Chapter 22
Problem I(1) a Recognized in period received.
(2) b Recognized in period received. Restriction is released when expenses are incurred. (3) a Recognized in period made.
(4) a Recorded at present value at time promise to give is received. (5) c Endowment principal cannot be spent. Earnings are unrestricted.
(6) b Recognized in period received. Restriction released either (1) when asset is placed in service or (2) over its useful life.
(7) f Recognized when conditions are met. (8) a Recorded at fair value when received.
(9) a Donated services of a skilled nature that would otherwise be purchased. (10) f Not skilled services. May be footnoted.
(11) b Recognized in period received. Restriction is released when time restriction is satisfied.
(12) b Recognized in period received. Restriction is released when expenses are incurred. (13) d Recognized revenue as expenses are incurred for research project.
(14) b Recognized in period received. Restriction is released either (1) when asset is placed in service or (2) over useful life of asset.
(15) a, b, or f (If collection is displayed to the public or otherwise held for exhibit, the university is not required to recognize contributions as revenue.)
Problem II
(a) Cash... 200,000
Revenues—Temporarily Restricted Contributions ... 200,000
(b) Expenses... 110,000
Cash... 110,000 Reclassifications Out—Temporarily Restricted—
Satisfaction of Program Restrictions... 110,000 Reclassifications In—Unrestricted—
Satisfaction of Program Restrictions ... 110,000 (c) Reclassifications Out—Temporarily Restricted—
Satisfaction of Program Restrictions... 90,000 Reclassifications In—Permanently Restricted—
Permanently Restricted Net Assets—Mandatory
Transfer-Out ... 90,000
Due to Endowment Fund... 90,000 Note to Instructor: The following entry would be made in the endowment fund:
Due from Restricted Current Fund ... 90,000 Permanently Restricted Net Assets—Mandatory
Transfer-In ... 90,000 (d) Cash... 15,000
Revenues—Temporarily Restricted Contributions ... 15,000
Problem III
(1) (a) Cash ... 90,000
Revenues—Temporarily Restricted Contributions... 45,000
Revenues—Permanently Restricted Contributions... 45,000
Endowment Investments ... 45,000
Cash... 45,000 (b) Cash ... 1,686,000
Accounts Receivable ... 148,000 Deferred Revenues... 66,000
Revenues—Student Tuition and Fees... 1,900,000 Cash ... 158,000
Deferred Revenues... 158,000 (c) Cash ... 308,000
Allowance for Uncollectible Tuition and Fees ... 12,000
Accounts Receivable... 320,000 Expenses—Institutional Support (Provision for Uncollectible
Tuition and Fees) ... 9,000
Allowance for Uncollectible Tuition and Fees ... 9,000
(d) Cash ... 6,000
Revenues—Unrestricted Investment Income ... 6,000
(e) Cash ... 75,000
State Appropriations Receivable... 75,000 State Appropriations Receivable ... 40,000
Revenues—State Government Appropriations ... 40,000
(f) Cash ... 30,000
Revenues—Temporarily Restricted Contributions... 30,000
(g) Cash ... 24,000
Investments... 21,000 Revenues—Temporarily Restricted Gain on the Sale of
Investments... 1,100
Revenues—Temporarily Restricted Investment Income... 1,900
Expenses—Research ... 400,000 Expenses—Institutional Support... 100,000 Expenses—Student Aid ... 100,000 Expenses—Student Services... 200,000 Expenses—Operation and Maintenance of Plant ... 500,000
Accounts Payable ... 60,000 Cash... 1,740,000 (i) Expenses—Research ... 13,000
Cash... 13,000 Reclassifications Out—Temporarily Restricted—Satisfaction
of Program Restrictions ... 13,000 Reclassifications In—Unrestricted—Satisfaction of Program Restrictions ... 13,000 (j) Accounts Payable ... 40,000 Cash... 40,000 (k) Cash ... 7,000
Revenues—Temporarily Restricted Endowment Income... 7,000
(l) Cash ... 16,000 Pledges Receivable ... 14,000
Revenues—Unrestricted Contributions ... 30,000 Expenses—Institutional Support Provision for Uncollectible
Contributions... 2,000
Allowance for Uncollectible Contributions ... 2,000
(2) USJR Private University
Statement of Activities For Year Ended June 30, 20x9
Temporarily Permanently
Unrestricted Restricted Restricted Total Changes in net assets:
Revenues and gains:
Tuition and fees... P1,900,000 P1,900,000 Contributions ... 30,000 P 75,000 P45,000 150,000 Government appropriations, grants, and
contracts... 40,000 40,000
Endowment income ... 7,000 7,000
Net realized gains on investments ... 1,100 1,100
Other investment income... 6,000 1,900 7,900
Total revenues and gains ... P1,976,000 P 85,000 P45,000 P2,106,000 Net assets released from restrictions:
Satisfaction of program restrictions... 13,000 (13,000) 0
Total revenues and gains and other support... P1,989,000 P 72,000 P45,000 P2,106,000 Expenses and losses:
Instruction... P 500,000 P 500,000 Research ... 413,000 413,000
Institutional support ... 111,000 111,000 Student aid ... 100,000 100,000
Operation and maintenance of plant... 500,000 500,000
Student services... 200,000 200,000 Total expenses and losses... P1,824,000 P 0 P 0 P1,824,000 Increase (decrease) in net assets ... P 165,000 P 72,000 P45,000 P 282,000 Net assets at beginning of year ... 487,000 40,000 50,000 577,000 Net assets at end of year... P 652,000 P112,000 P95,000 P 859,000 Problem IV
(1) Journal entries:
(a) Cash ... 20,000,000
Bonds Payable... 20,000,000 Cash ... 5,000,000
Revenues—Temporarily Restricted Contributions... 5,000,000 (b) Construction in Progress ... 7,000,000
Cash... 7,000,000 (c) Expenses—Operation and Maintenance of Plant
(Interest Expense)... 800,000
Cash... 800,000 (d) Building... 25,000,000
Construction in Progress... 7,000,000 Cash... 16,000,000 Retained Percentage—Liability to Contractor ... 2,000,000 Reclassifications Out—Temporarily Restricted—Satisfaction of
Plant Restrictions... 5,000,000 Reclassifications In—Unrestricted—Satisfaction of Plant
Restrictions... 5,000,000 (e) Mortgage Payable ... 2,000,000
Expenses—Operation and Maintenance of Plant
(Interest Expense)... 800,000 Cash... 2,800,000 (f) Land... 200,000 Building... 350,000 Mortgage Payable ... 90,000 Revenues—Unrestricted Contributions ... 460,000 (g) Contributions Receivable... 200,000
Revenues—Temporarily Restricted Contributions... 200,000
Expenses—Institutional Support (Provision for Uncollectible
Contributions) ... 20,000
Allowance for Uncollectible Contributions ... 20,000 (h) Investments ... 500,000
(i) Cash ... 10,000
Revenues—Temporarily Restricted Investment Income... 10,000
(j) Expenses—Operation and Maintenance of Plant
(Depreciation Expense) ... 25,000
Accumulated Depreciation... 25,000
(2) USLS Private University
Statement of Activities For Period Ended June 30, 20xx
Temporarily Permanently
Unrestricted Restricted Restricted Total Changes in net assets:
Revenues and gains:
Contributions ... P 460,000 P 5,700,000 P6,160,000
Other investment earnings ... 0 10,000 10,000
Total unrestricted revenues and gains.. P 460,000 P 5,710,000 P 0 P6,170,000 Net assets released from restrictions:
Satisfaction of plant acquisition restrictions ... 5,000,000 (5,000,000)* 0
Total revenues and gains and other support P5,460,000 P 710,000 P 0 P6,170,000 Expenses:
Operations and maintenance of plant ... P1,625,000 P1,625,000
Institutional support ... 20,000 20,000 Total expenses ... P1,645,000 P 0 P 0 P1,645,000 Increase (decrease) in net assets ... P3,815,000 P 710,000 P 0 P4,525,000 *Note to Instructor: The reclassification amount would total P25,000 if USLS’s policy is to release the restrictions over the life of the assets rather than when placed into operation.
Problem V
(1) Closing entries:
Each asset Revenues—Tuition and Fees ... 1,500,000 class is closed Revenues—Government Appropriations ... 800,000 separately. Revenues—Unrestricted Contributions ... 265,000 Revenues—Unrestricted Other Investment Income... 250,000 Reclassifications In—Unrestricted—Satisfaction of
Program Restrictions ... 75,000 Reclassifications In—Unrestricted—Satisfaction of Plant
Acquisition Restrictions... 250,000 Reclassifications In—Unrestricted—Expiration of Time
Restrictions... 50,000 Unrestricted Net Assets ... 305,000
Expenses—Research ... 840,000 Expenses—Instruction... 1,230,000 Expenses—Academic Support... 250,000 Expenses—Student Services... 200,000 Expenses—Instructional Support ... 225,000
Expenses—Operation and Maintenance of Plant ... 400,000 Expenses—Student Aid ... 350,000 Revenues—Sales and Services of Auxiliary Enterprises500,000
Expenses—Auxiliary
Enterprises... 475,000 Unrestricted Net Assets ... 25,000 Revenues—Temporarily Restricted Contributions... 200,000
Revenues—Temporarily Restricted Endowment
Income... 15,000 Revenues—Temporarily Restricted Net Realized Gains
on Endowment ... 25,000 Temporarily Restricted Net Assets ... 135,000
Reclassifications Out—Temporarily Restricted—
Satisfaction of Program Restrictions ... 75,000 Reclassifications Out—Temporarily Restricted—
Expiration of Time Restrictions... 50,000 Reclassifications Out—Temporarily Restricted—
Satisfaction of Equipment Acquisition Restrictions ... 250,000 Revenues—Permanently Restricted
Contributions... 500,000
Permanently Restricted Net Assets... 500,000
(2) University of Cebu
Statement of Activities For Year Ended December 31, 20x8
Temporarily Permanently
Unrestricted Restricted Restricted Total Changes in net assets:
Revenues and gains:
Tuition and fees ... P1,500,000 P1,500,000 Contributions... 265,000 P 200,000 P 500,000 965,000 Government appropriations, grants, and
contracts ... 800,000 800,000
Investment income on endowment ... 15,000 15,000
Net realized gains on endowment investments 25,000 25,000
Other investment income ... 250,000 250,000
Sales and services of auxiliary enterprises... 500,000 500,000
Total revenues and gains ... P3,315,000 P 240,000 P 500,000 P4,055,000 Net assets released from restrictions:
Satisfaction of program restrictions ... P 75,000 P (75,000) P 0
Satisfaction of equipment acquisition restrictions 250,000 (250,000) 0
Satisfaction of time restrictions ... 50,000 (50,000) 0
Total net assets released from restrictions ... P 375,000 P(375,000) P 0
Total revenues and gains and other support P3,690,000 P(135,000)P 500,000 P4,055,000
Research... P 840,000 P 840,000 Instruction ... 1,230,000 1,230,000 Academic support... 250,000 250,000 Student services... 200,000 200,000 Institutional support... 225,000 225,000
Operation and maintenance of plant ... 400,000 400,000
Student aid... 350,000 350,000 Auxiliary enterprises... 475,000 475,000 Total expenses ... P3,970,000 P 0 P 0 P3,970,000 Increase (decrease) in net assets... P (280,000) P(135,000) P 500,000 P 85,000 Net assets, January 1, 20x8... 675,000 975,000 2,500,000 4,150,000 Net assets, December 31, 20x8... P 395,000 P 840,000 P3,000,000 P4,235,000 Problem VI
University of Cebu Statement of Financial Position
December 31, 20x8 Assets: Cash ... P 255,000 Accounts receivable ... 625,000 Contributions receivable ... 85,000 Inventory of supplies ... 75,000 Student loans receivable... 300,000 Land, buildings, and equipment (net) ... 1,000,000 Endowment investments... 3,025,000 Total assets... P5,365,000 Liabilities:
Accounts payable ... P 220,000 Amounts held on behalf of others ... 250,000 Long-term debt... 560,000 U.S. government grants refundable ... 100,000 Total liabilities ... P1,130,000 Net assets:
Unrestricted ... P 395,000 Temporarily restricted ... 840,000 Permanently restricted... 3,000,000 Total net assets ... P4,235,000 Total liabilities and net assets ... P5,365,000 Problem VII
(1) Patient service revenues include charges to patients for routine services, nursing services, and professional services.
Other operating revenues include revenues from services other than health care provided to patients as well as from sales and services to persons other than patients.
Nonoperating revenues are primarily from gifts, grants, and investment income and gains that are peripheral or incidental to the major operation of the hospital.
b. N e. N h. PS k. N
c. PS f. N i. OO
Problem VIII
(1) Accounts Receivable ... 1,010,000
Patient Service Revenues... 1,010,000 To record billings.
(2) Inventory... 12,000
Other Operating Revenues—Unrestricted (contributions) ... 12,000
To record donation of drugs from doctor.
(3) Cash ... 28,800
Other Operating Revenues—Unrestricted... 28,800 To record cash revenues.
(4) Charity Services... 13,000
Accounts Receivable ... 13,000 To record charity allowance.
(5) Contractual Adjustments ... 68,000
Accounts Receivable ... 68,000 To record adjustments for Medicare charges.
(6) Provision for Bad Debts ... 26,000
Allowance for Uncollectible Receivables... 26,000 To record increase in allowance.
Problem IX
(1) Accounts Receivable ... 8,500,000
Revenues ... 8,500,000 Contractual Adjustments ... 3,700,000
Allowance for Contractual Adjustments... 3,700,000 Cash ... 4,460,000
Contractual Adjustments ... 340,000 Allowance for Contractual Adjustments ... 3,700,000
Accounts Receivable ... 8,500,000 Cash ... 250,000
Contractual Adjustments ... 250,000 Contractual Adjustments ... 90,000
Cash ... 90,000 (2) Net patient service revenues = P4,620,000 (P8,500,000 – P3,700,000 – P340,000 + P250,000 –
P90,000)
(3) Net cash flow from transactions with Medicare = P4,620,000 (P4,460,000 + P250,000 – P90,000)
(4) Assuming the P90,000 payment back to Medicare was in settlement, the revenue account will be closed along with the contra-revenue account “Contractual Adjustments.” The net amount will appear on the financial statements.
Problem X
Pure Air Rehabilitation Hospital Statement of Activities
For Period Ended December 31, 20x9
Temporarily Permanently
Unrestricted Restricted Restricted Total
Patient service revenues (net of $26,000
contractual adjustments)... P 714,000 P 714,000
Other operating revenues:
Seminar income ... P 23,000 P 23,000
Child day care income... 15,000 15,000
Parking fees ... 4,500 4,500
Total other operating revenue ... P 42,500 P 42,500
Total operating revenues... P 756,500 P 756,500 Operating expenses:
Nursing services ... P 230,000 P 230,000 Professional fees ... 340,000 340,000
General and administrative... 150,000 150,000
Depreciation expense ... 90,000 90,000
Interest expense ... 13,000 13,000
Repairs and maintenance ... 110,000 110,000
Provision for uncollectibles ... 14,000 14,000
Total operating expenses ... P 947,000 P 947,000
Loss from operations ... P(190,500) P (190,500) Nonoperating revenue:
Interest income... P 3,000 P 3,000 Contributions... P 18,000 18,000
Endowment income... 120,000 120,000
Gains on sale of endowments... 56,000 P 0 56,000
Total nonoperating revenue... P 3,000 P194,000 P 0 P 197,000 Change in net assets... P(187,500) P194,000 P 0 P 6,500 Net assets, January 1, 20X9 ... 800,000 755,000 750,000 2,305,000 Net assets, December 31, 20X9 ... P 612,500 P949,000 P750,000 P2,311,500 Problem XI
Requirement:
1. Prepare statement of activities for the year ended June 30, 20x8. 2. Prepare statement of financial position as of June 30, 20x8
(1) Adventist Hospital
Statement of Activities For Year Ended June 30, 20x8
TemporarilyPermanently
Public support and revenue: Public support:
Contributions ... P300,000 P15,000 P315,000
Annual auction proceeds (net of P11,000 expense) 31,000 31,000
Total public support... P331,000 P15,000 P 0 P346,000 Revenues:
Membership dues... P 25,000 P 25,000 Program service fees ... 30,000 30,000 Investment income ... 10,000 10,000 Endowment income ... P20,000 20,000 Total revenue ... P 65,000 P20,000 P 0 P 85,000 Net assets released from restrictions:
Satisfaction of program restrictions ... P 5,000 P (5,000) P 0 Total public support, revenue, and other support... P401,000 P30,000 P 0 P431,000 Expenses:
Program services:
Blind children ... P150,000 P150,000 Deaf children... 120,000 120,000 Supporting services:
Management and general ... 51,000* 51,000
Fund raising... 9,000 9,000 Total expenses ... P330,000 P 0 P 0 P330,000 Change in net assets... P 71,000 P30,000 P 0 P101,000 Net assets, July 1, 20x7... 38,000 3,000 250,000 291,000 Net assets, June 30, 20x8 ... P109,000 P33,000 P250,000 P392,000 *P49,000 + P2,000 provision for uncollectible pledges
(2) Adventist Hospital
Statement of Financial Position June 30, 20x8
Assets:
Cash ... P 40,000 Pledges receivable (net of P3,000 allowance) ... 9,000 Bequest receivable ... 5,000 Accrued interest receivable ... 1,000 Long-term investments ... 140,000 Endowment investments... 250,000 Total assets ... P445,000 Liabilities:
Accounts payable and accrued expenses... P 51,000 Refundable deposits... 2,000 Total liabilities ... P 53,000 Net assets: Unrestricted... P109,000 Temporarily restricted ... 33,000 Permanently restricted ... 250,000 Total net assets ... P392,000 Total liabilities and net assets ... P445,000
Multiple Choice Problems
7. c – P210 x 4 = P840 8. d – term endowment
59. b (Permanently restricted net assets have increased by only P120,000.) 60.
61. b (The financial aid is shown as a direct reduction to the tuition revenue so that revenues and support should total only P780,000.)
68. c (Amounts charged to patients less contractual adjustments)
69. d (The charity care work should not be recorded in any way because there is no expectation of collection. The contractual adjustment is reported as a contra balance to the revenue.)
95. d (These services do not meet the criteria for donated services that are recognized.)
155. b (The charity must convey the donation to the designated beneficiary. Unless the charity was given varied powers that allowed it to change the beneficiary, this amount
163. d (If the other information that is included contains a call for a specific action that will help accomplish the mission of the charity and if the mailing is not directed solely to potential donors, a portion of the costs can be allocated to program service expenses.)
164. a (Because of the time restriction, the amount spent for playground equipment remains in temporarily restricted net assets until depreciated. The equipment was bought at the end of the year so that no depreciation was recorded and no reclassification was made.)
Quiz-XXII 1. c 21. a 41. c 61. b 81. a 101. d 121. c 141. c 161. c 2. a 22. a 42. d 62. c 82. a 102. a 122. a 142. b 162. d 3. c 23. d 43. a 63. d 83. b 103. b 123. c 143. d 163. d 4. a 24. a 44. b 64. b 84. a 104. d 124. c 144. a 164. a 5. b 25. c 45. d 65. a 85. b 105. b 125. c 145. d 165. a 6. a 26. d 46. c 66. c 86. d 106. a 126. c 146. c 166. c 7. c 27. b 47. c 67. b 87. b 107. a 127. c 147. b 167. e 8. d 28. d 48. b 68. c 88. a 108. b 128. a 148. c 168. a 9. c 29. a 49. c 69. d 89. d 109. d 129. c 149. a 169. a 10. d 30. c 50. c 70. c 90. b 110. a 130. b 150. c 170. b 11. b 31. a 51. d 71. b 91. a 111. b 131. b 151. d 171. d 12. a 32. b 52. c 72. c 92. a 112. c 132. c 152. e 172. c 13. b 33. b 53. c 73. b 93. c 113. d 133. b 153. d 173. d 14. c 34. b 54. b 74. a 94. d 114. b 134. a 154. b 174. c 15 b 35 c 55 a 75 b 95 d 115. c 135. d 155. d 175. c 16. d 36. a 56. d 76. a 96. d 116. c 136. a 156. b 176. d 17. b 37. d 57. c 77. b 97. a 117. c 137. c 157. b 177. b 18. b 38. a 58. c 78. c 98. c 118. b 138. d 158. c 178. c 19. c 39. b 59. b 79. c 99. b 119. d 139. b 159. b 20. d 40. a 60. a 80. a 100. b 120. d 140. b 160. a 1. c 21. b 41. a 2. d 22. d 42. b 3. b 23. a 43. b 4. e 24. d 44. a 5. c 25. c 45. c 6. e 26. a 46. c 7. c 27. a 47. a 8. c 28. c 48. b 9. b 29. d 10. d 30. b 11. d 31. d 12. a 32. c 13. d 33. d
Theories
Completion Statements 1. unconditional 2. nonreciprocal 3. unconditional 4. when received 5. conditional 6. fair value7. market quotations, appraisals, present-value calculations 8. nonfinancial assets, specialized skills
9. fair value, asset or asset enhancement 10. collection items
11. selectively
12. unrestricted, temporarily restricted, permanently restricted 13. endowments
14. temporarily restricted 15. temporarily restricted
16. temporarily restricted, unrestricted, donor-imposed stipulations, accounting policy, explicit donor instructions
17. expire 18. whole
19. donor-imposed restrictions, donor-imposed restrictions 20. total assets, total liabilities, total net assets (equity)
21. unrestricted, temporarily restricted, permanently restricted 22. board-designated, unrestricted 23. category 24. unrestricted 25. separately 26. natural, matrix 27. gross 28. columnar, layered 29. change 30. direct, indirect 31. permits
True or False Statements
32. True 43. True 54. True 65. True
33. False 44. False 55. False 66. False
34. False 45. False 56. True 67. False
35. True 46. False 57. False 68. True
14. d 34. a 15 b 35 c 16. d 36. a 17. a 37. a 18. e 38. d 19. c 39. b 20. b 40. d
36. True 47. False 58. False 69. True
37. False 48. False 59. False 70. True
38. False 49. True 60. True 71. False
39. True 50. False 61. True 72. False
40. True 51. True 62. True 73. False
41. True 52. False 63. True
42. False 53, False 64. True
Multiple Choice Theories
74. a 84. a 94. e 104. a 114. c 124. b 134. d 144. c 75. c 85. d 95. a 105. b 115. b 125. d 135. c 145. c 76. b 86. c 96. b 106. d 116. b 126. b 136. c 146. a 77. b 87. e 97. b 107. c 117. b 127. c 137. b 147. ** 78. e 88. e 98. d 108. b 118. d 128. a 138. d 148. c 79. e 89. d 99. d 109. b 119. * 129. d 139. b 149. a 80. e 90. c 100. d 110. a 120. d 130. d 140. b 150. b 81. e 91. d 101. a 111. b 121. b 131. d 141. c 151. b 82. d 92. d 102. b 112. b 122. d 132. d 142. b 152. c 83. a 93. c 103. a 113. d 123. e 133. b 143. c *contribution revenue **incomplete data Note for Nos.:
148. (The work of the librarian does not enhance a nonfinancial asset nor does it require a specialized skill that would be purchased if not donated.)
149. (The FASB wanted to get away from fund accounting and provide information about the private not-for-profit organization as a whole.)
