Chapter 12-1 Problems

What is the term for Endowment as a gift?

The principal which is available for expenditure after a specific period of time.

NFP org maintains an endowment of $1,000,000 income to be used in research for substance abuse. The endowment had income of $60,000 to be expensed in accordance with the donor’s requests. The expenses reported would be

A decrease in net assets without donor restrictions

Private Think Tank receieves a gift of $100,000 that must be used to fund a symposium on federal accounting. Once this place condusts it, what should be debited and restricted by donor fund?

Net assets released from restriction.

Statement of cash flows of a NFP should be divided into which of the categories?

Operating, financing, and investment activities (OFI!)

TSL, NFP agency, redeems $100,000 bond held as an investment of resources without donor restrictions. Also received a $6,000 interest payment. What is the entry in the cash flows?

$100,000 as a cash flow from investing activities

$6,000 as a cash flow from operating activities

EnRix corp gives an NFP $500,00 to research a new type of battery. Terms of the gift include EnRix owns the rights to any patents issued as a consequence of research and EnRix controlls when and where research results are published. At the time of the receipt, what should be recongized?

Deferred Revenue of $500,000 not restricted by donor

Harley Safe Place, NFP, receieves pledge from donor without restriction of $600,000. Donor promises to make payments in 6 months, near the end fiscal year. What entry at the time of pledge?>

Revenue of $600,000 in fund restricted by donors

Walden Inst., a political NFP, was promised a $1 million endowment on condition that established a program in entrepreneurial studies and hire a leading scholar to lead it. Upon receiving the pledge, the institute should recognize

0 Revenue.

Emerson Museum receives a cash gift of $7,000,000. Board of Trustees decides the gift should be used to establish a permanent endowment, the income from which would be used to provide research grants to Impressionist art historians. Museums should report the gift as an increase in

Resources without donor restriction

The Fellowship Church of America issues $10,000,000 in bonds, the proceeds of which must be used to construct new facilities. Included in the bond indenture is a provision that the church must maintain $400,000 in a specially designated bank account to ensure timely payment of principal and interest.

Upon receiving the $10 million in bond proceeds and placing the $400,000 in a designated bank account, the church should report

Cash of $100,000 in a fund without donor restrictions

All costs of activities that have a fundraising component must be classified as fundraising costs unless it can be demonstrated that they satisfy the criteria in dealing with all the following except

Fiscal viability

In allocating joint costs between fundraising and other activities, a not-for-profit could use all the following methods except

Straight-line

A local chapter of the Society for Protection of the Environment benefited from the voluntary services of two attorneys. One served as a member of society's board of directors, performing tasks comparable to other directors. During the year, he attended 20 hours of meetings. The other drew up a lease agreement with a tenant in a building owned by the society. She spent five hours on the project. The billing rate of both attorneys is $200 per hour. The year in which the service is provided, the society should recognize revenues of contributed services

$1,000

the Museum of Contemporary Art received two valuable paintings. The museum has determined that one with a market value of $7,000 is inappropriate for display and therefore will be sold and the proceeds will be used to acquire another painting that can be displayed. The other with a market value of $10,000 will be placed on exhibit. The museum has a policy of not capitalizing works of art unless required to do so. In the year that it received the two paintings, it should recognize contribution revenues of

$7,000

the United Way of Leno County distributes all contributions to not-for-profit organizations within the area it serves. Donors have a choice. They can either designate the organization to which their contributions will be given or permit the United Way to distribute the contributions as it deems appropriate. During the current year, the United Way received $1 million of specifically designated contributions and $6 million of undesignated contributions. It should recognize contribution revenues of

$6,000,000, and a $1,000,000 liability for specifically designated contributions

variance power refers to the ability

of a charitable organization to unilaterally decide to direct the use of donated assets to a beneficiary other than that specified by the donor.

the Association for Educational Enrichment receives a contribution of $400,000 that must be used for student scholarships. Prior to granting any scholarships, the Association invests the funds received in marketable securities. During the year, the securities pay dividends of $10,000 and an increase in market value to $440,000. The Association should report as an

Ample investment earning without donor restrictions of $50,000

Carter Research Center, a not-for-profit entity, acquired $50,000 of laboratory instruments with funds that were donated and restricted for the purchase of equipment. Instruments have a useful life of five years and no salvage value. During each of the five years of the instruments' useful life, the Center should recognize depreciation expense of

$10,000 in fund not restricted by donors

Respect to the statement of cash flows

GASB, but not the FASB - requires entities to use the direct method

Friends of the Opera, a financially interrelated fundraising support group for the City Opera Company receives $100,000 in donations, all of which will eventually be transferred to the City Opera Company. When Friends of the Opera receive the gift

Recognize revenue of $100,000

at the start of the year the Permanent Endowment Fund of the State Performing Arts Festival Association reported net assets of one million dollars. During the year it earned $400,000 in interest and dividends, but its investments lost $60,000 in market value. The Association spent the entire $40,000 of interest and dividends. At the year end, the Permanent Endowment Fund should report net assets of

$940,000 (1m minus the $60,000 drop)

Mountain Research Institute began the year with net assets in its Permanent Endowment Fund of one million dollars. During the year it earned $70,000 and the market value investments increased by 20,000. However, the Institute's policy, decided on by its Board of Directors, is meant earning to be spent only to the extent that they exceed an amount necessary to cover inflation. Inflation rate for the year was 3%. During the year the Institute spent none of the $70,000. At year end, the Permanent Endowment Fund should report net assets of

$1,090,000