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Accounting for Governmental and Nonprofit Entities

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ACC591 GNFP Spring Term, 2013 Prof Orpurt Homework #3 Due: Friday April 19 by 5pm. I prefer that you drop off a printed or NEATLY written paper version of your homework.

Question 1: 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 the signed agreement with the donor, the museum should: A. Record a debit to Contributions Receivable-Temporarily Restricted in the amount of $1,000,000. B. Record a debit to Contributions Receivable-Temporarily Restricted in the amount of $500,000. C. Not make a journal entry until the conditions of the agreement have been met. D. Either A. or C. are permissible, depending on the museum’s established policy. Question 2: Sharon Helper, a local CPA, volunteered her time to develop a new computerized accounting system for an after-school development program for disadvantaged children. If Sharon had not volunteered her time, it would have been necessary for the organization to hire an accountant for this project. The value of Sharon’s time devoted to this project should be recorded as: A. Contributed revenue. B. A supporting services expense. C. Neither A. nor B. are correct. D. Both A. and B. are correct. Question 3: A nongovernmental not-for-profit animal shelter receives contributed services from the following individuals valued at their normal billing rates: Veterinarian provides volunteer animal care $8,000 Board members with accounting expertise volunteer to prepare books for audit 4,500 Registered nurse volunteers as receptionist 3,000 Teacher provides volunteer dog walking 2,000 What amount should the shelter record as contribution revenue? A. $12,500 B. $8,000 C. $11,000 D. $14,500

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Question 4: 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 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: A. Special event revenue of $4,800 and special event expense of $1,500. B. Special event revenue of $4,800 and fund raising expense of $1,300. C. Special event revenue of $2,300 and fund raising expense of $1,300. D. Both A. and B. are correct. Question 5: 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: A. Purpose, mission-related, and benefit to the public. B. Purpose, audience and content. C. Purpose, expand donor base, and content. D. Reasonable, improve financial condition, and benefit to the public. Question 6: Funds received from an external donor that are to be retained and invested, with the related earnings restricted to the purchase of library books, would be accounted for as an increase to: A. Temporarily restricted net assets in a private university. B. Nonexpendable, restricted net position in a public university. C. Unrestricted net assets/position in either a public or private university. D. Permanently restricted net position in a public university. Question 7: 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. As a temporarily restricted support. B. As a refundable advance. C. As a memorandum entry reported in the footnotes. D. As unrestricted support.

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Question 8: A private not-for-profit college has both regular and term endowments. On the college’s statement of financial position, how should the net assets of each type of endowment be reported? Term Endowments Regular Endowments A. Temporarily restricted Permanently restricted B. Permanently restricted Permanently restricted C. Unrestricted Temporarily restricted D. Temporarily restricted Temporarily restricted

Question 9: Assuming that an agency’s unused appropriations expire at year-end but appropriations continue in effect for obligated amounts (purchase orders, etc.), which of the following budgetary accounts would likely be found in the agency’s post-closing trial balance at year-end? A. Commitments and Other Appropriations Realized. B. Undelivered Orders and Other Appropriations Realized. C. Expended Authority and Undelivered Orders. D. Commitments and Undelivered Orders. Question 10: Which of the following is NOT a true statement about the difference between accounting and reporting for federal government agencies versus state and local governments? A. The federal government uses a dual-track method of accounting for proprietary accounts and budgetary accounts; state and local governments also use budgetary accounting. B. State and local governments use accrual accounting in the government-wide statements as well as proprietary and fiduciary funds; federal agencies use only the cash basis of accounting. C. The budget is recorded in the general ledger of a state or local government and a federal agency. D. State and local governments do not account for apportionments and most do not account for allotments.

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Question 11 Indicate whether each of the following donated services situations would require a journal entry for contribution revenue and a related expense or asset by circling Yes or No. Yes No 1. Volunteers worked as sales assistants in a not-for-profit hospital snack shop. Yes No 2. An architect provided pro bono design services for the planned remodeling of a local museum. Yes No 3. A member of a not-for-profit organization volunteered to repaint the organization’s activities room to make it more attractive. Leaders of the organization had not planned to repaint the room. Yes No 4. Several local persons used their cars to deliver meals to senior citizens for Meals on Wheels. Yes No 5. A psychiatrist volunteered several hours each week at a not-for-profit counseling center to assist persons with alcohol and drug addiction. Yes No 6. A local CPA firm performed the regular annual financial statement audit for the university’s chapter of Beta Alpha Psi. Yes No 7. A local pastor donated several hours weekly to the local food bank run by an NFP. Yes No 8. A registered dietitian donates several hours each summer providing dietary instruction to children with diabetes who are attending a camp sponsored by the local chapter of the American Diabetes Association.

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