Deck 18: Accounting and Reporting for Private Not-For-Profit Organizations

Question 1

Which account would be credited in recording a gift of medicine to a nursing home from an outside party?

A) Non-Operating Gain-Special Revenues.
B) Contractual Adjustments.
C) Patient Service Revenues.
D) Drugs and Medicines.
E) Non-Operating Revenues-Contribution.

Answer 1

E

Question 2

Which of the following types of health care organizations recognize depreciation expense?

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Answer 2

D

Question 3

Historically, what was the pattern of reporting of not-for-profit organizations?
(1) Patterned after for-profit accounting
(2) Emphasis on separate fund types
(3) Disregard for the entire entity

A) 1 only.
B) 2 only.
C) 1 and 2 only.
D) 1, 2 and 3.
E) 2 and 3 only.

Answer 3

B

Question 4

Unconditional transfers of cash or other resources to an entity in a voluntary nonreciprocal transaction is the GAAP definition for

A) miscellaneous revenues.
B) contributions.
C) unconditional promises to give.
D) exchange transactions.
E) pledges.

Question 5

Reciprocal transfers where both parties give and receive something of value are

A) contributed services.
B) unconditional promises to give.
C) endowment transactions.
D) exchange transactions.
E) required contributions.

Question 6

A gift to a not-for-profit school that is not restricted by the donor is credited to:

A) Fund Balance.
B) Deferred Revenues.
C) Contribution Revenues.
D) Non-Operating Revenues.
E) Encumbrances.

Question 7

Which of the following types of health care organizations follow FASB Accounting Standards Codification for GAAP?

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question 8

When are unconditional promises to give recognized as revenues?

A) In the period the promise is received.
B) In the period the promise is collected.
C) In the period in which the conditions on which they depend are substantially met.
D) In the period in which the conditions on which they depend have begun to be met.
E) Unconditional promises from potential donors are not revenues.

Question 9

In accruing patient charges for the current month, which one of the following accounts should a hospital credit?

A) Accounts Payable.
B) Deferred Revenue.
C) Unearned Revenue.
D) Patient Service Revenues.
E) Accounts Receivable.

Question 10

Which one of the following financial statements is not required by GAAP regarding a voluntary health and welfare organization?

A) Statement of Financial Position.
B) Statement of Functional Expense.
C) Statement of Activities and Changes in Net Assets.
D) Statement of Cash Flows.
E) Statement of Operations.

Question 11

The following gifts are received in Year One by a not-for-profit organization:
I) $2,000 specified by the donor to be used to pay salaries.
II) $10,000 for new conference room furniture.
III) $5,000 to be held for one year before being expended.
The salaries are paid in Year Two and the conference room furniture is purchased in Year One.
How much should be shown as increases as Temporarily Restricted Net Assets in Year One?

A) $2,000
B) $7,000
C) $12,000
D) $15,000
E) $17,000

Question 12

What are the three categories of net assets required by GAAP in reporting a not-for-profit organization?

A) Unrestricted, Temporarily Restricted, and Permanently Restricted.
B) Unrestricted, Restricted, and Fund Balance.
C) Restricted, Permanently Restricted, and Fund Balance.
D) Unrestricted, Temporarily Restricted, and Fund Balance.
E) None of these.

Question 13

On a statement of functional expenses for a voluntary health and welfare organization, how are expenses classified?

A) health services expenses and operating expenses.
B) program services expenses and administrative services expenses.
C) program services expenses and supporting services expenses.
D) operating expenses and supporting services expenses.
E) operating expenses and administrative expenses.

Question 14

What is the basis of accounting used in reporting the Statement of Activities and Changes in Net Assets?

A) Cash basis.
B) Modified accrual basis.
C) Accrual basis.
D) Either cash basis or accrual basis, depending on the type of revenue.
E) Either modified accrual basis or accrual basis, depending on the type of revenue.

Question 15

Which of the following statements is required for voluntary health and welfare organizations, but not for other not-for-profit organizations?

A) Statement of Activities and Changes in Net Assets.
B) Statement of Functional Expenses.
C) Statement of Financial Position.
D) Statement of Cash Flows.
E) Statement of Budget to Actual.

Question 16

Which one of the following is a voluntary health and welfare organization?

A) Charity raising money for underprivileged children.
B) Nursing home.
C) Clinic.
D) Hospital.
E) Preschool.

Question 17

Which statement below is not correct?

A) The accounting period in which pledged revenues are recognized is dependent on donor specifications.
B) The permanently restricted section of a nonprofit organization's net assets is set aside by donor restrictions.
C) A contributed asset is recognized as revenue by a nonprofit organization.
D) Depreciation expense is not recognized by nonprofit organizations.
E) Nonprofit organizations issue a statement of activities.

Question 18

Which of the following is not a question individuals ask of not-for-profit organizations in considering whether to make a contribution?

A) Will donated funds be used effectively by the organization to accomplish its purpose?
B) Will the donated funds be wasted?
C) How much should this organization receive?
D) Is this organization profitable?
E) Is contributing to this charity a wise allocation of resources?

Question 19

The following gifts are received in Year One by a not-for-profit organization:
I) $2,000 specified by the donor to be used to pay salaries.
II) $10,000 for new conference room furniture.
III) $5,000 to be held for one year before being expended.
The salaries are paid in Year Two and the conference room furniture is purchased in Year One.
How much should be reclassified on the Statement of Activities in Year Two from the Temporarily Restricted column to the Unrestricted column?

A) $2,000.
B) $5,000.
C) $7,000.
D) $10,000.
E) $12,000.

Question 20

How are investments in equity securities with readily determinable market values and their related unrealized gains and losses reported by a not-for-profit organization?

A) Lower of cost or market, with unrealized losses in the Statement of Activities.
B) Fair value, with unrealized gains and losses in the Statement of Activities.
C) Lower of cost or market, with unrealized losses in Temporarily Restricted Net Assets.
D) Cost, with unrealized gains and losses in the Statement of Activities.

Question 21

In not-for-profit accounting, an acquisition occurs when one not-for-profit organization obtains:

A) Significant influence over another not-for-profit organization.
B) The direct ability to determine the direction of management of another not-for-profit organization.
C) The indirect ability to direct the policies of management of another not-for-profit organization.
D) Control over another not-for-profit organization.
E) None of these. An acquisition can only occur for profit-oriented organizations.

Question 22

Which of the following is not true about a merger of two not-for-profit organizations?

A) The two organizations will continue to legally exist but there will be a new governing board.
B) Neither organization is considered to be acquired.
C) Identifiable assets and liabilities are not adjusted to their fair values at the date of the merger.
D) The two entities will together form an entirely new organization with a new governing board.
E) There will be no acquisition value or goodwill determination.

Question 23

What term is used by voluntary health and welfare organizations for contributions?

Question 24

What criteria must be met before a voluntary health and welfare organization can recognize donated services as a means of support?

Question 25

What is the main source of financial support for most voluntary health and welfare organizations?

Question 26

Which entry would be the correct entry on the donor's books when the donor retains control of an asset that it contributes to a not-for-profit organization?

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question 27

Which entry would be the correct entry on the not-for-profit organization's books to record a donor's gift when the money is simply passing through the not-for-profit organization and creates no direct benefit, and when control of the assets has been relinquished by the donor?

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question 28

Which entry would be the correct entry on the donor's books when the donor relinquishes control of an asset that it contributes to a not-for-profit organization?

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question 29

What is the appropriate account to credit when estimating a portion of health care organization receivables that will prove to be uncollectible?

A) Bad Debt Expense.
B) Allowance for Uncollectible Accounts.
C) Patient Service Revenues.
D) Accounts Receivable.
E) Contractual Adjustments.

Question 30

When an acquisition occurs in not-for-profit accounting, recognition of goodwill depends on:

A) Whether control has been achieved by the acquiring not-for-profit entity.
B) Whether the acquired not-for-profit entity has the ability to generate significant amounts of earned revenue or whether it generates mostly contribution and investment revenue in the future.
C) Whether the acquired not-for-profit entity has the ability to generate significant amounts of both earned revenues and contribution revenues in the future.
D) Whether the acquired not-for-profit entity has a history of generating significant revenues of any type.
E) None of these. Goodwill can only be recognized in an acquisition of a for-profit entity.

Question 31

Which entry would be the correct entry on the not-for-profit organization's books to record a donor's gift when power over the assets has been retained by the donor?

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question 32

Which entry would be the correct entry to record that a not-for-profit organization collected $80,000 of the amounts pledged and wrote off $3,000 of the amounts pledged as amounts uncollectible?

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question 33

What is the appropriate account to debit when reducing net patient service revenue as a result of arrangements with third party payors?

A) Contractual Adjustments.
B) Allowance for uncollectible and reduced accounts.
C) Patient Service Revenues.
D) Account Receivable-Patients.
E) Accounts Receivable-Third Party.

Question 34

For a voluntary health and welfare organization, what are supporting services expenses?

Question 35

What two classifications are used for the expenses incurred by voluntary health and welfare organizations?

Question 36

Which entry would be the correct entry to record that a hospital has provided patient services for $200,000, of which 25% will be billed to a third party?

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question 37

If the total acquisition value of an acquired not-for-profit organization is greater than the fair value of all identifiable net assets of the organization, and that organization's revenues are not earned by dues or other types of earned revenues, then the excess of acquisition value over identifiable net assets is immediately reported:

A) As goodwill on the consolidated balance sheet.
B) As a pro-rata increase to the identifiable assets and liabilities acquired.
C) As a direct reduction in unrestricted net assets on the balance sheet.
D) As a reduction in unrestricted net assets on the statement of activities.
E) As an increase in other assets on the balance sheet.

Question 38

Which entry would be the correct entry to record pledges of $100,000 to a public television fundraiser? The public television organization estimates that 5% of the funds will be uncollectible.

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question 39

What financial statements would normally be prepared by a voluntary health and welfare organization?

Question 40

What are the objectives of accounting for a not-for-profit organization?

Question 41

Dura Foundation, a voluntary health and welfare organization dedicated to finding medical cures and supported by contributions from the general public, included the following costs in its Statement of Functional Expenses for the year ended December 31, 2013:
What should Dura Foundation report as program service expenses?

Question 42

For the month of December 2013, patient charges at Northfield Hospital (a not-for-profit hospital) were $2,720,000. Third-party payors were billed $1,800,000.
The hospital estimated that contractual adjustments would reduce the amount collected from third-party payors to $1,710,000.
Required:
Prepare the necessary journal entry to record the contractual adjustments.

Question 43

How does a recipient not-for-profit organization record the receipt of a gift that will be transferred without restriction to another charitable organization? What if the donor retains the right to revoke or redirect the gift?

Question 44

A not-for-profit organization provides the following information for the year:
Required: Prepare the journal entries for these transactions.

Question 45

For the month of December 2013, patient charges at Northfield Hospital (a not-for-profit hospital) were $2,720,000. Third-party payors were billed $1,800,000.
$520,000 of the $2,720,000 was expected to be uncollectible.
Required:
Prepare the necessary journal entry to record the anticipated uncollectible amount.

Question 46

For not-for-profit organizations, what is the difference in identification of "control" between a merger and an acquisition?

Question 47

Wakefield Home is a private not-for-profit healthcare organization offering services for a fee. In the first quarter of 2013, Wakefield Home rendered services of $300,000 to patients. Of this amount 75% will be paid by patients, and $25,000 will be adjusted based on estimated insurance agreements. The remaining amount is to be paid by third party insurance providers.
A local business donated medical supplies to Wakefield with a value of $40,000.
Prepare the journal entry for the receipt of these supplies.

Question 48

The Yelton Center is a voluntary health and welfare organization. During 2012, unrestricted pledges of $780,000 were received by the center, sixty percent of which were payable in 2012, with the remainder payable in 2013 (for use in 2013). Officials estimated that fifteen percent of these pledges will be uncollectible.
Required:
How much should the Yelton Center report as revenue for 2012?

Question 49

How does a voluntary health and welfare organization account for donated goods and cash contributed for operating purposes? What types of revenues are recognized by voluntary health and welfare organizations?

Question 50

For May 2013, Carlington Hospital's charges for patient services were $608,000, of which 80% was billed to third-party payors.
Required:
Prepare the journal entry to accrue patient charges for the month.

Question 51

A not-for-profit organization (Charity A) raises money for other charitable organizations. Charity A receives $10,000 to distribute to Charity
B.
Assume there are no donor rights to revoke or redirect the gift.

Question 52

What are third party payors? Why are their interests important in accounting for health care entities?

Question 53

For the month of December 2013, patient charges at Northfield Hospital (a not-for-profit hospital) were $2,720,000. Third-party payors were billed $1,800,000.
In this month, there were several patients that had no health insurance and due to their low income level, the hospital decided that $85,000 of receivables would not be collectible.
Required:
Prepare the necessary journal entry to reflect the decision to consider the $85,000 as charity care.

Question 54

Wakefield Home is a private not-for-profit healthcare organization offering services for a fee. In the first quarter of 2013, Wakefield Home rendered services of $300,000 to patients. Of this amount 75% will be paid by patients, and $25,000 will be adjusted based on estimated insurance agreements. The remaining amount is to be paid by third party insurance providers.
Record the journal entries that reflect all of this information.

Question 55

Dura Foundation, a voluntary health and welfare organization dedicated to finding medical cures and supported by contributions from the general public, included the following costs in its Statement of Functional Expenses for the year ended December 31, 2013:
What should Dura Foundation report as supporting service expenses?

Question 56

During 2013, the Garfield Humane Society, a voluntary health and welfare organization, received cash donations of $892,000 and membership dues of $62,000. A member of the Humane Society donated services valued at $8,000 that would otherwise have been performed by a paid staff member. A pet food manufacturer donated dog food valued at $16,400. The Humane Society received a gift of $140,000, to be used in building a new animal shelter. Also during 2013, investments held by the Humane Society earned interest of $2,000.
Required:
Prepare a schedule showing the amount that the Garfield Humane Society should have recorded for public support for 2013.

Question 57

A local social worker, earning $12 per hour working for the state government, contributed 600 hours of time at no charge to the Yelton Center, a voluntary health and welfare organization. If not for these donated services, an additional staff person would have been hired by the organization.
Required:
How should the Yelton Center record the contributed services?

Question 58

A not-for-profit organization receives a computer as a donation (valued at $2,000). Prepare the journal entry for the transaction.

Question 59

For a not-for-profit organization, when is recognition of contributions of artworks and historical treasures not required?

Question 60

For the month of December 2013, patient charges at Northfield Hospital (a not-for-profit hospital) were $2,720,000. Third-party payors were billed $1,800,000.
Prepare the necessary journal entry to record the revenue and receivables.

Question 61

Wakefield Home is a private not-for-profit healthcare organization offering services for a fee. The home has an endowment and the income may be used to sponsor families that are unable to pay for services but the principal must be preserved. In addition, various fundraising activities take place during the year.
When the Home held its annual Holiday fund raiser, pledges of $50,000 were received. The administration expected 5% to be uncollectible.
In addition, income of $10,000 was received from the endowment to sponsor families.
Prepare the journal entries for these transactions.

Question 62

Wakefield Home is a private not-for-profit healthcare organization offering services for a fee. In the first quarter of 2013, Wakefield Home rendered services of $300,000 to patients. Of this amount 75% will be paid by patients, and $25,000 will be adjusted based on estimated insurance agreements. The remaining amount is to be paid by third party insurance providers.
The Home incurred the following liabilities: $110,000 salaries, $30,000 medical equipment, $10,000 utilities expense.
Prepare the journal entries for these transactions.