Homework answers / question archive / Chapter 13 – Homework   Which of the following organizations would be considered a non-governmental not-for-profit organization?   An organization that provides shelter for men who have been victims of domestic violence, and has been designated as a not-for-profit organization by the IRS

Chapter 13 – Homework   Which of the following organizations would be considered a non-governmental not-for-profit organization?   An organization that provides shelter for men who have been victims of domestic violence, and has been designated as a not-for-profit organization by the IRS

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Chapter 13 – Homework

 

1. Which of the following organizations would be considered a non-governmental not-for-profit organization?

 

1. An organization that provides shelter for men who have been victims of domestic violence, and has been designated as a not-for-profit organization by the IRS. The board of trustees is composed of county commissioners, but in the case of the dissolution of the organization, any remaining funds would be donated to the United Way. Funding for the organization comes entirely from contributions.
2. An organization that provides services to persons who wish to learn English as their second language. The organization is incorporated, and is funded by fees charged to the learners. All profits are reinvested in the organization to provide further services. The organization has applied for not-for-profit status with the IRS.
3. An organization classified by the IRS as a not-for-profit organization which employs individuals with disabilities in a workshop where the workers make custom stationery out of recycled goods. The organization receives cash and in-kind contributions as well as the proceeds from the sale of the stationery. The organization’s board is composed of local business men and women.
4. An organization which provides fund-raising services for other not-for-profit organizations. The organization is funded by fees for its services, and was incorporated by the former chairperson of the local United Way organization. The organization distributes 40% of its profits to local charities.

 

 

2. According to GAAP, all not-for-profit organizations are required to prepare

 

1. A statement of activities, a statement of functional expense, and a statement of cash flows prepared using accrual accounting.
2. A statement of activities, a balance sheet, and a statement of cash flows prepared using accrual accounting.
3. A statement of financial position, a statement of activities, a statement of cash flows and a statement of functional expenses prepared using accrual accounting.
4. A statement of cash flows, a statement of activities, and a statement of financial position prepared using either cash basis or accrual basis accounting.

 

 

3. Jane’s Planes is an organization that provides air transportation for critically ill children. A friend of Jane’s Planes, Richard Bucks donated a plane to be used over its remaining life solely for transportation of critically ill children. In addition, he donated a substantial amount of investments that were to be used strictly to generate income to help fund the organization’s expenses. These donations would be included in the organization’s net assets as:

 

 

Plane                                                   Investments

1. Permanently restricted                        Permanently restricted
2. Temporarily restricted                         Permanently restricted
3. Permanently restricted                        Temporarily restricted
4. Temporarily restricted                         Temporarily restricted

 

 

4. In a local NFP elementary school’s statement of cash flows, a contribution restricted for use on a new building project would be reported as:

 

1. A financing activity
2. A capital & related financing activity
3. An investing activity
4. An operating activity

 

 

5. A wealthy donor promised $1 million to the local art museum to expand the size of its building, contingent on the museum obtaining a grant from the State Endowment for the Arts of at least $500,000. Upon completing a signed agreement with the donor, the museum should:

 

1. Record a debit to Contributions Receivable—Temporarily Restricted in the amount of $1,000,000.
2. Record a debit to Contributions Receivable—Temporarily Restricted in the amount of $500,000.
3. Not make a journal entry until the conditions of the agreement have been met.
4. Either Record a debit to Contributions Receivable—Temporarily Restricted in the amount of $1,000,000 or Not make a journal entry until the conditions of the agreement have been met are permissible, depending on the museum’s established policy.

 

 

6. Orlando Perez, president of a local information systems company, volunteered his time to help develop software for Best Friends, a local no-kill pet shelter. The software will allow the organization to track intake, placement, and statistics of animals in their three locations. Without Mr. Perez’s assistance, Best Friends would have needed to hire someone to develop this software. Best Friends should record the value of Mr. Perez’s time as:

 

1. Program revenue and supporting services expense.
2. Contribution revenue and supporting services expense.
3. Program revenue and program expense.
4. Contribution revenue and a program expense.

 

 

7. The Maryville Cultural Center recently conducted a successful talent show in which local talent performed for a nominal prize. The talent show is an ongoing major event and is central to the center’s mission. The event raised $4,800 in gross revenue. Expenses related to the event included $1,000 to rent an auditorium, $1,200 to advertise the event, $500 for trophies and other awards for the winner and the runners up, and $100 for printing and mailing tickets. The center believes there was no monetary value received by donors (attendees). To report this event in its statement of activities, the center will report:

 

1. Special event revenue of $4,800 and special event expense of $1,500.
2. Special event revenue of $4,800 and fund-raising expense of $1,300.
3. Special event revenue of $2,300 and fund-raising expense of $1,300.
4. Special event revenue of $4,800, special event expense of $1,500 and fund-raising expense of $1,300.

 

 

8. Many not-for-profit organizations attempt to classify fund-raising expenses as program services expenses by making the activities look educational in nature or advocating for the mission of the organization. For such expenses to be reported as program services expenses, they must meet which of the following three criteria:

 

1. Purpose, mission-related, and benefit to the public.
2. Purpose, audience, and content.
3. Purpose, expand donor base, and content.
4. Reasonable, improve financial condition, and benefit to the public.

 

 

9. Save Our Beaches, a NFP organization, prepared and distributed a tri-fold flyer to individuals and families at White Sands Beach, a popular beach for both residents and tourists. The flyer provided information about beach pollution and invited the public to participate in the organization’s semi-annual beach cleanup. In addition, one segment of the flyer solicited contributions to the organization to help fund its activities. The cost of the flyer and its distribution would be considered:

 

1. A fund-raising cost.
2. A program cost.
3. Both a fund-raising and program cost
4. A management and general expense

 

10. A particular organization functions as an intermediary between donors and other beneficiary organizations. The intermediary organization must report contribution revenue from donors if:

 

1. The organization has variance power.
2. The organization elects to consistently report such donor gifts as contribution revenue.
3. The beneficiary organization requests a delay in receiving the contribution from the intermediary organization.
4. All of the above are correct.

 

11.  For each of the independent transactions listed in the left-hand column below, indicate which of the revenue or contribution classifications apply by choosing one or more of the letters from the listed items in the right-hand column.

 

Revenue and contribution classifications

1. Revenue
2. Contributions – unrestricted
3. Contributions – temporarily restricted
4. Contributions – permanently restricted
5. None of the above

 

1. A museum gift shop sold prints of famous paintings

 

__a.     ___b.   ___c.   ___d.   ___e.

 

2. At the end of the year a donor agreed to contribute $400,000 to a local artists fund if the museum raised a matching amount in the first quarter of the upcoming year.

 

___a.   ___b.   ___c.   ___d.   __e.

 

3. A registered nurse volunteered 10 hours a week to a local agency for disabled persons.

 

___a.   __b.     ___c.   ___d.   ___e.

 

4. A donor contributed $1 million to a not-for-profit hospital for a new clinic

 

___a.   ___b.   _c.       ___d.   ___e.

 

5. An NFP art association hosted its annual art exhibition for the association’s major contributors

 

___a.   ___b.   ___c.   ___d.   __e.

 

6. A donor contributed securities valued at $10 million to be permanently invested.  Earnings thereon are stipulated by the donor to be used for eye research.

 

___a.   ___b.   __c.     __d.     ___e.

 

7. A local computer store donated computers for children’s use at an NFP hands-on children’s museum.

___a.   _b.       ___c.   ___d.   ___e.

 

 

8. A local PTA received cash contributions of $2,000 to be used for its operating activities

 

___a.   __b.     ___c.   ___d.   ___e.

 

 

12. The Shannon Community Kitchen provides hot meals to homeless and low-income individuals and families; it is the organization’s only program. It is the policy of the community kitchen to use temporarily restricted resources for which the purpose has been met before unrestricted resources. The Kitchen had the following revenue and expense transactions during the 2017 fiscal year.

 

1. Unrestricted cash donations of $25,000 were received. A local philanthropist also contributed $3,000, which was to be used for the purchase of Thanksgiving dinner foodstuffs.

 

2. A local grocery store provided fresh produce with a fair value of $100. The produce was immediately used.

 

3. Volunteers from the local university contributed 100 hours to preparation and serving of meals. The estimated fair value of their labor was $750.

 

4. The Kitchen received a $5,000 federal grant for the purchase of institutional kitchen appliances.

 

5. At Thanksgiving time, the Kitchen spent $4,100 on foodstuffs for preparation of the Thanksgiving dinner.

 

 

6. Record the release of net assets from temporarily restricted account to unrestricted account.

 

13. INVOLVE was incorporated as a not-for-profit voluntary health and welfare organization on January 1, 2017. During the fiscal year ended December 31, 2017, the following transactions occurred.

 

1. A business donated rent-free office space to the organization that would normally rent for $35,000 a year.

 

2. A fund drive raised $185,000 in cash and $100,000 in pledges that will be paid within one year. A state government grant of $150,000 was received for program operating cost related to public health education.

 

3. Salaries and fringe benefits paid during the year amounted to $208,560. At year-end, an additional $16,000 of salaries and fringe benefits were accrued.

 

 

4. A donor pledged $100,000 for construction of a new building, payable over five fiscal years, commencing in 2019. The discounted value of the pledge is expected to be $94,260.

 

5. Office equipment was purchased for $12,000. The useful life of the equipment is estimated to be five years. Office furniture with a fair value of $9,600 was donated by a local office supply company. The furniture has an estimated useful life of 10 years. Furniture and equipment are considered unrestricted net assets by INVOLVE.

 

6. Telephone expense for the year was $5,200, printing and postage expense was $12,000 for the year, utilities for the year were $8,300 and supplies expense was $4,300 for the year. At year-end, an immaterial amount of supplies remained on hand and the balance in accounts payable was $3,600.

 

 

7. Volunteers contributed $15,000 of time to help with answering the phones, mailing materials, and various other clerical activities.

 

8. It is estimated that 90 percent of the pledges made for the 2018 year will be collected. Depreciation expense is recorded for the full year on the assets recorded in item 5.

 

 

9. Salaries and wages, and other expenses (except for the provision for uncollectible accounts which is allocated 100 percent to fund-raising) were allocated to program services and support services in the following percentages: public health education, 35 percent; community service, 30 percent; management and general, 20 percent; and fund-raising, 15 percent.
10. Net assets were released to reflect satisfaction of state grant requirements that the grant resources be used for public health education program purposes.

 

11. Record the closure of all nominal accounts at year end.

 

Contributions-unrestricted                  229,600

Unrestricted net assets                                    73,120

            Public health education                       102,452

            Community service                             87,816

            Management & general                       58,544

            Fund-raising                                        53,908

 

• Record the transfer of contributions to temporarily restricted net assets account.

 

• Record the transfer to the temporarily restricted account

 

• Record the transfer to the unrestricted accounts.

 

14. Prepare a statement of activities for the year ended December 31, 2017

 

 

15. Prepare a statement of financial position for the year ended December 31, 2017.
16. Prepare a statement of cash flows for the year ended December 31, 2017.

 

17. Prepare a statement of functional expenses for the year ended December 31, 2017.