Acctg for Not for Profit Organization PDF

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Accounting for Not-for-Profit OrganizationsGeneral Concepts: Unconditional promises to give are recognized as contribution revenue when a. The promise is received b. The related receivable is collected c. The time or purpose restriction is satisfied d. The future event that binds the promisor occurs...

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Accounting for Not-for-Profit Organizations General Concepts: 1. Unconditional promises to give are recognized as contribution revenue when a. The promise is received b. The related receivable is collected c. The time or purpose restriction is satisfied d. The future event that binds the promisor occurs (Adapted) 2. Net assets that are restricted by the governing board of a nongovernment , not-forprofit organization are reported as a part of: a. Permanently restricted net assets b. Temporarily restricted net assets c. Unrestricted net assets d. Either permanently restricted or temporarily restricted net assets, depending on the term of the restriction (Adapted) 3. Which of the following is not a characteristic of a conditional promise to give: a. Depends on the occurrence of a specified future and uncertain event to bind the promisor b. Gift may have to be returned to donor if condition is not met c. Recognized as contribution revenue when the conditions are substantially met d. Depends on demand by the promiseefor the performance (Adapted) 4. Unconditional promise to give that are collectible within one year of the financial statement date: a. Should be reported at their gross amount b. Should be reported at the gross amount less an allowance for uncollectible accounts c. Should be reported at the present value of the amounts expected to be collected, using the donor’s incremental borrowing note d. Should not be reported until collected (Adapted) 5. When a temporary restriction on resources of a nongovernment, not-for-profit entity is met by the incurrence of an expense for the restricted purpose: a. The expense is reported in the statement of activity as an increase in unrestricted net assets

b. Amounts reported in the temporarily restricted net assets are reclassified as unrestricted net assets c. The entry is a debit to expense and a credit to the program services d. The expense is reported in restricted net assets (Adapted) 6. How will a nongovernment, not-for-profit entity record an agency transaction in which it receives resources? a. No entry is made in the accounts b. Debit the asset account and credit contribution revenue c. Debit the asset account and credit temporarily restricted net assets d. Debit the asset account and credit a liability account (Adapted) 7. Financial statements of a Not-For-Profit Organization, focuses on: a. Basic information for the organization as a whole b. Standardization of funds nomenclature c. Inherent differences of not-for-profit organizations that impact reporting presentations. d. Distinctions between current fund and noncurrent fund (Adapted) 8. In preparing the statement of cash flows for a nongovernment, not-for-profit entity, cash contributions that are restricted for long term pruposes are classified as: a. Operating Activities b. Investing Activities c. Financing Activities d. Capital and related financing activities (Adapted) 9. Long-lived assets are purchased by a nongovernment, not-for-profit entity with cash that was restricted for that purpose. The assets are reported in temporarily restricted net assets. Depreciation expense is reported in unrestricted net assets. a. The depreciation expense is incorrectly reported b. An amount equal to the depreciation is reclassified from temporarily restricted to unrestricted net assets c. An amount equal to the depreciation is reclassified from temporarily restricted to restricted net assets d. An amount equal to the depreciation is reported as revenues (Adapted)

10. A nongovernment, not-for-profit entity gives donors a sweatshirt imprinted with its logo when they pay P15 dues. The value of the sweatshirt is approximately P15. This transaction is most likely reported as: a. An exchange transaction b. An agency transaction c. A contribution d. A gift in kind (Adapted) 11. A large not-for-profit organization’s statement of activities should report the net change for net assets that are

a. b. c. d.

Unrestricted Permanently Restricted Yes Yes Yes No No No No Yes (AICPA)

12. A statement of financial position (balance sheet), which reports unrestricted temporarily restricted, and permanently restricted net assets, is required for which one of the following organizations? I. II.

A public university A private, not-for-profit hospital a. Both I and II b. I only c. Neither I nor II d. II only

13. Which of the following classifications is required for reporting of expenses by all not-for-profit organizations? a. Natural classification in the statement of activities or notes to the financial statements. b. Functional classification in the statement of activities or notes to the financial statements. c. Functional classification in the statement of activities and natural classification in a matrix format in a separate statement. d. Functional classification in the statement of activities and natural classification in the notes to the financial statements. (AICPA)

14. Which prescribes the financial statements of not-for-profit organizations, reporting reclassifications is caused by which of the following? I. II.

Expiration of donor-imposed conditions. Expiration of donor-imposed restrictions. a. I only b. Both I and II c. II only d. Neither I nor II (AICPA)

15. Which of the following transactions or events would cause increase in unrestricted net asset for the year-ended December 31, 2012? I.

II.

A voluntary health and welfare organization spent a restricted donation which was received in 2011. In accordance with the donor’s wishes, the donation was spent on public health education during 2012. During 2012, a private, not-for-profit college earned dividend and interest on term endowments. Donors placed no restriction on the earnings of term endowments. The governing board a college intends to use this investment income to fund undergraduate scholarships for 2013. a. b.

II only I only

c. d.

Neither I nor II Both I and II (AICPA)

Accounting for Hospital/Health Care Providers: 16. Tina Hospital’s patient service revenues for services provided in 2011, at established rates, amounted to P8,000,000 on the accrual basis. For internal reporting, Tina uses the discharged method. Under this method, patient service revenues are recognized only when patients are discharged, with no recognition given to revenues accruing for services to patient’s not yet discharged. Patient service revenues at established rates using the discharge method amounted to P7,000,000 for 2011. According to generally accepted accounting principles, Tina should report patient service revenues for 2011 of a. b. c. d.

Either P8,000,000 or P7,000,000, at the option of the hospital P8,000,000 P7,500,000 P7,000,000 (AICPA)

17. During 2011, UST Hospital purchased medicines for hospital use totalling P800,000. Included in this P800,000 was an invoice of P10,000 that was cancelled in 2011 by the vendor because the vendor wished to donate this medicine to UST. This donation of medicine should be recorded as a. b. c. d.

A P10,000 reduction of medicine expense. An increase in other operating revenue of P10,000. A direct P10,000 credit to the general (unrestricted) funds balance. A P10,000 credit to the restricted funds balance. (AICPA)

18. St. Luke’s Hospital received an unrestricted bequest of P100,000 in 2011. This bequest should be recorded as a. b. c. d.

A memorandum entry only. Other operating revenue of P100,000. Non-operating revenue of P100,000. A direct credit of P100,000 to the fund balance. (AICPA)

19. On March 1, 2011, KatkatOng established a P100,000 endowment fund, the income from which is to be paid to Cebu Hospital for general operating purposes. Cebu does not control the fund’s principal. KatkatOng appointed Philippine National Bank as trustee of this fund. What journal entry is required by Cebu to record the establishment of the endowment?

a. b. c.

Debit Cash…………………………………………. P100,000 Nonexpendable endowment fund Cash…………………………………………. 100,000 Endowment fund balance……… Nonexpendable endowment fund…... 100,000

Credit P100,000 100,000

d.

Endowment fund balance Memorandum entry only

100,000 (AICPA)

20. In 2011, St. Paul Hospital received an unrestricted bequest of common stock with a fair market value of P50,000 on the date of receipt of the stock. The testator had paid P20,000 for this stock in 2009. St. Paul Hospital should record this bequest as a. b. c. d.

Non-operating revenue of P50,000 Non-operating revenue of P30,000 Non-operating revenue of P20,000 A memorandum entry only. (AICPA)

21. Capitol Hospital has a marketable equity securities portfolio that is appropriately included in noncurrent assets in unrestricted funds. The portfolio has an aggregate cost of P300,000. It had an aggregate fair market value of P250,000 at the end of 2012 and P290,000 at the end of 2011. If the portfolio was properly reported in the balance sheet at the end of 2011, the change in the valuation allowance at the end of 2012 should be a. b. c. d.

P0. A decrease of P40,000 An increase of P40,000 An increase of P50,000 (AICPA)

22. Philippine General Hospital’s accounting records disclosed the following information: Net resources invested in plant assets…………………………….. Board-designated funds………………………………………………….

P10,000,000 2,000,000

What amount should be included as part of unrestricted funds? a.

P12,000,000

c.

b.

10,000,000

d.

P2,000,000 0 (AICPA)

23. East Avenue Hospital fiscal year ends May 31,2011. In March 2011, a P300,000 unrestricted bequest and a P500,000 pure endowment grant were received. In April 2011, a bank notified East Avenue that the bank received P10,000 to be held in permanent trust by the bank. East Avenue is to receive the income from this donation. East Avenue should record the P300,000 unrestricted bequest as a.

Non-operating revenue

b. c. d.

Other operating revenue A direct credit to the fund balance A credit to operating expenses (AICPA)

24. Using the same information in No. 23, the P500,000 pure endowment grant: a. b. c. d.

May be expended by the governing board only to the extent of the principal since the income from this fund must be accumulated. Should be reported as non-operating revenue when the full amount of principal is expended Should be recorded as a memorandum entry only Should be accounted for as donor-restricted funds upon receipt (AICPA)

25. Using the same information in No. 23, the donation P10,000 being held by the bank is permanent trust should be: a. b. c. d.

Recorded in East Avenue’s restricted endowment fund Recorded by East Avenue as non-operating revenue Recorded by East Avenue as other operating revenue Disclosed in notes to East Avenue’s financial statements (AICPA)

26. UE Hospital, a voluntary institution, has a pure endowment fund, the income from which is required to be used for library acquisitions. Philippine law and the donor are silent on the accounting treatment for investment gains and losses. In 2011, UE Hospital sold 1,000 shares of stock from the endowment fund’s investment portfolio. The carrying amount of these securities was P50,000. Net proceeds from the sale amounted to P120,000. This transaction should be recorded I the endowment fund as a debit to cash for P120,000 and as credits to a. b. c. d.

Endowment fund principal, P50,000 and endowment fund revenue, P70,000 Endowment fund principal, P50,000 and due to the general fund , P70,000 Investments, P50,000 and endowment fund balance, P70,000 Investments, P50,000 and endowment fund revenue, P70,000 (AICPA)

27. Land valued at P400,000 and subject to a P150,000 mortgage was donated to Makati Medical Hospital without restriction as to use. Which of the following entries should Makati Medical make to record this donation? a.

b.

Land………………………………………………...........................P400,000 Mortgage Payable…………………………………… 150,000 Endowment Fund Balance………………………. 250,000 Land…………………………………….…………...........................P400,000 Debt Fund Balance……...…………………………… 150,000

c.

d.

Contributions………………………………………….. 250,000 Land……………………………………………….............................P400,000 Debt Fund Balance …………………………………… 150,000 Endowment Fund Balance………………………….250,000 Land………………………………………………..............................P400,000 Mortgage Payable…………………………………… …150,000 Unrestricted Fund Balance………………………….250,000 (AICPA)

28. In June 2011, San Antonio Hospital purchased medicines from Park Pharmaceutical Co. at a cost of P1,000. However, Park notified San Antonio that the invoice was being canceled and that the medicines were being donated to San Antonio. San Antonio should record this donation of medicines as a. b. c. d.

Other operating revenue P1,000 A P1,000 credit to operating expense A P1,000 credit to non-operating expense A memorandum entry only (AICPA)

29. Williams Hospital, a nonprofit hospital affiliated with a religious group, reported the following information for the year ended December 31, 2011: Gross patient service revenue at the hospital’s established rates……………………………………………………… Bad debts expense……………………………………………………………… Contractual adjustments with third-party payors………………… Allowance for discounts to hospital employees…………………….

P980,000 10,000 100,000 15,000

On the hospital’s statement of operations for the year ended December 31, 2011, what amount should be reported as net patient service revenue? a. b.

P865,000 880,000

c. d.

P855,000 955,000 (AICPA)

30. Princess Hospital, a non-profit hospital affiliated with a private university, provided P200,000 of charity care for patients during the year ended December 31,2011. The hospital should report the charity care: a. b. c. d.

As net patient service revenue of P200,000 on the statement of operations As net patient service revenue of P200,000 and as operating expense of P200,000 on the statement of operation As Accounts Receivable of P200,000 on the balance sheet at December 31,2011 Only in the notes to the financial statements for 2011 (AICPA)

31. Leslie Hospital, a non-profit hospital affiliated with a private university , reported the following information for the year ended December 31,2011

Cash Contributions received from donors for capital additions to be acquired in 2012………………………………P150,000 Proceeds from sales at hospital gift shop and snack bar……….. 75,000 Dividend revenue not restricted by donors or by law………….... 25,000 Using the information provided, what amount should be reported as “other revenue and gains" on the hospital’s statement of operations for the year ended December 31,2011: a. b.

P25,000 75,000

c. d.

P100,000 250,000 (AICPA)

32. FEU Hospital a non-profit hospital affiliated with FEU University, received the following cash contributions from donors during the year ended December 31, 2011. Contributions restricted by donors for research……………….P50,000 Contributions restricted by donors for Capital acquisitions…………………………………………………………..250,000 Neither of the contributions was spent during 2011, however, during 2012, the hospital spent the entire P50,000 contribution on research and the entire P250,000 contribution on a capital asset which was placed into service during the year. On the hospital’s statement of operations for the year ended December 31, 2012. What total amount should be reported for “net assets released from restrictions”? a. b.

P 50,000 300,000

c. d.

P250,000 0 (AICPA)

33. St. Luke’s Hospital a private not-for-profit hospital, had the following cash receipts for , the year ended December 31, 2011, would report an increase in operating activities of: Patient Service Revenue…………………………………………P300,000 Gift Shop Revenue…………………………………………………. 25,000 Interest Revenue restricted by donor stipulation for acquisition of equipment………………………. 50,000 As a result of these cash receipts, the hospital’s statement of cash flows for the year ended December 31, 2011, would report an increase in operating activities of a. P325,000 c. P350,000 b. 375,000 d. 300,000 (AICPA) 34. St. Paul’s Hospital, a non-profit hospital affiliated with St. Paul College , had the following cash receipts for the year ended December 31, 2011: Collections of health care receivables……………………… Contribution from donor to establish a term endowment Tuition from nursing school……………………………………. Dividends received from investments in permanent endowment

P750,000 250,000 50,000 80,000

The dividends received are restricted by the donor for hospital building improvements. No improvements were made during 2011. On the hospital’s

statement of cash flows for the year ended December 31,2011, what amount of these cash receipts would be included in the amount reported for net cash provided (used) by operating activities? a. b.

P880,000 800,000

c. d.

P1,050,000 750,000 (AICPA)

35. Chinese General Hospital a non-profit hospital affiliated with a religious group, received the following cash contributions from donors during the year ended December 31, 2011: For capital acquisitions……………………………………………… P400,000 For permanent endowments……………………………………… 300,000 The cash received for capital acquisitions will be spent in 2012, while the cash received for the permanent endowment was used to acquire investments during 2008. What effect did these cash contributions have on the amounts reported for the cash flows from investing activities and cash flows from financing activities on the statement of cash flows for the year ended December 31, 2011:

a. b. c. d.

Cash flows from Investing activities Decrease P300,000 Decrease P700,000 Decrease P300,000 Decrease P300,000

Cash flows from Financing activities Increase P400,000 Increase P700,000 Increase P300,000 Increase P400,000 (AICPA)

36. Clara Hospital, a private not-for-profit hospital, earned P250,000 of gift shop revenues and spent on research during the year ended December 31, 2012. The P50,000 spent on research was part of a P75,000 contribution received during December of 2011 from a donor who stipulated that the donation be used for medical research. Assume none of the gift shop revenues were spent in 2012. For the year ended December 31, 2012, what was the increase in unrestricted net assets from the events occurring during 2012? a. b.

P300,000 200,000

c. P250,000 d. 275,000 (AICPA)

37. In hospital accounting, restricted funds are a. b. c. d.

Not available unless the Board of Directors remove the restrictions Restrictions as to use only for board-designated purposes Not available for current operating use; however, the income generated by the funds is available for current operating use Restricted as to use by the donor, grantor, or other source of the resources (AICPA)

38. In addition to the statement of changes in net assets, which of the following financial statements should not-for-profit hospitals prepare? a.

Balance sheet and income statement

b. c. d.

Balance sheet, income statement, and statement of changes in financial position Balance sheet, statement of operations, and statement of cash flows Statement of funds, statement of operations, and statement of cash flows (AICPA)

39. In the balance sheet of a not-for-profit hospital, marketable equity securities should be reported at a.

b. c. d.

The lower of aggregate cost or market in separate portfolios for unrestricted current, unrestricted noncurrent, restricted current, and un...