Deck 19: Accounting for Nongovernment Nonbusiness Organizations: Colleges and Universities, hospitals, and Other Health Care Organizations

Question 1

Under Southdale Hospital's established rate structure,the hospital would have earned patient service revenue of $7,000,000 for the year ended December 31,2017.However,Southdale did not expect to collect this amount because of charity allowances of $1,000,000 and discounts of $500,000 to third party payers.In May 2017,Southdale purchased bandages from Ace Supply Co.at a cost of $5,000.However,Ace notified Southdale that the invoice was being cancelled and that the bandages were being donated to Southdale. For the year ended December 31,2017,how much should Southdale record as patient service revenue?

A)$7,000,000
B)$6,500,000
C)$6,000,000
D)$5,500,000

Answer 1

A

Question 2

The following funds were among those on Cole University's books at April 30,2017: How much of the above-mentioned funds should be included in plant funds?

A)$0
B)$2,500,000
C)$5,000,000
D)$7,500,000

Answer 2

D

Question 3

When the donor has specified a particular date or event after which the principal of the Endowment Fund may be expended,the Endowment Fund is referred to as a(n):

A)pure endowment fund.
B)term endowment fund.
C)quasi endowment fund.
D)expendable endowment fund.

Answer 3

B

Question 4

Which of the following statements related to pledges is incorrect?

A)Pledges are signed commitments to contribute specific amounts of money on a future date or in installments.
B)Pledges are recorded as revenues when a promise to give is nonrevocable and unconditional.
C)Pledges are generally enforceable contracts.
D)All of these are correct.

Question 5

Board designated funds should be accounted for as:

A)restricted funds.
B)specific purpose funds.
C)unrestricted funds.
D)none of these.

Question 6

A municipality's capital projects fund is similar to a university's:

A)renewals and replacements fund.
B)retirement of indebtedness fund.
C)investment in plant fund.
D)none of these.

Question 7

Tuition waivers for which there is no intention of collection from the student should be classified by a college as:

A)Revenue,No; Expenditures,No
B)Revenue,No; Expenditures,Yes
C)Revenue,Yes; Expenditures,Yes
D)Revenue,Yes; Expenditures,No

Question 8

Investments are reported by NNOs at

A)cost.
B)fair value.
C)the lower of cost or fair value.
D)the higher of cost or fair value.

Question 9

All of the following are a plant fund in colleges and universities EXCEPT:

A)unexpended plant fund.
B)funds for renewals and replacements.
C)investment in plant.
D)plant replacement and expansion fund.

Question 10

Which of the following is used for current expenditures by a college?

A)Unrestricted Current Funds,No; Restricted Current Funds,No
B)Unrestricted Current Funds,No; Restricted Current Funds,Yes
C)Unrestricted Current Funds,Yes; Restricted Current Funds,Yes
D)Unrestricted Current Funds,Yes; Restricted Current Funds,No

Question 11

The basic financial statements for all NNOs include a:

A)Balance sheet and Statement of cash flows
B)Statement of activities and Statement of cash flows
C)Balance sheet and Statement of activities
D)Balance sheet,Statement of activities,and Statement of cash flows

Question 12

Most property,plant and equipment transactions of hospitals are accounted for in the:

A)fund for renewals and replacements.
B)general fund.
C)plant replacement and expansion fund.
D)unexpended plant fund.

Question 13

Under Southdale Hospital's established rate structure,the hospital would have earned patient service revenue of $7,000,000 for the year ended December 31,2017.However,Southdale did not expect to collect this amount because of charity allowances of $1,000,000 and discounts of $500,000 to third party payers.In May 2017,Southdale purchased bandages from Ace Supply Co.at a cost of $5,000.However,Ace notified Southdale that the invoice was being cancelled and that the bandages were being donated to Southdale. For the year ended December 31,2017,Southdale should record the donation of bandages as:

A)a $5,000 reduction in operating expenses.
B)nonoperating revenue of $5,000.
C)other operating revenue of $5,000.
D)a memorandum entry only.

Question 14

All NNOs have current restricted funds and unrestricted funds EXCEPT:

A)colleges and universities
B)hospitals
C)VHWOs
D)ONNOs

Question 15

For a university,the receipt of assets for operating activities that have external restrictions as to the purposes for which they can be used is recorded by crediting:

A)Fund Balance-Restricted.
B)Contribution Revenue.
C)Deferred Revenue.
D)Net Assets Released.

Question 16

Which basis of accounting should a voluntary health and welfare organization use?

A)Cash basis for all funds
B)Modified accrual basis for all funds
C)Accrual basis for all funds
D)Accrual basis for some funds and modified accrual basis for other funds

Question 17

In accounting for loan funds,revenue is recorded when the:

A)contribution is received.
B)loan is made to students.
C)loan is repaid by students.
D)students graduate.

Question 18

Revenues and expenses of hospitals are recorded in the accounts of the:

A)Endowment Fund.
B)General Fund.
C)Plant Replacement Fund.
D)Specific Purpose Fund.

Question 19

Resources of an unrestricted fund that are designated by the governing board for endowment purposes are accounted for in the unrestricted fund by all NNOs EXCEPT:

A)voluntary health and welfare organizations.
B)hospitals.
C)colleges and universities.
D)other NNOs.

Question 20

Special entities are not-for-profit organizations that are:

A)government owned.
B)privately owned.
C)publicly owned.
D)either government owned or privately owned.

Question 21

During the years ending June 30,2016,and June 30,2017,Jefferson University conducted a cancer research project financed by a $3,000,000 gift from an alumnus.This entire amount was pledged by the donor on July 10,2015,although he paid only $800,000 at that date.The gift was restricted to the financing of this particular research project.During the two-year research period,Jefferson related gift receipts and research expenditures were as follows: How much gift revenue should Jefferson University report in the temporarily restricted column of its statement of activities for the year ended June 30,2017?

A)$3,000,000
B)$1,600,000
C)$1,200,000
D)$0

Question 22

A good reason for NNOs to adopt fund accounting even though FASB standards do NOT require it is because:

A)the capital assets are significant.
B)the donated services are significant.
C)the program services are involved with more than one type of revenue.
D)restrictions are placed by donors in many cases.

Question 23

Which one of the following statements is NOT required for NNOs?

A)statement of financial position
B)statement of cash flows
C)statement of changes in net assets
D)statement of activities

Question 24

GASB No.35 allows public colleges and universities to:

A)apply guidance designed for special-purpose governments.
B)use FASB standards to permit consistent reporting.
C)optionally follow FASB standards.
D)none of these are correct.

Question 25

The following events were recorded on the books of Free Hospital for the year ended December 31,2017.
1.Revenue from patient services totaled $12,000,000.The allowance for uncollectibles was established at $2,500,000.Of the $12,000,000 revenue,$4,500 was recognized under cost reimbursement agreements.This revenue is subject to audit and retroactive adjustment by third-party payors.
2.Patient service revenue is accounted for at established rates on the accrual basis.
3.Other operating revenue totaled $260,000,of which $120,000 was from specific purpose funds.
4.Free received $310,000 in unrestricted gifts and bequests.They are recorded at fair market value when received.
5.Endowment funds earned $120,000 in unrestricted income.
6.Board designated funds earned $62,000 in income.
7.Free's operating expenses for the year amounted to $10,030,000.This included $380,000 in straight-line depreciation.
Required:
Prepare a statement of activities for Free Hospital for the year ended December 31,2017.

Question 26

Prepare journal entries for the following transactions or events:
1.The board of trustees of Snark College voted to designate $300,000 for expansion of the student union and $90,000 for future research projects.
2.In accordance with the requirements of a bond indenture,Snark College transferred $85,000 of unrestricted funds for the accumulation of cash to retire the debt related to the construction of the Central Computer Building.
3.A governing board of a hospital designates $280,000 for the future expansion of the emergency care facilities.
4.A heart association receives pledges of $900,000 from the general public in connection with a telethon.It is estimated that 30% of the amounts pledged will not be collectible.
5.An ONNO receives the donated services of a CPA with a market value of $10,000.
6.On November 3,2017,$75,000 was donated to a university for library acquisitions of which $50,000 was expended for this purpose during the remainder of the fiscal year.
7.On November 4,2017,$15,000 was contributed to a voluntary health organization to be used to conduct CPR classes for the public.During the remainder of the current fiscal year $14,000 was expended for this purpose.
8.On November 5,2017,$100,000 was contributed to a hospital for cancer research of which $90,000 was expended for this purpose during the remainder of the fiscal year.

Question 27

Military Family Center is a voluntary welfare organization funded by contributions from the general public.During 2016 unrestricted pledges of $800,000 were received,half of which were payable in 2016 with the other half payable in 2017 for use in 2017.It was estimated that 10% of these pledges would be uncollectible.How much should National report as net contribution revenue for 2016 with respect to the pledges?

A)$800,000
B)$720,000
C)$360,000
D)$0

Question 28

Bell Foundation,a voluntary health and welfare organization,supported by contributions from the general public,included the following costs in its statement of functional expenses for the year ended December 31,2017. Bell's functional expenses for 2017 program services included:

A)$200,000.
B)$600,000.
C)$1,000,000.
D)$1,800,000.

Question 29

Which of the following groups of not-for-profit entities must use fund accounting to be in conformity with GAAP?

A)Governmental,Yes; Nongovernmental,Yes
B)Governmental,Yes; Nongovernmental,No
C)Governmental,No; Nongovernmental,Yes
D)Governmental,No; Nongovernmental,No

Question 30

The following events affected the New Athens University Loan Fund:
1.$300,000 is received from a donor to establish a student loan fund.Loans will carry a 6% annual interest rate.
2.The Loan Fund loaned the $300,000 to students.Five percent of the loans are estimated to be uncollectible.
3.Loans of $50,000 were repaid with $3,000 of interest.
4.A $1,000 student loan was written off as uncollectible.
Required:
Prepare the journal entries necessary to record these transactions.

Question 31

The fund structure and terminology differ among NNOS,but there are six funds commonly used.Identify the funds used by nongovernment nonbusiness organizations.

Question 32

On October 10,2016,a national voluntary health help foundation was the recipient of a telethon sponsored by a renowned celebrity.Phone donations totaling $8,500,000 were promised.Based on historical information,15% of these pledges are expected to be uncollectible.Of these pledges,$7,100,000 were collected in 2017; the remainder were considered uncollectible.
Required:
Identify the proper fund and prepare the journal entries necessary in 2016 and 2017.

Question 33

Contributions to NNOS include gifts of cash,pledges,donated services,and gifts of noncash assets.Explain how contributions are recorded by NNOS.

Question 34

An NNO obtained cash for the acquisition of property and equipment as follows:
These funds are used to acquire land.In addition,$20,000 in principal and $2,000 in interest is paid on indebtedness relating to property and equipment.Depreciation on property and equipment for the year is $80,000.
Required:
Prepare all necessary entries in the affected funds of the NNO,assuming that the NNO is a:
a.Voluntary health and welfare organization.
b.University.
c.Hospital.

Question 35

Admissions,counseling and registration are considered to be:

A)educational and general services.
B)auxiliary enterprises.
C)student services.
D)institutional support.

Question 36

Cindy Duncan is a social worker on the staff of Military Family Center,a voluntary welfare organization.She earns $42,000 annually for a normal workload of 2,000 hours.During 2017 she contributed an additional 800 hours of her time to Military Family Center at no extra charge.How much should Military Family Center record in 2017 as contributed service expense?

A)$0
B)$1,680
C)$8,400
D)$16,800

Question 37

The following information was taken from the accounts and records of the ABC Foundation,a private,not-for-profit organization.All balances are as of June 30,2017,unless otherwise noted.
The unrestricted support from contributions was received in cash during the year.The expenses included $500,000 payable from donor-restricted resources.
Required:
Prepare ABC's statement of activities for the fiscal year ended June 30,2017.

Question 38

For the fall semester of 2017,Irving College assessed its students $5,000,000 for tuition and fees.The net amount realized was only $4,700,000 because of the following revenue reductions: How much should Irving College report for the period for unrestricted current funds revenues from tuition and fees?

A)$5,000,000
B)$4,900,000
C)$4,780,000
D)$4,700,000