Chapter 16, Modern Advanced accounting-review Q & exr

CHAPTER 16NONPROFIT ORGANIZATIONS

The title of each problem is followed by the estimated time in minutes required for completion and by a difficulty rating. The time estimates are applicable for students using the partially filled-in working papers.

Pr. 16–1 Seaside Hospital (30 minutes, easy)

Preparation of statement of activities for a nonprofit hospital that has only a general fund.

Pr. 16–2 Holley School (30 minutes, medium)

Journal entries for transactions and events of a nonprofit private secondary school, in unrestricted fund, quasi-endowment fund, and plant fund.

Pr. 16–3 Nonprofit Trade Association (30 minutes, medium)

Preparation of a statement of activities and a statement of financial position for a nonprofit trade association that does not use fund accounting.

Pr. 16–4 Suburban Welfare Services (50 minutes, medium)

Working paper to compute original and revised equity percentages for funds of a nonprofit voluntary health and welfare organization in an investment pool. Journal entries for unrestricted fund for operations of the investment pool.

Pr. 16–5 Harbor Hospital (50 minutes, medium)

Journal entries for transactions and events of general fund, restricted fund, and annuity fund of a nonprofit hospital.

Pr. 16–6 Wigstaff Foundation (50 minutes, medium)

Preparation of a statement of cash flows for a nonprofit research and scientific organization, in the indirect method format.

Pr. 16–7 Mid-City Sports Club (50 minutes, medium)

Preparation of journal entries (explanations omitted) for events and transactions of a nonprofit social club. Also, preparation of a statement of activities and a statement of financial position.

Pr. 16–8 State University (60 minutes, strong)

Journal entries for transactions and events of a nonprofit university's unrestricted fund, restricted fund, and endowment fund.

Pr. 16–9 Resthaven Hospital (60 minutes, strong)

Journal entries for transactions and events of a nonprofit hospital's general fund, plant replacement and expansion fund, and endowment fund.

Pr. 16–10 Libra College (60 minutes, strong)

Journal entries for unrestricted fund and restricted fund of a nonprofit college; preparation of statement of changes in fund balances.

Pr. 16–11 Disadvantaged Children Association (60 minutes, strong)

Preparation of financial statements, excluding a statement of cash flows, for a nonprofit voluntary health and welfare organization.

The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 16 440

ANSWERS TO REVIEW QUESTIONS

1. A nonprofit organization is an entity that is usually operated for the benefit of society as a whole, rather than for the benefit of an individual proprietor or a group of partners or stockholders. The concept of "net income" is not meaningful for a nonprofit organization.

2. Among the types of nonprofit organizations in the United States are the following (only four required):Cemetery organizations Private and community foundationsCivic organizations Private elementary and secondary schoolsColleges and universities Professional associationsCultural institutions Public broadcasting stationsFraternal organizations Religious organizationsHospitals Research and scientific organizationsLabor unions Social and country clubsLibraries Trade associationsMuseums Voluntary health and welfare organizationsPerforming arts organizations Zoological and botanical societiesPolitical parties

3. Each of the AICPA Accounting and Auditing Guides or Industry Audit Guides dealing with nonprofit organizations contains a section that indicates that the accounting concepts included therein have the substantial authoritative support required for generally accepted accounting principles.

4. Characteristics of nonprofit organizations resembling those of governmental entities include the following (only three are required):

(1) Service to society. Nonprofit organizations render services to society as a whole.

(2) No profit motivation. Nonprofit organizations do not operate with the objective of earning a net income.

(3) Financing by the citizenry. Most nonprofit organizations depend on the general population for a substantial portion of their support because revenues from services generally do not cover all their operating costs.

(4) Stewardship for resources. Because a substantial portion of the resources of a nonprofit organization is contributions, the organization must account for the resources on a stewardship basis.

(5) Importance of budget. The annual budget is important for a nonprofit organization because of the four preceding characteristics.

5. Characteristics of nonprofit organizations that resemble those of business enterprises include the following:

(1) Governance by board of directors. A nonprofit organization is governed by elected or appointed directors, trustees, or governors.

(2) Measurement of cost expirations. Cost expirations, or expenses, rather than expenditures, generally are reported in the statement of activities of a nonprofit organization.

(3) Use of accrual basis of accounting. Nonprofit organizations employ the accrual basis of accounting.

6. Both hospitals and universities (nonprofit organizations) accrue their basic revenue charges to patients and students, respectively, at gross amounts, before reductions for allowances, remissions, and the like. The latter are recorded in revenue-offset accounts by hospitals and generally with expenses for student aid by universities.

The McGraw-Hill Companies, Inc., 2006441 Modern Advanced Accounting, 10/e

7. a. A nonprofit organization records contributed material in its accounting records at the current fair value of the material when contributed. Failure to record contributed material would understate assets and revenues at the time of the contribution and would understate expenses when the material was used in operations.

b. A nonprofit organization records contributed services in its accounting records only if the services were rendered to the organization under specified conditions. The contributed services are recorded as salaries expense and as revenues at an appropriate rate, less any meals or living costs incurred by the organization for the donor of the services.

8. Expenses of a nonprofit organization that receives significant support from the public are classified on a functional basis that differentiates between program services expenses and supporting services expenses.

9. Unpaid amounts of grants that may be revoked by the board of trustees of a nonprofit performing arts organization are not recognized as expenses until they are paid.

10. Collections often are not assigned a value in the financial statements of a nonprofit museum. Instead, the "Collections" caption in the statement of financial position is referenced to a note in the financial statements that describes the collections.

11. A nonprofit organization's annuity fund records assets contributed with the requirement that the organization pay specified fixed amounts periodically to named recipients, for a stipulated time period. A nonprofit organization's life income fund records assets contributed with the stipulation that income from the assets be paid periodically to named recipients during their lifetimes.

12. a. Designated Fund Balance is a ledger account in a nonprofit organization's unrestricted fund that is used to record the board of directors' earmarking of unrestricted fund resources for a specific purpose.

b. A third-party payor is an organization that is liable for payment of many hospital receivables, instead of the patients receiving the hospital's services. Examples of third-party payors are the U.S. government (Medicare and Medicaid programs), Blue Cross, and private medical insurance carriers.

c. A pledge is a commitment by a prospective donor to contribute a specific amount of cash or property to a nonprofit organization on a future date or in installments.

d. Charity care is health services provided by nonprofit hospitals to indigent patients, there being no expectation of resultant cash flows to the hospital.

e. A term endowment fund is a fund whose principal may be expended by the nonprofit organization after the passage of a period of time or the occurrence of an event specified by the donor of the endowment principal.

13. The financial statements issued by a nonprofit organization are a statement of activities, a statement of financial position, and a statement of cash flows.

SOLUTIONS TO EXERCISES

Ex. 16–1 1. d 8. a2. c 9. c3. a 10. e ($620,000 – $80,000 = $540,000)4. c 11. c5. b 12. c6. a 13. d7. a

Ex. 16–2 Journal entries for Neighborhood Hospital, May 31, 2006:


Accounts Receivable 860,000Patient Service Revenues 860,000


Contractual Adjustments 140,000Accounts Receivable 140,000

Doubtful Accounts Expense 20,000Allowance for Doubtful Accounts 20,000

Ex. 16–3 Financial statement presentation of Redwood Hospital for month of Sept., 2006:

In statement of activitiesPatient service revenues (net of contractual adjustments, $18,500) $223,000

In statement of financial positionAccounts receivable (net of allowance for doubtful accounts, $14,600) $208,400

Ex. 16–4 Journal entries for Recuperative Hospital, Oct. 31, 2006:



Contractual Adjustments 32,000Accounts Receivable 32,000

Doubtful Accounts Expense 24,000Allowance for Doubtful Accounts 24,000

Ex. 16–5 Journal entry for University of South Park Unrestricted Fund, June 15, 2006:

Library Books 16,000Contributions Revenue 16,000

To record contribution of library books by various publishers.

Ex. 16–6 Journal entry for Cordova Hospital General Fund, Mar. 31, 2006:

Inventories 6,200Contributions Revenue 6,200

To record difference between current fair value ($6,400) and nominal cost ($200) of medicine and drugs as support from contributed material.

Ex. 16–7 Journal entry for Warner College Unrestricted Fund, Oct. 31, 2006:

Salaries Expense ($3,400 – $180) 3,220Contributions Revenue 3,220

To record contributed services at current fair value, less value of meals provided to donors. (Tax withholdings are disregarded.)


Ex. 16–8 Journal entries for Modern Museum, June 30, 2006:

Salaries Expense 68,000Contributions Revenue 68,000

To record contributed services of docents for the year.

Rent Expense 96,000Contributions Revenue 96,000

To record current fair value of rental of storage facilities whose use was contributed.

Ex. 16–9 Journal entries for Community Welfare, Inc. Unrestricted Fund, Nov. 30, 2006:

Pledges Receivable 500,000Contributions Revenue 500,000

Provision for Doubtful Pledges ($500,000 x 0.20) 100,000Allowance for Doubtful Pledges 100,000

Allowance for Doubtful Pledges 30,000Pledges Receivable 30,000

Cash 240,000Pledges Receivable 240,000

Ex. 16–10 Adjusting entry for Wabash Hospital General Fund, June 30, 2006:

Pledges Receivable 60,000Provision for Doubtful Pledges 7,200

Allowance for Doubtful Pledges ($60,000 x 0.12) 7,200Contributions Revenue ($300,000 – $275,000) 25,000Fund Balance ($50,000 – $15,000) 35,000

To adjust accounting for pledges from cash basis to accrual basis of accounting required for nonprofit hospitals.

Ex. 16–11 Journal entries for Wilmington College Restricted Fund, June 30, 2006:

Investments in Securities ($10,000 x 0.25) 2,500Gains on Securities Investments 2,500

To record 25% share ($90,000 $360,000 = 25%) of realized and unrealized gains of investment pool for the year.

Cash ($18,000 x 0.25) 4,500Interest and Dividends Revenue 4,500

To record 25% share of earnings of investment pool for the year.

Journal entries for Wilmington College Quasi-Endowment Fund, June 30, 2006:

Investments in Securities ($10,000 x 0.35) 3,500Gains on Securities Investments 3,500

To record 35% ($126,000 $360,000 = 35%) of realized and unrealized gains of investment pool for the year.

Cash ($18,000 x 0.35) 6,300Interest and Dividends Revenue 6,300

To record 35% share of earnings of investment pool for the year.

Journal entry for Wilmington College Annuity Fund, June 30, 2006:


Investments in Securities ($10,000 x 0.40) 4,000Cash ($18,000 x 0.40) 7,200

Annuity Payable 11,200To record 40% share ($144,000 $360,000 = 40%) of realized and unrealized gains and earnings of investment pool for the year.

Ex. 16–12 Journal entries for Artistry Unlimited:

2006July 1 Cash 50,000

Contribution Revenue 50,000To record gift restricted to scholarships for students of ballet.

Sept. 1 Grants Expense 45,000Cash 45,000

To record grants awarded to nine students of ballet.

Ex. 16–13 Journal entry for Technology Specialists, July l, 2006:

Grants Expense 10,000Cash 10,000

To record payment of first installment of revocable three-year grant to Martin Grey.

Ex. 16–14 NO-PROF HOSPITALStatement of Financial Position

June 30, 2006(amounts in thousands)

AssetsCash and cash equivalents $ 100Accounts receivable (net) 900Inventory of supplies 200Short-term prepayments 50Cash and investments restricted to acquisition of plant assets 600Plant assets (net) 3,100

Total assets $4,950

Liabilities & Net AssetsLiabilities:

Notes payable $ 300Accounts payable and accrued liabilities 550Advances from third-party payors 200Deferred revenues 100Housing and mortgage bonds payable 900

Total liabilities $2,050

Net Assets (unrestricted):Fund balance designated for plant assets $ 600Undesignated fund balance 2,300

Total net assets $2,900Total liabilities and net assets $4,950


CASES

Case 16–1 The action by the board of directors of Roakdale Association is unsupportable; it might be interpreted as a deliberate attempt to mislead users of the organization's financial statements. All unrestricted revenues, regardless of source, must be recorded in the Unrestricted Fund of Roakdale Association. By definition, a restricted fund is appropriate only for recording contributions restricted for specific expenditures by the donors. If the board of directors of Roakdale Association desires to earmark a portion of Unrestricted Fund assets for some purpose, the directors may designate a portion of the Undesignated Fund Balance ledger account of the Unrestricted Fund.

Case 16–2 Following are answers to the questions of Toledo Day Care Center's board of trustees:

(l) Generally, only the revenues of an endowment fund are expendable for current operations, assuming that no restrictions were placed on the revenues by the donor of the endowment. However, the principal of a term endowment may be expended after the passage of a period of time or the occurrence of an event specified by the donor. The principal of a quasi-endowment fundone that is established by the board of trustees rather than by a donormay be expended on authorization by the trustees.

(2) The principal of a permanent endowment never may be expended; it must be maintained by the nonprofit organization in perpetuity. However, as indicated in (1), the principal of a term endowment is expendable when specified by the donor, and the principal of a quasi-endowment fund may be expended at any time as authorized by the board of trustees.

(3) Separate accounting records should be established for each individual endowment fund. It is not proper to account for endowment funds in a single restricted fund of a voluntary health and welfare organization.

Case 16–3 The method used by Science Unlimited to present unsold products in its balance sheet is incorrect. First, all unsold products expected to be sold during the forthcoming operating cycle or one year, whichever is longer, should be displayed with the current asset inventory. The "base stock" concept of inventory is not in accordance with generally accepted accounting principles, for either nonprofit organizations or business enterprises. Second, the appropriate method of valuing inventories for which selling prices are less than production costs is net realizable value, defined as estimated selling price less estimated costs of completion and disposal. Arbitrary valuation methods are unacceptable under generally accepted accounting principles. For Science Unlimited, distribution and handling costs of unsold products constitute disposal costs; storage costs should be recognized as expenses when incurred.

Case 16–4 The method used by Station KKLL to value the radio station antenna tower is not in accordance with generally accepted accounting principles for nonprofit organizations. Contributed plant assets received by a nonprofit organization should be valued at current fair value, not at a nominal cost. Otherwise, both revenues in the year of the donation and depreciation expense in subsequent years are understated.

Case 16–5 The proposal of the accountant for Nonprofit Religious Organization is not in accordance with generally accepted accounting principles for nonprofit organizations. According to FASB Statement No. 116, "Accounting for Contributions Received and Contributions Made" (par. 9), contributed services are to be recognized only if they create or enhance nonfinancial assets or they require special skills that would be purchased if not contributed by individuals possessing those skills.

Case 16–6 The chief accountant of Vol-Wel cannot ethically comply with the president's instruction to recognize as contributions revenue the $60,000 estimated value of services rendered by fund-raising volunteers. Section ET 203.05 of AICPA Professional Standards, vol. 2, states that AICPA members who sign communications such as a transmittal letter accompanying financial statements are subject to Rule 203 of the AICPA Code of Professional Conduct,


which in essence requires members to comply with generally accepted accounting principles. Included in those principles is FASB Statement No. 116, "Accounting for Contributions Received and Contributions Made," paragraph 9 of which limits the recognition of contributions of services to services that create or enhance nonfinancial assets or require specialized skills, such as those of accountants. Fund-raising activities require no such specialized skills.

The president's request to transfer a substantial part of his $100,000 annual salary to program expenses and fund-raising expenses from management and general expenses may be complied with if the chief accountant can obtain evidence supporting the president's participation in programs and fund raising. A source of evidence might be the president's appointments calendar or expense reimbursement requests. However, the chief accountant should point out to the president that Vol-Wel, as a voluntary health and welfare organization, is also required to report expenses by their natural classification, in accordance with paragraph 26 of FASB Statement No. 117, "Financial Statements of Not-for-Profit Organizations." (See also paragraph l59, Note F, thereof.)


30 Minutes, EasySeaside Hospital Pr. 16–1

Seaside Hospital

Statement of Activities

For Year Ended June 30, 2006

(amounts in thousands)

Revenues:

Patient service revenue (net) $ 1 4 2 0

Other operating revenue 1 8 0

Contributions 3 8 0

Investment revenue 2 8 0

Total revenues $ 2 2 6 0

Expenses:

Nursing services $ 5 6 0

Other professional services 2 6 0

General services 3 6 0

Fiscal services 1 8 0

Administrative services 2 8 0

Depreciation 3 4 0

Doubtful accounts 8 0

Total expenses 2 0 6 0

Increase in unrestricted net assets $ 2 0 0


30 Minutes, MediumHolley School Pr. 16–2

Holley School Quasi-Endowment Fund

Journal Entry


(3) Cash 1 1 0 0 0 0

Investments in Securities 1 0 0 0 0 0

Payable to Unrestricted Fund 1 0 0 0 0

To record sale of investments at a gain, the use of

which is unrestricted.

Holley School Plant Fund

Journal Entries


(1) Equipment 5 0 0 0 0

Fund Balance 5 0 0 0 0

To record acquisition of computers by Unrestricted

Fund.

(4) Buildings 2 0 0 0 0 0 0

Cash 2 5 0 0 0 0

Mortgage Note Payable 1 7 5 0 0 0 0

To record construction of new building financed in part

by 5% mortgage note payable.

Holley School Unrestricted Fund

Journal Entries


(1) Undesignated Fund Balance 5 0 0 0 0

Cash 5 0 0 0 0

To record acquisition of computers to be carried in

Plant Fund.

(2) Cash 2 0 0 0 0 0

Contributions Revenue 2 0 0 0 0 0

To record receipt of unrestricted gift.

(3) Receivable from Quasi-Endowment Fund 1 0 0 0 0

Investment Income 1 0 0 0 0

To record investment gain receivable from Quasi-

Endowment Fund.


30 Minutes, MediumNonprofit Trade Association Pr. 16–3

Nonprofit Trade Association



Revenues and gains

Membership dues $ 1 8 4 0 0 0

Conferences and meetings 3 2 1 0 0 0

Publication and advertising sales 1 4 3 0 0 0

Special assessments 5 0 0 0 0

Investment revenue and net gains 1 1 0 0 0

Total revenues and gains $ 7 0 9 0 0 0

Expenses:

Member services $ 5 6 0 0 0

Conferences and meetings 1 6 6 0 0 0

Technical services 2 1 8 0 0 0

Communications 6 1 0 0 0

General administration 1 5 4 0 0 0

Membership development 2 7 0 0 0

Total expenses 6 8 2 0 0 0

Increase in unrestricted net assets $ 2 7 0 0 0

Net assets, beginning of year 2 8 5 0 0 0

Net assets, end of year $ 3 1 2 0 0 0

Nonprofit Trade Association

Statement of Financial Position

June 30, 2006

Assets

Current assets:

Cash $ 7 0 0 0

Short-term investments in securities 2 1 7 0 0 0

Accounts receivable, less allowance for doubtful accounts,

$3,000 2 5 0 0 0

Publications inventory 6 1 0 0 0

Total current assets $ 3 1 0 0 0 0

Long-term investments in securities 1 2 0 0 0 0

Plant assets, less accumulated depreciation $22,000 3 3 0 0 0

Other assets 2 8 0 0 0

Total assets $ 4 9 1 0 0 0

Liabilities & Net Assets

Current liabilities:

Accounts payable and accrued liabilities $ 4 8 0 0 0

Deferred membership dues 1 3 1 0 0 0

Total current liabilities $ 1 7 9 0 0 0

Net assets (unrestricted) 3 1 2 0 0 0

Total liabilities & net assets $ 4 9 1 0 0 0


50 Minutes, MediumSuburban Welfare Services Pr. 16–4

a. (1) Suburban Welfare Services

Computation of Original Equity Percentages for Investment Pool

July 1, 2005

Current OriginalCost fair value equity, %

Unrestricted Fund $ 5 0 0 0 0 $ 5 9 4 0 0 2 2 . 0 0

Restricted Fund 2 0 0 0 0 1 6 2 0 0 6 . 0 0

Plant Fund 8 0 0 0 0 8 9 1 0 0 3 3 . 0 0

Arnold Life Income Fund 1 0 0 0 0 0 1 0 5 3 0 0 3 9 . 0 0

Totals $ 2 5 0 0 0 0 $ 2 7 0 0 0 0 1 0 0 . 0 0

(2) Suburban Welfare Services

Computation of Revised Equity Percentages for Investment Pool

January 2, 2006

Current RevisedCost fair value equity, %

Unrestricted Fund $ 5 3 3 0 0 (1) $ 6 6 0 0 0 (2) 1 8 . 3 3

Plant Fund 8 4 9 5 0 (3) 9 9 0 0 0 (4) 2 7 . 5 0

Arnold Life Income Fund 1 0 5 8 5 0 (5) 1 1 7 0 0 0 (6) 3 2 . 5 0

Edwards Endowment Fund 7 0 0 0 0 7 8 0 0 0 2 1 . 6 7

Totals $ 3 1 4 1 0 0 $ 3 6 0 0 0 0 1 0 0 . 0 0

Computations:

(1) $50,000 + ($15,000 x 0.22) = $53,300

(2) $300,000 x 0.22 = $66,000

(3) $80,000 + ($15,000 x 0.33) = $84,950

(4) $300,000 x 0.33 = $99,000

(5) $100,000 + ($15,000 x 0.39) = $105,850

(6) $300,000 x 0.39 = $117,000


Suburban Welfare Services (concluded) Pr. 16–4

b. Suburban Welfare Services Unrestricted Fund

Journal Entries

20 05

Dec 31 Investments in Securities 1 5 0 0 0

Cash 2 5 0 0 0

Gains on Securities Investments ($15,000 x 0.22) 3 3 0 0

Interest and Dividends Revenue ($25,000 x 0.22) 5 5 0 0

Payable to Restricted Fund [($15,000 + $25,000)

x 0.06] 2 4 0 0

Payable to Plant Fund [($15,000 + $25,000) x 0.33] 1 3 2 0 0

Payable to Arnold Life Income Fund [($15,000 +

$25,000) x 0.39] 1 5 6 0 0

To record realized and unrealized gains and earnings

of investment pool for six months ended Dec. 31,

2005, and liabilities to other funds.

31 Payable to Restricted Fund 2 4 0 0

Payable to Plant Fund 1 3 2 0 0

Payable to Arnold Life Income Fund 1 5 6 0 0

Investments in Securities ($15,000 x 0.78) 1 1 7 0 0

Cash ($25,000 x 0.78) 1 9 5 0 0

To record allocation of investments and payment of

cash to other funds of investment pool.

20 06

Jan 2 (No entry required for withdrawal of Restricted Fund from investment pool; custody of the Restricted Fund’s

investments is returned to it.)

June 30 Investments in Securities 4 0 0 0 0

Cash 6 0 0 0 0

Gains on Securities Investments ($40,000 x 0.1833) 7 3 3 2

Interest and Dividends Revenue ($60,000 x 0.1833) 1 0 9 9 8

Payable to Plant Fund [($40,000 + $60,000) x

0.2750] 2 7 5 0 0

Payable to Arnold Life Income Fund [($40,000 +

$60,000) x 0.3250] 3 2 5 0 0

Payable to Edwards Endowment Fund [($40,000 +

$60,000) x 0.2167] 2 1 6 7 0

To record realized and unrealized gains and earnings

of investment pool for six months ended June 30,

2006, and liabilities to other funds.

30 Payable to Plant Fund 2 7 5 0 0

Payable to Arnold Life Income Fund 3 2 5 0 0

Payable to Edwards Endowment Fund 2 1 6 7 0

Investments in Securities ($40,000 x 0.8167) 3 2 6 6 8

Cash ($60,000 x 0.8167) 4 9 0 0 2

To record allocation of investments and payment of

cash to other funds of investment pool.


50 Minutes, MediumHarbor Hospital Pr. 16–5

a. Harbor Hospital General Fund

Journal Entries

October, 2006

(1) Accounts Receivable 8 0 0 0 0

Patient Service Revenues 8 0 0 0 0

To record gross patient service revenue for month of

October at full rates.

Accounts Receivable 2 5 0 0

Patient Service Revenues 2 5 0 0

To record amount receivable from Bovard Welfare

Organization for charity care.

Contractual Adjustments 6 0 0 0

Accounts Receivable 6 0 0 0

To record contractual adjustments allowed to Medicaid

for October.

Doubtful Accounts Expense 8 0 0 0

Allowance for Doubtful Accounts 8 0 0 0

To provide for doubtful accounts for October.

(2) Salaries Expense 9 8 0 0

Contributions Revenue 9 8 0 0

To record donated services by volunteer nurses for

October, at going salary rates ($10,000), less cost of

meals served to volunteer nurses at no charge ($200).

(3) Pledges Receivable 5 0 0 0

Contributions Revenue 5 0 0 0

To record pledges received from donors during

October.

Cash 3 5 0 0

Pledges Receivable 3 5 0 0

To record pledges collected in cash during October.

Provision for Doubtful Pledges 8 0 0

Allowance for Doubtful Pledges 8 0 0

To provide for doubtful pledges for October.

(4) Receivable from Arline E. Walters Annuity Fund 5 0 0

Cash 5 0 0

To record payment of Arline E. Walters annuity for

October.

(Continued on page 454.)


Harbor Hospital (concluded) Pr. 16–5

Harbor Hospital General Fund

Journal Entries (concluded)

October, 2006

(5) Cash 3 0 0 0

Fund Balance 3 0 0 0

To record receipt of cash from Charles Watson

Restricted Fund for new surgical equipment.

Plant Assets 3 0 0 0

Cash 3 0 0 0

To record acquisition of new surgical equipment.

b. Harbor Hospital Arline E. Walters Annuity Fund

Journal Entry

October, 2006

Annuity Payable 5 0 0

Payable to General Fund 5 0 0

To record liability to General Fund for payment of

Arline E. Walters annuity for October.

Harbor Hospital Charles Watson Restricted Fund

Journal Entry

October, 2006


Cash 3 0 0 0

To record payment to General Fund for acquisition of

new surgical equipment


50 Minutes, MediumWigstaff Foundation Pr. 16–6

Wigstaff Foundation

Statement of Cash Flows (indirect method)


Net cash provided by operating activities (Exhibit 1) $ 2 6 6 0 0 0

Cash flows from investing activities:

Acquisition of furniture and equipment $ 2 2 0 0 0

Acquisition of long-term investments in securities 6 0 0 0 0

Net cash used in investing activities ( 8 2 0 0 0 )

Cash flows from financing activities:

Payment of long-term debt $ 1 6 4 0 0 0 *

Net cash used in financing activities ( 1 6 4 0 0 0 )

Net increase in cash $ 2 0 0 0 0

Cash, beginning of year 6 3 0 0 0 0

Cash, end of year $ 6 5 0 0 0 0

*($164,000 + $794,000) – ($176,000 + $618,000) = $164,000

Exhibit 1 Cash flows from operating activities:

Increase in unrestricted net assets $ 1 8 8 0 0 0

Adjustments to reconcile increase in unrestricted net assets to net cash

provide by operating activities:

Depreciation expense 1 4 8 0 0 0

Increase in accounts receivable (net) ( 3 2 0 0 0 )

Increase in unbilled contract revenue and reimbursable grant costs ( 1 9 6 0 0 0 )

Increase in short-term prepayments ( 4 0 0 0 )

Increase in accounts payable and accrued liabilities 6 0 0 0 0

Increase in restricted grant advances 1 0 2 0 0 0

Net cash provided by operating activities $ 2 6 6 0 0 0


50 Minutes, MediumMid-City Sports Club Pr. 16–7

a. Mid-City Sports Club

Journal Entries


(1) Cash 2 0 0 0 0

Dues Revenue 2 0 0 0 0

(2) Cash 2 8 0 0 0

Snack Bar and Soda Fountain Revenue 2 8 0 0 0

(3) Cash 6 0 0 0

Interest Revenue 6 0 0 0

(4) Clubhouse Expense 1 7 0 0 0

Inventories 2 6 0 0 0

General and Administrative Expense 1 1 0 0 0

Accounts Payable 5 4 0 0 0

(5) Accounts Payable 5 5 0 0 0

Cash 5 5 0 0 0

(6) Assessments Receivable 1 0 0 0 0

Contributions Revenue 1 0 0 0 0

(7) Cash 5 0 0 0

Gifts Revenue 5 0 0 0

(8) Clubhouse Expense 9 0 0 0

Snack Bar and Soda Fountain Expense 2 0 0 0

General and Administrative Expense 1 0 0 0

Accumulated Depreciation of Building 4 0 0 0

Accumulated Depreciation of Furniture and

Equipment 8 0 0 0

(9) Snack Bar and Soda Fountain Expense ($5,000 +

$26,000 – $1,000) 3 0 0 0 0

Inventories 3 0 0 0 0


Mid-City Sport Club (concluded) Pr. 16–7

b. Mid-City Sports Club



Revenues and gains:Dues $ 2 0 0 0 0

Snack bar and soda fountain 2 8 0 0 0

Interest 6 0 0 0

Gifts and contributions ($10,000 + $5,000) 1 5 0 0 0

Total revenues and gains $ 6 9 0 0 0

Expenses:Clubhouse ($17,000 + $9,000) $ 2 6 0 0 0

Snack bar and soda fountain ($2,000 + $30,000) 3 2 0 0 0

General and administrative ($11,000 + $1,000) 1 2 0 0 0

Total expenses $ 7 0 0 0 0

(Decrease) in unrestricted net assets $ ( 1 0 0 0 )Cumulative increase in net assets, beginning of year 1 2 0 0 0

Cumulative increase in net assets, end of year $ 1 1 0 0 0

Mid-City Sports Club


June 30, 2006

AssetsCurrent assets:

Cash ($9,000 + $20,000 + $28,000 + $6,000 – $55,000 + $5,000) $ 1 3 0 0 0

Investments in securities 5 8 0 0 0

Assessments receivable 1 0 0 0 0

Inventories 1 0 0 0

Total current assets $ 8 2 0 0 0

Plant assets:Land $ 1 0 0 0 0

Building 1 6 4 0 0 0

Furniture and equipment 5 4 0 0 0

Subtotal $ 2 2 8 0 0 0Less: Accumulated depreciation ($130,000 + $4,000 + $46,000 + $8,000) 1 8 8 0 0 0

Net plant assets $ 4 0 0 0 0


Liabilities & Net AssetsCurrent liabilities:

Accounts payable ($12,000 + $54,000 – $55,000) $ 1 1 0 0 0

Net assets:Membership certificates, 100 at $1,000 each (no change during the year) $ 1 0 0 0 0 0

Cumulative increase in net assets 1 1 0 0 0

Total net assets (unrestricted) $ 1 1 1 0 0 0



60 Minutes, StrongState University Pr. 16–8

State University

Journal Entries


Unrestricted Restricted Endowment

Transaction Fund Fund Fund

no. Ledger accounts dr (cr) dr (cr) dr (cr)

(1) Cash 5 0 0 0 0 5 0 0 0 0

Fund Balance ( 5 0 0 0 0 ) ( 5 0 0 0 0 )

Investment in Securities 5 0 0 0 0

Cash ( 5 0 0 0 0 )

(2) Cash 1 6 8 6 0 0 0

Deferred Revenue 6 6 0 0 0

Accounts Receivable [$1,900,000 –

($1,686,000 + $66,000)] 1 4 8 0 0 0

Revenues (1 9 0 0 0 0 0 )

Cash 1 5 8 0 0 0

Deferred Revenues ( 1 5 8 0 0 0 )

(3) Cash 3 4 9 0 0 0

Allowance for Doubtful Accounts 1 0 0 0

Accounts Receivable ( 3 5 0 0 0 0 )

Expenses 3 0 0 0

Allowance for Doubtful Accounts ( 3 0 0 0 )

(4) Cash 6 0 0 0

Revenues ( 6 0 0 0 )

(5) Cash 7 5 0 0 0

State Appropriation Receivable ( 7 5 0 0 0 )

State Appropriation Receivable 5 0 0 0 0

Revenues ( 5 0 0 0 0 )

(6) Cash 2 5 0 0 0

Revenues ( 2 5 0 0 0 )

(7) Cash 2 6 0 0 0

Investments in Securities ( 2 1 0 0 0 )

Fund Balance ( 5 0 0 0 )

Cash 1 9 0 0


(8) Expenses 1 7 7 7 0 0 0

Cash ($1,777,000 – $59,000) (1 7 1 8 0 0 0 )

Accounts Payable ( 5 9 0 0 0 )



State University (concluded) Pr. 16–8

State University



Unrestricted Restricted Endowment

Transaction Fund Fund Fund


(9) Expenditures 1 3 0 0 0

Cash ( 1 3 0 0 0 )


Revenues ( 1 3 0 0 0 )

(10) Accounts Payable 4 5 0 0 0

Cash ( 4 5 0 0 0 )

(11) Cash 7 0 0 0



60 Minutes, StrongResthaven Hospital Pr. 16–9

Resthaven Hospital

Journal Entries

For Year Ended December 31, 2006

Plant

General Replacement and Endowment

Transaction Fund Expansion Fund Fund


(1) Accounts Receivable 1 1 0 1 0 0 0

Patient Service Revenues (1 1 0 1 0 0 0 )

(2) Doubtful Accounts Expense 3 0 0 0 0

Contractual Adjustments 1 5 0 0 0

Allowance for Doubtful Accounts ( 3 0 0 0 0 )

Accounts Receivable ( 1 5 0 0 0 )

(3) Mortgage Bonds Payable 1 8 0 0 0

Cash ( 1 8 0 0 0 )

(4) Cash 5 6 5 0 0

Unrestricted Gift Revenue ( 5 0 0 0 0 )

Unrestricted Revenue from

Endowment Fund ( 6 5 0 0 )

Cash 6 5 0 0



Cash ( 6 5 0 0 )

(5) Fund Balance 2 6 0 0 0

Cash ( 2 6 0 0 0 )

Equipment 2 6 0 0 0

Fund Balance Designated for

Plant Assets ( 2 6 0 0 0 )

Cash 5 0 0

Accumulated Depreciation of

Equipment ($24,000 – $2,400) 2 1 6 0 0

Loss on Disposal of Plant Assets

($2,400 – $500) 1 9 0 0

Equipment ( 2 4 0 0 0 )

(6) Administrative Services Expense 1 2 0 0 0 0

Interest Expense 9 5 0 0 0

General Services Expense 2 2 5 0 0 0

Nursing Services Expense 5 2 0 0 0 0

Other Professional Services Expense 1 6 5 0 0 0

Inventory of Supplies 6 0 0 0 0

Accrued Liabilities 6 0 0 0

Accounts Payable (1 1 9 1 0 0 0 )



Resthaven Hospital (concluded) Pr. 16–9

Resthaven Hospital


For Year Ended December 31, 2006

Plant

General Replacement and Endowment

Transaction Fund Expansion Fund Fund


(7) Cash 9 8 5 0 0 0

Accounts Receivable ( 9 8 5 0 0 0 )

Allowance for Doubtful Accounts 1 1 0 0 0

Accounts Receivable ( 1 1 0 0 0 )

(8) Accounts Payable 8 2 5 0 0 0

Cash ( 8 2 5 0 0 0 )

(9) Nursing Services Expense 3 7 0 0 0

Inventory of Supplies ( 3 7 0 0 0 )

(10) Interest Receivable 8 0 0

Fund Balance ( 8 0 0 )

(11) Depreciation Expense 1 1 7 0 0 0


Buildings ( 4 4 0 0 0 )


Equipment ( 7 3 0 0 0 )

(12) Interest Expense 6 1 0 0

Accrued Liabilities ( 6 1 0 0 )


60 Minutes, StrongLibra College Pr. 16–10

Libra College

Journal Entries


Unrestricted Restricted

Transaction Fund Fund

no. Ledger accounts dr (cr) dr (cr)

(1) Cash 3 0 0 0 0 0 0Accounts Receivable, Tuition and Fees ( 3 6 2 0 0 0 )

Tuition and Fees Revenue (2 5 0 0 0 0 0 )

Deferred Revenues ( 1 3 8 0 0 0 )

(2) Deferred Revenues 2 5 0 0 0

Tuition and Fees Revenue ( 2 5 0 0 0 )

(3) Allowance for Doubtful Accounts ($360,000 + $15,000 –

$362,000) 1 3 0 0 0

Accounts Receivable, Tuition and Fees ( 1 3 0 0 0 )

Doubtful Tuition and Fees Expense [$10,000 –

($15,000 – $13,000)] 8 0 0 0

Allowance for Doubtful Accounts ( 8 0 0 0 )

(4) State Appropriation Receivable 6 0 0 0 0

Government Grants Revenue ( 6 0 0 0 0 )

(5) Cash 8 0 0 0 0

Private Gifts Revenue ( 8 0 0 0 0 )


Cash ( 3 0 0 0 0 )

(6) Cash 1 8 0 0 0

Fund Balance ( 1 8 0 0 0 )

Cash 3 1 0 0 0

Investment in Securities ( 2 5 0 0 0 )


Investments in Securities 4 0 0 0 0

Cash ( 4 0 0 0 0 )

(7) Educational and General Expenses 2 5 0 0 0 0 0

Accounts Payable (2 5 0 0 0 0 0 )

Accounts Payable ($100,000 + $2,500,000 – $75,000) 2 5 2 5 0 0 0

Cash (2 5 2 5 0 0 0 )



Libra College (concluded) Pr. 16–10

Libra College



Unrestricted Restricted

Transaction Fund Fund

no. Ledger accounts dr (cr) dr (cr)

(8) Accounts Payable 5 0 0 0Cash ( 5 0 0 0 )

(9) Payable to Other Funds 4 0 0 0 0

Cash ( 4 0 0 0 0 )

(10) Educational and General Expenses ($40,000 x ¼) 1 0 0 0 0

Short-Term Prepayments ( 1 0 0 0 0 )


60 Minutes, StrongDisadvantaged Children Association Pr. 16–11

Disadvantaged Children Association



Changes in unrestricted net assets:

Revenue and gains:

Contributions $ 3 2 0 0 0 0

Membership dues 2 5 0 0 0

Program service fees 3 0 0 0 0

Investment revenue and gains 1 0 0 0 0

Total unrestricted revenues and gains $ 3 8 5 0 0 0

Expenses:

Program $ 2 7 0 0 0 0

Management and general ($45,000 + $2,000) 4 7 0 0 0

Fund raising 8 0 0 0

Total expenses $ 3 2 5 0 0 0

Increase in unrestricted net assets $ 6 0 0 0 0

Changes in temporarily restricted net assets:

Contributions $ 1 5 0 0 0

Management and general expenses ( 4 0 0 0 )

Fund-raising expenses ( 1 0 0 0 )

Increase in temporarily restricted net assets $ 1 0 0 0 0

Increase in net assets $ 7 0 0 0 0

Net assets, beginning of year ($12,000 + $26,000 +

$3,000) 4 1 0 0 0

Net assets, end of year $ 1 1 1 0 0 0

Disadvantaged Children Association


June 30, 2006

Assets

Cash ($40,000 + $9,000) $ 4 9 0 0 0

Bequest and interest receivable ($5,000 + $1,000) 6 0 0 0

Pledges receivable (net) ($12,000 – $3,000) 9 0 0 0

Investments in securities, at fair value 1 0 0 0 0 0


Liabilities & Net Assets

Liabilities:

Accounts payable and accrued liabilities

($50,000 + $1,000) $ 5 1 0 0 0

Deferred revenues 2 0 0 0

Total liabilities $ 5 3 0 0 0

Net assets:

Unrestricted ($38,000 + $60,000) $ 9 8 0 0 0

Temporarily restricted ($3,000 + $10,000) 1 3 0 0 0

Total net assets $ 1 1 1 0 0 0



Documents

Chapter 16, Modern Advanced accounting-review Q & exr