Professional Documents
Culture Documents
Chapter 21
Chapter 21
VOLUNTARY HEALTH AND WELFARE ORGANIZATIONS,
HEALTH CARE ENTITIES, AND COLLEGES AND UNIVERSITIES
Answers to Questions
1 The financial statements required for nongovernment not-for-profit entities
include a balance sheet, a statement of activities, and a cash flow statement.
Voluntary health and welfare organizations also provide a statement of
functional expenses.
2 Each hospital, college, and voluntary health and welfare organization (and
other not-for-profit organizations as well) must be evaluated to determine
whether it meets the definition of a government in the authoritative literature.
Those that meet the definition of a government must apply the government
GAAP hierarchy. GASB standards are the most authoritative guidance for
these entities. All other entities are to apply FASB standards.
3 A conditional promise to give depends on the occurrence of a specified
future and uncertain event to bind the promisor. An unconditional promise to
give depends only on the passage of time or demand by the promisee for
performance.
A donor-imposed condition provides that the donor will have his resources
returned (or will be released from the promise to give) if the condition is not
met. A donor-imposed restriction only limits the purpose or timing of use of
the contributed assets.
4 Nongovernment not-for-profit entities report depreciation on their property.
Governmental health care entities also report depreciation. Colleges and
universities and voluntary health and welfare organizations that are
governmental entities do not record depreciation.
(Many of these
organizations will report depreciation after the GASB adopts its expected new
reporting model.)
5 Unconditional promises to give with payments due in the next period are
reported as restricted support (net of an appropriate allowance for
uncollectible accounts) that increase temporarily restricted net assets, even if
the resources are not restricted for specific purposes.
6 When a time restriction is met, temporarily restricted net assets are
reclassified as unrestricted net assets.
The entry includes a debit to
170
171
7 Gifts in kind are reported as unrestricted support that increases unrestricted
net assets if the not-for-profit entity has discretion over the disposition of the
resources and a fair value can be reasonably determined. If fair value cannot
be determined, the items are recorded as sales revenue when they are sold. If
the not-for-profit entity has little or no discretion over disposition of the items,
the gifts in kind should be accounted for as agency transactions.
Chapter 21
8
Program services of voluntary health and welfare organizations are
expenses incurred in meeting the social service objectives of the organization.
Examples are research, public education, community services, and patient
services. Supporting services consist of the organization's administrative and
fund raising costs, and expenses for these items are so classified in the
statement of activities.
9 The statement of functional expenses of voluntary health and welfare
organizations is intended to reconcile the functional classification of expenses
(which results in highly aggregated data) with basic object-of-expenditure
classifications that are less aggregated and easier for many users to
understand.
10 Contributed services are recognized only if the services (a) create or
enhance nonfinancial assets of the organization or (b) require specialized
skills, are provided by individuals possessing those skills, and would typically
need to be purchased if not provided by donation.
11 Charity care is excluded from both gross patient service revenue and from
expense. The hospital's policy for providing charity care and the level of
charity care provided are disclosed in notes to the financial statements.
12 Net patient service revenues of hospitals are measured by deducting
courtesy allowances and contractual adjustments from gross patient
revenues. Uncollectible accounts expenses are not deducted in computing net
patient service revenues. Net patient service revenues are reported in the
statement of activities.
13 The three major revenue groupings used by hospitals are patient service
revenues, other operating revenue, and nonoperating gains. Examples are:
Patient service revenues -- routine care, emergency room, recovery room,
pharmacy
Other operating revenues -- tuition from educational programs, research
grants for specific purposes, gift shop sales, television rentals
Nonoperating gains -- unrestricted gifts, unrestricted endowment income, gain
on sale of plant assets, rents from property not used in hospital operations
(Premium fees also are significant for many hospitals today. They would be
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173
Student Services. Amounts expended for admissions and registrar,
and amounts expended for students emotional, social, and physical
well-being
Institutional support. Amounts expended for administration and the
long-range planning of the university
Operation and maintenance of plant. Expenses of current operating
funds for operating and maintaining the physical plant (net of amounts
to auxiliary enterprises and university hospitals)
Student aid. Expenses from restricted or unrestricted funds in the
form of grants, scholarships, or fellowships to students.
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174
SOLUTIONS TO EXERCISES
Solution E21-1
Solution E21-2
Solution E21-3
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
c
a
d
c
b
b
a
d
b
c
b
b
c
d
a
Solution E21-4
Solution E21-5
Solution E21-6
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
c
a
b
a
d
b
a
d
c
d
Solution E21-7
Solution E21-8
1
2
3
4
5
1
2
3
4
b
b
c
b
b
d
b
a
c
b
a
a
a
c
Solution E21-9
Contributions receivable
Allowance for uncollectible contributions
Unrestricted support-contributions
Restricted support-contributions
To record contribution revenues and an allowance
for uncollectible accounts.
$20,000
$
600
13,580
5,820
Contributions that are not due until the next period imply a time restriction
unless the donor explicitly stipulates that the pledge is for current
expenditures. Thus, unrestricted net assets are increased by $13,580 and
temporarily restricted net assets are increased by $5,820.
Solution E21-10
Cash
200
Restricted support--contributions
To record a gift restricted to a special project.
Expenses--community service [program services]
$
$
200
200
175
Chapter 21
Cash
To record expenditures for restricted purpose.
Temporarily restricted net assets-reclassifications out
Unrestricted net assets-reclassifications in
To record satisfaction of temporary restriction.
200
200
200
Solution E21-11
Program services:
Education
Public Health
Research
$20,400
15,700
12,000
$48,100
Supporting services:
Fund raising
Management and general
$11,400
5,500
$16,900
Solution E21-12
Equipment
Unrestricted support--Contributions
To record receipt of donated equipment.
$6,000
$1,500
Cash
$8,000
$6,000
$1,500
Restricted support--contributions
To record receipt of donation restricted to the
purchase of a truck.
Accrued interest receivable
Restricted revenue--investment income
To record accrual of interest on funds
restricted for the purchase of a truck.
$8,000
215
$
215
$750,000
(15,000)
$735,000
176
177
Chapter 21
Solution E21-14
Restricted Current Fund
Cash
$3,000,000
$3,000,000
Expenditures--tobacco research
Cash/Vouchers payable
To record expenditures for tobacco research.
$1,200,000
$1,200,000
$1,200,000
$1,200,000
178
SOLUTIONS TO PROBLEMS
Solution P21-1
Payment of salaries
Expenses--management and general
Expenses--community service
Cash
To record payment of salaries allocated 20%
to management and general services and 80%
to program services.
2,920
11,680
$ 14,600
Donated services
Expenses--management and general
Unrestricted support--donated services
To record donated services.
900
$
900
3,000
1,800
300
300
Donated facilities
Expenses--management and general
Expenses--community service
Unrestricted support--donated facilities
To record allocation of donated facilities 20%
to management and general and 80% to program services.
600
2,400
Payment of utilities
Expenses-management and general
Expenses-community service
Cash
To record payment of utilities allocated 20%
to management and general and 80% to program
services.
360
1,440
300
60
240
1,200
4,800
179
Chapter 21
Cash
To record payment of recordkeeping expenses
allocated 20% to management and general and
80% to program services.
6,000
180
Solution P21-1
(continued)
Gifts in kind are reported as contributions since Share Shop has discretion
over their distribution and a fair value is determinable. When gifts in kind
are distributed to recipients, they are recorded as program expenses. If fair
value cannot be determined, neither the contribution nor distribution would be
recorded.
Inventory--nonperishable food
Inventory--household items
Unrestricted support--donated assets
To record receipt of donated food and
household items.
$ 60,000
40,000
Expenses--community service
Inventory--nonperishable food
Inventory--household items
To record distribution of food and household
items to qualified recipients.
$ 65,000
$100,000
$ 45,000
20,000
Cash contributions
Cash
$10,000
Unrestricted support--contributions
To record receipt of cash contributions.
$ 10,000
Pledges receivable
Unrestricted support--contributions
Allowance for uncollectible pledges
To record pledges received and 10% estimated
uncollectible pledges.
$ 20,000
Cash
Unrestricted support--contributions
Allowance for uncollectible pledges
Contributions receivable
Temporarily restricted support-Contributions
To record receipt of cash, adjust the allowance
account for the overstatement of uncollected
pledges, and reclassify uncollected support.
$ 15,000
3,000
1,000
$ 18,000
2,000
$ 15,000
4,000
Grant
Grant receivable
Temporarily restricted support--grant
To accrue grant from Town of North Woods due in 2004.
$ 25,000
$ 25,000
181
Chapter 21
Solution P21-2
Hometown Memorial Hospital
Statement of Operations
For the year ended December 31, 2006
Unrestricted revenues, gains, and other support:
Net patient service revenues
($2,500,000 - $400,000 - $100,000)..................
Other operating revenues ($300,000 + $50,000).........
Income from investment in affiliate...................
Investment income.....................................
Unrestricted contributions............................
Net assets released from restrictions for
operating purposes....................................
Total operating revenues, gains, and net assets
released from restrictions for operations...........
$2,000,000
350,000
80,000
270,000
200,000
80,000
2,980,000
1,000,000
500,000
290,000
310,000
150,000
50,000
200,000
2,500,000
480,000
97,000
577,000
182
Solution P21-3
State Junior College
Statement of Current Funds Revenues,
Expenditures, and Other Changes
for the year 2003
Unrestricted
Revenues
Tuition and fees*
$2,000,000
State appropriations
800,000
Local appropriations
300,000
Private gifts and grants
80,000
Endowment income
20,000
Sales of auxiliary
enterprises
500,000
Total current revenue
3,700,000
Expenditures and mandatory transfers
Educational and general:
Instruction
$2,100,000
Research
30,000
Student services
120,000
Operation and
maintenance of plant
180,000
Scholarships*
120,000
Educational and general
expenditures
Mandatory transfers
2,550,000
Restricted
Total
$200,000
70,000
$2,000,000
800,000
300,000
280,000
90,000
270,000
500,000
3,970,000
$ 70,000
$2,100,000
100,000
120,000
200,000
180,000
320,000
270,000
2,820,000
100,000
100,000
2,650,000
270,000
2,920,000
480,000
480,000
3,130,000
270,000
$ 520,000
$100,000
3,400,000
$
620,000
*Scholarships include the tuition waivers and the expended restricted funds.
183
Chapter 21
Solution P21-4
Community Society
Statement of Activities
For the Year Ended December 31, 2005
Changes in Unrestricted Net Assets
Revenues and gains
Contributions.....................................
Membership dues ..................................
Investment income ................................
Total revenue and gains .......................
Net assets released from restrictions:
For research..................................
For fixed assets...............................
Increase in unrestricted net assets ...........
Expenses:
Program Services:
Research..........................................
Education.........................................
Total Program Services ........................
Supporting Services:
Management and general............................
Fund raising .....................................
Total Supporting Services .....................
Total expenses ................................
Net increase in unrestricted net assets .......
Changes in Temporarily Restricted Net Assets
Contributions ($438,000 + $409,000)...............
Investment income ................................
Gain on sale of investments.......................
Net assets released from restrictions *............
Decrease in temporarily restricted net assets .....
Changes in Permanently Restricted Net Assets
Contributions ....................................
Increase in permanently restricted net assets......
Increase in net assets ...............................
Net assets, beginning.................................
Net assets, ending ...................................
$3,000,000
400,000
83,000
3,483,000
$ 500,000
3,789,000
4,289,000
7,772,000
2,300,000
300,000
2,600,000
117,000
223,000
340,000
2,940,000
4,832,000
847,000
22,500
5,000
(4,289,000)
(3,414,500)
37,000
37,000
1,454,500
5,475,000
$6,929,500
184
Solution 21-5
1
$6,000,000
Expenditures--scholarships
Expenditures--bad debts
Tuition and fees receivable
Allowance for uncollectible accounts
To record scholarships and estimated bad debts.
Cash
$4,800,000
$6,000,000
200,000
100,000
$
$4,800,000
Cash
800,000
$800,000
200,000
100,000
$2,430,000
170,000
$2,600,000
$1,000,000
$1,000,000
$1,000,000
Fund balance--restricted
To record mandatory transfer from UCF.
5
$1,000,000
Fund balance
Cash
To record debt service payment.
960,000
$
960,000
360,000
360,000
185
Chapter 21
Cash
Fund balance
To record restricted gift.
440,000
$
440,000
186
Expenditures--instruction
Cash
To record expenditures for program.
Fund balance
Revenues
To record revenues equal to qualifying
expenditures.
8
237,000
$
237,000
237,000
44,000
44,000
$237,000
Fund balance--restricted
Cash
To record acquisition of equipment.
44,000
44,000
187
Chapter 21
Solution P21-6
Voluntary Health and Welfare Organization gift
1a Cash
Unrestricted supportcontributions
To record cash contribution received.
b Expenses (by function)
Cash
To record operating expenses paid.
2a Cash
Restricted supportcontributions
Research
To record restricted cash gift received.
b Expensesresearch
Cash
To record research expenses.
c Temporarily restricted net assets
reclassifications out
Unrestricted net assets
Reclassifications in
To record release of assets from temporary
restrictions.
$5,000,000
$5,000,000
$2,300,000
$2,300,000
$5,000,000
$5,000,000
$2,300,000
$2,300,000
$2,300,000
$2,300,000
$5,000,000
$5,000,000
$2,300,000
$2,300,000
$2,300,000
$2,300,000
188
$5,000,000
$2,300,000
$5,000,000
$2,300,000
2a Cash
Fund balance--research
To record restricted donation.
$5,000,000
2b Expenditures--research
Cash
To record research expenditures.
$2,300,000
Fund balance--research
Revenues--educational and general
To record contribution revenues.
3
$5,000,000
$2,300,000
$2,300,000
$2,300,000
3a Cash
Fund balance--restricted
To record capital gift.
$5,000,000
3b Construction in progress
Cash
To record construction costs.
$2,300,000
Fund balance--restricted
Construction in progress
To reclassify construction in progress.
$5,000,000
$2,300,000
$2,300,000
$2,300,000
$2,300,000
$2,300,000
189
Chapter 21
1b
2a
2b
Unrestricted Fund:
Cash
Nonoperating gains--general
contributions
Unrestricted Fund:
Expenses
Cash
Specific Purpose Fund:
Cash
Fund balanceleukemia researchgifts
Unrestricted Fund:
Expenses
Cash
Due from Specific Purpose Fund
RevenuesAmounts released from
restrictions for operating purposes
3a
3b
$5,000,000
$5,000,000
$2,300,000
$2,300,000
$5,000,000
$5,000,000
$2,300,000
$2,300,000
$2,300,000
$2,300,000
$2,300,000
$5,000,000
$2,300,000
$2,300,000
$5,000,000
$2,300,000
190
Solution P21-7
1
$20,000
$20,000
$65,000
35,000
$ 3,250
96,750
*To the extent that pledges are not collected by year end a time
restriction will be implied. An adjusting entry reducing unrestricted
support and recording temporarily restricted support for the net
realizable value of the uncollected pledges will be required.
3
Inventory of materials
Unrestricted support--donated materials
To record donations of food.
$150,000
Expenses--Meals
Inventory of materials
To record expenses for food used.
$151,200
Inventory of supplies
Cash
To record purchases of supplies.
$ 27,000
$ 10,000
100,000
Pledges receivable
Allowance for uncollectible pledges
$300,000
$150,000
$151,200
$27,000
$ 22,000
88,000
$ 15,000
$285,000