LJ

Nonprofit Accounting

Nonprofit Accounting

NONPROFIT ORGANIZATIONS
A.

B.

Nonprofit Organizations:
1.

Private Not-for-Profit Colleges/Universities

2.

Private Not-for-Profit Hospitals/Healthcare Entities

3.

Voluntary Health & Welfare Organizations

4.

Any Other Nonprofit Organization (labor union, research foundation, church, etc.)

Instead of GASB standards, all these nonprofits:

1.

Follow FASB nonprofit model.

2.

Carry and depreciate their own

3.

Carry and service their own

4.

Use normal accrual accounting (not modify accrual).

5.

Measurement focus: provide information for the entity as a whole.

6.

Deal with restricted money (must be restricted by an

7.

Deal with gifts, bequests, donations, grants, etc.

xed assets

long term debt, such as bonds payable

Notes:

outside

party).

Nonprofit Accounting

DONATED MONEY
Nonprofits use normal accrual accounting, so restricted money is recorded as revenue
immediately when either:
A.

Collected or

B.

Pledged (promised)

Example: $100,000 Gift restricted to purchase equipment

Cash

Temporarily restricted revenue

100,000

To record receipt of donation restricted to purchase equipment.

100,000

Year-end: Equipment still not purchased

Temporarily restricted revenue

100,000

Net assets temporarily restricted

100,000

To set up Net Asset account on B/S

Next Year: Funds spent; equipment purchased

Equipment
Cash
To record purchase of equipment

100,000

Net assets temporarily restricted

100,000

Net assets released from restriction

To record donation used for intended purpose

Net Assets Temporarily Restricted is a(n)

B/S

Net Assets Released from Restriction is

I/S

a(n)

B/S=Balance Sheet
I/S=Income Statement

100,000

100,000

account.
account.

Nonprofit Accounting

PLEDGES & DONATED SERVICES

A.

Pledges --- Record as revenue at fair market value, net of uncollectibility, in the year
the pledge is made.

Example: Nonprofit Hospital has a pledge drive. $200,000 in pledges have some kind of
restriction. Based on past experience, they expect to collect 100% of the restricted pledges but
$50,000 on the unrestricted pledges will not be collected.

Pledges receivable

650,000

Allowance for uncolletible

50,000

Unrestricted revenue

400,000

Temporarily restricted revenue

200,000

To record pledges at FV in the year the pledges are made.

B.

Donated Services
are met:

--- Record as both an expense and a revenue if the following criteria

1.

Fair value of the service is determinable, and either

2.

Services donated would have been paid for otherwise by the nonprofit, or

3.

Nonfinancial assets are created or enhanced.

Example: Nuts donate nursing services to a private, not-for-profit hospital

xxx expense

50,000

xxx revenue
(Notice: both a

revenue

so it washes out. Its all about

and an

full disclosure

expense

50,000
are recorded,
).

Nonprofit Accounting

STATEMENTS OF FINANCIAL POSITION

& ACTIVITIES
A.

Statement of Financial Position (i.e., a balance sheet)

Assets

XXXX

Liabilities

XXX

Net Assets:
Unrestricted
Temporarily Restricted
Permanently Restricted

XXX
XXX
XXX

Total Liabilities and Net Assets

B.

XXXX

Statement of Activities
Revenues (restricted and unrestricted)
Plus Net Assets Released From Restrictions

XXXX
XX
XXXX

Less Expenses

(XXX)

Net Change:
Net Assets: Unrestricted
Net Assets: Temporarily Restricted
Net Assets: Permanently Restricted

Notes:

XXX
XXX
XXX

Nonprofit Accounting

STATEMENT OF CASH FLOWS

Statement of Cash Flows --- FASB Format (must be the Direct Method)
1.

Cash Flow From Operating Activities (includes unrestricted items)

2.

Cash Flow From Investing Activities (including works of art)

3.

Cash Flow From Financing Activities (includes interest or dividend income restricted for
long-term purposes and contributions restricted for long-term purposes)

Cash Flows From Operating Activities

Cash received from customers
Cash paid to suppliers, employees, taxes
Cash paid for interest
Cash received for interest and dividends

XXXX
(XXX)
(XXX)
XX

Net cash provided (used) by Operating Activity

Cash Flow From Investing Activities
Buy or Sell Property, Plant or Equipment
Buy or Sell Investments

XXXX

XXXX
XX

Net cash provided (used) by Investing Activity

Cash Flow From Financing Activities
Borrow or repay debt principal
Dividend paid
Issue stock
Buy or sell Treasury Stock

XXXX

XXXX
(XXX)
XXX
XX

Net cash provided (used) by Financing Activity

XXXX

Net increase/decrease in cash and cash equivalents

XXXX

Cash and cash equivalents at the beginning of period

XXXX

Cash and cash equivalents at the end of the period

XXXX

Independently answer multiple-choice questions 1 15.

Nonprofit Accounting

MULTIPLE-CHOICE QUESTIONS 1 - 15
1. In the preparation of the statement of activities for a nongovernmental not-for-profit
organization, all expenses are reported as decreases in which of the following net assets
classes?
a.
b.
c.
d.

Total net assets

Unrestricted net assets
Temporarily restricted net assets
Permanently restricted net assets

(8327)

2. How should a nongovernmental not-for-profit organization report depreciation expense in its

statement of activities?
a.
b.
c.
d.

It should not be included.

It should be included as a decrease in unrestricted net assets.
It should be included as an increase in temporarily restricted net assets.
It should be reclassified from unrestricted net assets to temporarily restricted net assets,
depending on donor-imposed restrictions on the assets.
(8773)

3. Famous, a nongovernmental not-for-profit art museum, has elected not to capitalize its
permanent collections. In the previous year, a bronze statue was stolen. The statue was not
recovered and insurance proceeds of $35,000 ware paid to Famous in the current year. This
transaction would be reported in
I.
II.
a.
b.
c.
d.

The statement of activities as permanently restricted revenues.

The statement of cash flows as cash flows from investing activities.

I only
II only
Both I and II
Neither I nor II

(6812)

4. How should a nongovernmental, not-for-profit organization report donor-restricted cash

contributions for long-term purposes in its statement of cash flows?
a.
b.
c.
d.

Operating activity inflow

Investing activity inflow
Financing activity inflow
As a noncash transaction

(8605)

Nonprofit Accounting

5. A nongovernmental not-for-profit organization borrowed $5,000, which it used to purchase a

truck. In which section of the organizations statement of cash flows should the transaction
be reported?
a.
b.
c.
d.

In cash inflow and cash outflow from investing activities

In cash inflow and cash outflow from financing activities
In cash inflow from financing activities and cash outflow from investing activities
In cash inflow from operating activities and cash outflow from investing activities

(8112)

6. An unrestricted cash contribution should be reported in a nongovernmental not-for-profit

organizations statement of cash flows as an inflow from
a.

b.

Operating activities
Investing activities
c. Financial activities
d. Capital and related financing activities

(7746)

7. On December 30, Leigh Museum, a not-for-profit organization, received a $7,000,000

donation of Day Co., shares with donor stipulated requirements as follows:
Shares valued at $5,000,000 are to be sold with the proceeds used to erect a public
viewing building.
Shares valued at $2,000,000 are to be retained with the dividends used to support
current operations.
As a consequence of the receipt of the Day shares, how much should Leigh report as
temporarily restricted net assets on its statement of financial position?
a.
b.
c.
d.

$0
$2,000,000
$5,000,000
$7,000,000

(5475)

8. On January 2, the Baker Fund, a nongovernmental not-for-profit corporation, received a

$125,000 contribution restricted to youth activity programs. During the year, youth activities
generated revenues of $89,000 and had program expenses of $95,000. What amount should
Baker report as net assets released from restrictions for the year?
a.
b.
c.
d.

$0
$6,000
$95,000
$125,000

Nonprofit Accounting

9. The Turtle Society, a nongovernmental not-for-profit organization, receives numerous

contributed hours from volunteers during its busy season. Chris, a clerk at the local tax
collectors office, volunteered ten hours per week for 24 weeks transferring turtle food from
the port to the turtle shelter. His rate of pay at the tax office is $10 per hour, and the prevailing
wage rate for laborers is $6.50 per hour. What amount of contribution revenue should Turtle
Society record for this service?
a.

$0
b. $840
c. $1,560
d. $2,400

(8352)

10. Oz, a nongovernmental not-for-profit organization, received $50,000 from Ame Company to
sponsor a play given by Oz at the local theater. Oz gave Ame 25 tickets, which generally cost
$100 each. Ame received no other benefits. What amount of ticket sales revenue should Oz
record?
a.
b.
c.
d.

$0
$2,500
$47,500
$50,000

Cash 50,000

Ticket Rev
2,500
Contribution Rev 47,500

(7066)

11. Community Enhancers, a nongovernmental not-for-profit organization, received the following

pledges:
Unrestricted
Restricted for capital additions

$400,000
300,000

All pledges are legally enforceable. However, Communitys experience indicates that 5% of
all pledges prove to be uncollectible. What amount should Community report as pledges
receivable, net of any required allowance account?
a.
b.
c.
d.

$700,000
$665,000
$380,000
$285,000

Pledges Receivable 700,000

Allowance

35,000

Unrestricted Rev 380,000

Temp Rest Rev 285,000

(7747)

Nonprofit Accounting

12. Which of the following assets of a nongovernmental not-for-profit charitable organization

must be depreciated?
a.

b.

A freezer costing $150,000 for storing food for the soup kitchen
Building costs of $500,000 for construction in progress for senior citizen housing
c. Land valued at $1 million being used as the site of the new senior citizen home
d. A bulk purchase of $20,000 of linens for its nursing home

(8110)

13. Settam, a nongovernmental not-for-profit organization, received a donation of stock with

donor-stipulated requirements as follows:
Shares valued at $8,000,000 are to be sold with the proceeds used for renovation.
Shares valued at $2,000,000 are to be retained with the dividends used to support
current operations.
What amount should Settam include as unrestricted net assets as a result of this donation?
a.

b.

$0
$ 2,000,000
c. $ 8,000,000
d. $10,000,000

(8580)

14. Janna Association, a nongovernmental not-for-profit organization, received a cash gift with
the stipulation that the principal be held for at least 20 years. How should the cash gift be
recorded?
a.

b.

A temporarily restricted asset

A permanently restricted asset
c. An unrestricted asset
d. A temporary liability

(8113)

15. Hann School, a nongovernmental not-for-profit organization, spent $1 million of temporarily

restricted cash to acquire land and building. How should this be reported in the statement of
activities?
a.

b.

Increase in unrestricted net assets

Increase in temporarily restricted net assets
c. Increase in permanently restricted net assets
d. Decrease in permanently restricted net assets

(8578)

Nonprofit Accounting

HOSPITALS
A.

Required: FASB nonprofit model used for external reporting

B.

Optional: Funds used for internal reporting

All these funds are organized around one principle: is the money
or is it

unrestricted

restriction or is it a
1.

restricted
permanent restriction?
. If it is

, is it a

restricted
temporarily

Unrestricted Fund: General Fund (day-to-day operations)

a. Fixed assets and accumulated depreciation
b. Long-term debt
c. Board-designated assets (internally restricted money is technically unrestricted,
because the board can change their mind)
d. Agency activity (hospital acts as an agent)

unrestricted
permanent restricted

, temporarily

e. 3 Net Assets Positions:

and
2.

restricted,

Donor-Restricted Funds:
a. Specific Purpose Fund
(1)

Gifts / bequests / grants / donations temporarily restricted for operational

purposes

(2)

Net Asset Position:

temporary

b. Plant Replacement & Expansion Fund

(1)

Gifts / bequests / grants / donations temporarily restricted for capital

additions

(2)

Net Asset Position:

temporary

c. Endowment Funds
(1)

Pure or Permanent Endowment Funds

(2)

Term Endowment Funds

(3)

Net Asset Positions:

permanently

10

&

temporarily

Nonprofit Accounting

3.

Required Statements for External Reporting

a. Statement of Financial Position
b. Statement of Cash Flows (FASB format --- see page 5. A city hospital would
follow the GASB format.)

C.

Statement of Activities --- three revenue categories:

1.

Patient service revenue (Gross Patient Service Revenue less Charity Care equals
Patient Service Revenue less 3rd Party Contractual Adjustments equals Net Patient
Service Revenue)

2.

Other operating revenue

Educational programs
Cafeteria
Vending machines
Pay parking lot
Gift shop
Specific purpose grants
FMV of donated services
FMV of donated supplies (medicine, linens)
Gifts for charity care

3.

Nonoperating gains/losses
Unrestricted gifts, bequests
Gains/losses on sales of assets
Unrestricted endowment income
Unrestricted interest/dividend income

Independently answer multiple-choice questions 16 18.

11

Nonprofit Accounting

MULTIPLE-CHOICE QUESTIONS 16 - 18
16. Under Abbey Hospitals established rate structure, the hospital would have earned patient
service revenue of $6,000,000 for the year. However, Abbey did not expect to collect this
amount because of charity care of $1,000,000 and discounts of $500,000 to third-party
payors. How much should Abbey record as patient service revenue for the year?
a.
b.
c.
d.

$6,000,000
$5,500,000
$5,000,000
$4,500,000

6,000,000-1,000,000=5,000,000
(1422)

17. Hospital, Inc., a not-for-profit organization with no governmental affiliation, reported the
following in its accounts for the current year ended December 31:
Gross patient services revenue from all services provided at
the established billing rates of the hospital (note that this
figure includes charity care of $25,000)

$775,000

Provisions for bad debts

15,000

Difference between established billing rates and fees

negotiated with third-party payors (contractual adjustments)

70,000

What amount would the hospital report as net patient service revenue in its statement of
operations for the current year ended December 31?
a.

b.

$680,000
$690,000
c. $705,000
d. $735,000

(7790)

18. A not-for-profit hospital issued long-term tax exempt bonds for the hospitals benefit. The
hospital is responsible for the liability. Which fund may the hospital use to account for this
liability?
a.
b.
c.
d.

Enterprise
Specific purpose
General
General long-term debt account group

(4663)

12

Nonprofit Accounting

COLLEGES
A.

Required: FASB model used for external reporting

B.

Optional: Funds used for internal reporting

1.

Unrestricted Current Fund (current operations)

2.

Restricted Current Fund

3.

Agency Fund

4.

Loan Fund

5.

Annuity Income and/or Life Income Funds

6.

Endowment Funds
a. Pure (net assets permanently restricted)
b. Term (net assets temporarily restricted)
c. Quasi (board-designated assets; net assets unrestricted)

7.

Plant Funds:
a. Unexpended Plant (net assets temporarily restricted to capital additions)
b. Investment in Plant (net assets unrestricted)
c. Retirement of Indebtedness (net assets temporarily restricted to service debt)
d. Renewal & Replacement (net assets temporarily restricted for major repairs)

C.

Required Statements for External Reporting

1.

Statement of Financial Position

2.

Statement of Cash Flows (FASB format --- see page 5. State or city college would
follow GASB format.)

13

Nonprofit Accounting

3.

Statement of Activities
a. Tuition Waivers --- Expenditures, not revenue reductions:
(1)

Scholarships

(2)

Fellowships

(3)

Tuition Remissions (facultys children attend free)

b. Refunds --- Revenue reduction

c. Types of Expenses: 3 categories
(1)

Education & General (Faculty salaries, Research, Student Services,

Financial Aid)

(2)

Auxiliary Enterprise (Cafeteria, Bookstores, Athletic Programs)

(3)

Support: Management, General & Administrative, Fund Raising)

Independently answer multiple-choice questions 19 23.

14

Nonprofit Accounting

MULTIPLE-CHOICE QUESTIONS 19 - 23
19. During the year, Public College received the following:
An unrestricted $50,000 pledge to be paid the following year
A $25,000 cash gift restricted for scholarships
A notice that the college is named as a beneficiary of $10,000 in a recent graduates will
What amount of contribution revenue should Public College report in its statement of
activities?
a.
b.
c.
d.

$25,000
$35,000
$75,000
$85,000

(8077)

20. For the summer session, Unity University assessed its students $3,000,000 for tuition and
fees. However, the net amount realized was only $2,900,000 because of the following
reductions:
Tuition remissions granted to faculty members families
Class cancellation refunds

$30,000
70,000

How much unrestricted current funds revenues from tuition and fees should Unity report for
the period?
a.
b.
c.
d.

$2,900,000
$2,930,000
$2,970,000
$3,000,000

2,9000,000+30,000=2,930,000
(1406)

21. For the fall semester, Ames University assessed its students $3,000,000 for tuition and fees.
The net amount realized was only $2,500,000 because scholar-ships of $400,000 were
granted to students, and tuition remissions of $100,000 were allowed to faculty members
children attending Ames. What amount should Ames report for the period as unrestricted
current fund gross revenues from tuition and fees?
a.
b.
c.
d.

$2,500,000
$2,600,000
$2,900,000
$3,000,000

(4140)

15

Nonprofit Accounting

22. What describes a private nonprofit universitys internally designated asset , the income from
which will be used for a specified purpose?
a.
b.
c.
d.

Endowment
Term endowment
Quasi-endowment
Restricted

(9096)

23. A colleges plant funds group includes which of the following subgroups?
I.
II.
III.

Renewals and replacement funds

Retirement of indebtedness funds
Restricted current funds

a.

b.

I and II
I and III
c. II and III
d. I only

(2102)

Notes:

16

Nonprofit Accounting

VOLUNTARY HEALTH & WELFARE

ORGANIZATIONS
A.

Required FASB model used for external reporting

B.

Optional: Funds used for internal reporting

1.

Unrestricted Current Fund

2.

Restricted Current Fund

3.

Plant or Land, Building & Fixed Asset Fund

4.

Custodian Fund (identical to an Agency Fund)

5.

Loan Fund

6.

Annuity Income and/or Life Income Funds

7.

Endowment Funds:
a. Pure (net assets permanently restricted)
b. Term (net assets temporarily restricted)
c. Quasi (board-designated assets; net assets unrestricted)

C.

Required Statement for External Reporting

1.

Statement of Financial Position

2.

Statement of Cash Flows (FASB format --- see page 5)

3.

Statement of Activities
a. Revenue
(1)

Program Revenue

(2)

Membership Dues

(3)

Fees for Services

(4)

Interest and Dividend Income

b. Support (Public): contributions, gifts, pledges, bequests, and special events

17

Nonprofit Accounting

4.

Statement of Functional Expenses

a. Program Expenses (to meet your mission)
(1)

Research

(2)

Education

(3)

Health

b. Support Expenses
(1)

Fund Raising

(2)

Management

(3)

General & Administrative

Notes:

Independently answer multiple-choice questions 24 27.

18

Nonprofit Accounting

MULTIPLE-CHOICE QUESTIONS 24 - 27
24. A non-for-profit voluntary health and welfare organization should report a contribution for the
construction of a new building as cash flows from which of the following in the statement of
cash flows?
a.
b.
c.
d.

Operating activities
Financing activities
Capital financing activities
Investing activities

(7767)

25. A voluntary health and welfare organization received a cash donation in 2001 from a donor
specifying that the amount donated be used in 2003. The cash donation should be
accounted for as
a.

Revenue in 2001
b. Revenue in 2001, and 2002,and 2003, and as a deferred credit in the balance sheet at
the end of 2001 and 2002
c. Revenue in 2003, and no deferred credit in the balance sheet at the end of 2001 and
2002
d. Revenue in 2003, and as a deferred credit in the balance sheet at the end of 2001 and
2002
(4602)

26. A labor union had the following expenses:

Labor negotiations
Fund-raising
Membership development
Administrative and general

$500,000
100,000
50,000
200,000

In the statement of activity, what amount should be reported under the classification of
program services?
a.
b.
c.
d.

$850,000
$600,000
$550,000
$500,000

(1362)

19

Nonprofit Accounting

27. During the current year, a voluntary health and welfare organization receives $300,000 in
unrestricted pledges. Of this amount, $100,000 has been designated by donors for use next
year to support operations. If 15% of the unrestricted pledges are expected to be
uncollectible, what amount of unrestricted support should the organization recognize in its
current-year financial statement?
a.
b.
c.
d.

$300,000
$270,000
$200,000
$170,000

Notes:

20

Nonprofit Accounting

NONPROFIT AS TRUSTEE
A.

Application
Donor transfers assets to nonprofit organization as trustee for beneficiary; nonprofit is
middleman holding the money temporarily until it goes to the beneficiary.

B.

Treatment
Nonprofit organization treats such assets as:
1.

Refundable advance --- if ANY of the four following conditions are met:
a. Donor retains right to direct the assets
b. Donor controls the nonprofit / recipient
c. Donor may revoke donation / gift
d. Donor specifies itself or affiliate as beneficiary, and it is not an equity transaction
Cash

3,000

Liability

3,000

To record donated assets and related liability.

2.

Contribution / Support / Revenue --- it is NOT refundable, and EITHER:

a. Nonprofit has variance power (right to redirect assets to another beneficiary) OR
b. Nonprofit & beneficiary are financially interrelated
Cash

3,000

Revenue

To record assets donated as contributions / support.

21

3,000

Nonprofit Accounting

3.

Equity transaction --- ALL of the following three conditions are met:
a. Donor specifies itself or affiliate as beneficiary; AND
b. Donor & nonprofit are financially interrelated; AND
c. Its not refundable.
Cash

3,000

Net Assets

3,000

Notes:

Independently answer multiple-choice questions 28 30.

22

Nonprofit Accounting

MULTIPLE-CHOICE QUESTIONS 28 - 30
28. Arkin Corp. is a nongovernmental non-for-profit organization involved in research. Arkins
statement of functional expenses should classify which of the following as support services?
a.
b.
c.
d.

Salaries of staff researchers involved in research

Salaries of fundraisers for funds used in research
Costs of equipment involved in research
Costs of laboratory supplies used in research

(8775)

29. During the current year, Mill Foundation, a nongovernment non-for profit organization,
received $100,000 in unrestricted contributions from the general public. Mills board of
directors stipulated that $75,000 of these contributions would be used to create an
endowment. At the end of the current year, how should Mill report the $75,000 in the net
assets section of the statement of financial position?
a.
b.
c.
d.

Permanently restricted
Unrestricted
Temporarily restricted
Donor restricted

(7762)

30. Gridiron University is a private university. A successful alumnus has recently donated
$1,000,000 to Gridiron for the purpose of funding a center for the study of sports ethics.
This donation is conditional upon the university raising matching funds within the next 12
months. The university administrators estimate that they have a 50% chance of raising the
additional money. How should this donation be accounted for?
a.
b.
c.
d.

As a temporarily restricted support

As unrestricted support
As a refundable advance
As a memorandum entry reported in the footnotes

23

(8787)

Nonprofit Accounting

SIMULATION QUESTIONS
SIMULATION: Nonprofit Promise Transactions
Community Service, Inc. is a nongovernment not-for-profit voluntary health and welfare calendar-year
organization that began operations on January 1, year 1. It performs voluntary services and derives its
revenue primarily from voluntary contributions from the general public. Community implies a time
restriction on all promises to contribute cash in future periods. However, no such policy exists with respect
to gifts of long-lived assets.
Items 1 through 4 are based on the following selected transactions that occurred during Communitys
year 2 calendar year:

Unrestricted written promises to contribute cash --- year 1 and year 2

$22,000 3
95,000
28,000 1, 4

--- Year 1 promises (collected in year 2)

--- Year 2 promises (collected in year 2)
--- Year 2 promises (uncollected)

Written promises to contribute cash restricted to use for community college scholarships
(year 1 and year 2)
10,000 2
20,000 2
12,000 1, 4

--- Year 1 promises (collected and expended in year 2)

--- Year 2 promises (collected and expended in year 2)
--- Year 2 promises (uncollected)

Written promises to contribute $25,000 if matching funds are raised for the capital
campaign during year 2
--- Cash received in year 2 from contributor as a good faith advance
--- Matching funds received in year 2

25,000
0

Cash amount of $37,000 received in year 1 with donors only stipulation that a bus
be purchased
37,000 2

--- Expenditure of full amount of donation July 1, year 2

Items 1 through 4 represent the year 2 amounts that Community reported for selected financial
statement elements in its December 31, year 2, statement of financial position and year 2 statement of
activities. For each item, indicate whether the amount was Overstated, Understated, or Correctly stated.
Item

Choice

1.

Community reported $28,000 as contributions receivable.

28,000+12,000

Understated

2.

Community reported $37,000 as net assets released from restrictions

(satisfaction of use restrictions). 10,000+20,000+37,000

Understated

3.

Community reported $22,000 as net assets released from restrictions

(due to the lapse of time restrictions).

Correct

4.

Community reported $97,000 as contributions --- temporarily restricted.

Overstated
(6656)

4. 28,000+12,000=40,000

24

Nonprofit Accounting

SIMULATION: Nonprofit Statement of Activities

Area Help, Inc. is a nongovernmental not-for-profit voluntary health and welfare calendar-year
organization that began operations on January 1, year 1. It performs voluntary services and derives its
revenue primarily from voluntary contributions from the general public. Area Help implies a time restriction
on all promises to contribute cash in future periods. However, no such policy exists with respect to gifts of
long-lived assets.
Items 1 through 7 are based on the following selected transactions that occurred during Area Helps year
2 calendar year:

Debt security endowment received in year 2 income to be used for community service
--- Face value
$90,000
--- Fair value at time of receipt
88,000 1, 3
--- Fair value at December 31, year 2
87,000 3
--- Interest earned in year 2
9,000 3

10 concerned citizens volunteered to serve meals to the homeless

--- 400 hrs. free; fair market value of services $5 per hr.

2,000

Short-term investment in equity securities in year 2

--- Cost
--- Fair value December 31, year 2
--- Dividend income

10,000
12,000
1,000

Music festival to raise funds for a local hospital

--- Admission fees
--- Sales of food and drinks
--- Expenses

5,000
14,000
4,000

Reading Material donated to Area Help and distributed to the children in year 2
--- Fair market value

Federal youth training fee for service grant

--- Cash received during year 2
--- Instructor salaries paid

30,000
26,000 4

Other cash operating expenses

--- Business manager salary
--- General bookkeeper salary
--- Director of community activities salary
--- Space rental (75% for community activities, 25% for office activities)
--- Printing and mailing costs for pledge cards

60,000
40,000
50,000 4
20,000 4
2,000 5

Short-term bank loan in year 2

--- Interest payment in year 2
--- Principal payment in year 2

1,000
20,000

8,000 4

For Items 1 through 7, enter the appropriate amount for each of the following financial statement
elements in the year 2 statement of activities. Round all amounts to the nearest whole dollar.
1.
2.
3.
4.
5.
6.
7.

Item
Contributions --- permanently restricted Fair value at time of receipt
Revenues --- fees
Admission fee
Investment income --- debt securities 9,000-(88,000-87,000)=8,000
Program expenses 8,000+26,000+50,000+20,000x75%=99,000
General fundraising expenses (excludes special events) Printing & mailing
Income on long-term investments --- unrestricted
Contributed voluntary services

Amounts

88,000
5,000
8,000
99,000
2,000
0
0

(6674)

25