 represents depreciation on assets classified as donor restricted. Chase Private University elects to release donor restrictions when assets are placed in service. o. Art gallery improvements of $25,000 were made with donor-restricted contributions.Required:Assuming that fund accounting is used, record the events. Identify the appropriate fund for each transaction.

Question 70

In accounting for health care services, several methods are utilized.
Required:
a.List and briefly define the three types of classifications of health care facilities
b.Describe the effects of third party payer arrangements on revenue recognition procedures for health care organizations.
c.Describe the classification of expenses in a health care environment.

Question 71

Elder Care Services is a not-for-profit provider of health care services.
Required:
Prepare a schedule showing net cash provided by operating activities and nonoperating activities and nonoperating revenue that is presented under the indirect method of preparing a statement of cash flows.

Question 72

The following data apply to Riverside Hospital, a not-for-profit organization.
Required:
Using the direct method, prepare a statement of cash flows for the year ended December 31, 20X1.

Question 73

Consider the following events affecting Private University:
a.A $2,000,000, 10% serial bond issue, paying interest semiannually, was sold at face value on an interest payment date. Proceeds of the bond issue are to be used to add a wing to the library.
b.A lot valued at $30,000 was donated by a former librarian to permit building of the proposed library wing. No permanent restrictions were stipulated by the donor.
c.The State Building Board approved the plans submitted by the architect, who was paid $20,000. A contract for $1,900,000 was signed for construction of the library wing.
d.The bond interest was paid.
e.At year end, approximately two-thirds of the construction was completed. A payment of $1,200,000 was made to the contractor. f. Tuckpointing and other repairs to university buildings amounting to $35,000 were paid from resources previously provided specifically for that purpose by a retired faculty member. g. The library wing was completed. The remaining contract price is paid. h. Payments of the second six months' interest on bonds ($100,000) and the first bond serial ($200,000) were made. i. A donation made last year by a public accounting firm was expanded to acquire a specified collection of books on accounting, dating back to the 16th and 17th centuries, at a cost of $85,000. Required:Prepare journal entries to record the events.

Question 74

Explain how certain transactions that traditionally were reported as restricted by private universities will now be categorized as unrestricted exchange transaction. Describe how they will be accounted for per FASB 116.

Question 75

In accounting for not-for-profit public universities, Endowment and Similar Funds are commonly used.
Required:
a.List and briefly define the three types of endowments often found in the university environment.
b.Describe the accounting procedures for income earned on endowment funds.
c.Explain the use of investment pools.

Question 76

The following is an adjusted trial balance of the General Funds of Barnes Nursing Home (non-profit).
Required:
Prepare a statement of activities and a statement of financial position as of December 31, 20X5.

Question 77

Records of the items that follow are maintained in a public university's Plant Fund. Fill in the name or names of the appropriate plant subgroup funds in which the items are recorded.

Question 78

The following events involve a loan fund of East York public University:
a.To establish the Hanson Student Loan Fund, two brothers donated $40,000 cash and securities that cost $80,000. Market value of the securities at time of donation was $160,000.
b.The securities were later sold for $189,000. The original agreement stipulated that any gain on the sale or income received from the securities be added to the loan fund.
c.Loans of $140,000 were made to students at 6% annual interest.
d.The board of trustees agreed that loans to students in the amounts of $9,000 were uncollectible. At year end, the board took action to write off the uncollectible loans outstanding of $9,000.
e.Collections on Hanson loans amounted to $13,000 plus $450 in interest.Required:Prepare journal entries to record the above events.

Question 79

The following selected transactions affecting the Annuity and Life Income Funds of Tremper State University (public) occurred during the current fiscal year.
a.Upon his death, John Sooner, a local businessman, donates a portfolio of stock with a cost basis of $100,000 and a market value of $125,000. John's wife is to receive an annuity of $8,000 per year for life. Her life expectancy is ten years. An estimated rate of return of 8% yields a present value of $53,681 for the annuity.
b.Dividends of $7,500 are received from Life Income Fund investments.
c.Annuity fund investments with a book value of $6,000 are sold for $6,500.
d.The beneficiary of the life income investments described in part (b) are paid.
e.Interest is recorded on the annuity in part (a) and the first annuity payment to John Sooner's wife is made.Required:Make the journal entries necessary to record the transactions.