Roger Chapters 24-25 Flashcards
Not for profit accounting, business consolidations and combinations
What is the journal entry you need to do for a consolidation?
*Common stock
*APIC
*Retained earnings
*Assets (at FMV)
*Goodwill
*Investment
*Gain
When can services be included on the statement of activities?
Can be included if they are a professional service that is essential and the not for profit would have paid for them otherwise (ex: accounting)
How do you account for acquirer and acquiree in the year of acquisition?
Acquirer: Book income for the whole year
Acquiree: Book income from the date of acquisition (prospective)
What is the equation to figure out non-controlling interest?
Market share price x # shares held by non-controlling interest
What are the four financial statements required for a not for profit hospital?
- Statement of financial position (balance sheet)
- Statement of changes in net assets (or equity)
- Statement of cash flows
- Statement of operations (activities)
How do you record a contribution if you are an “agent?”
*Cash
*Refundable advance (liability)
What types of transactions are included in the financing section on a statement of cash flows for a not for profit?
Proceeds from DONOR RESTRICTED contribution (ex: endowment fund, any contribution with restrictions that will not lapse)
Money restricted for a long term purpose (Ex: payment on bonds, note payable, money restricted for endowment, PP&E)
Any long term contribution
What is an unconditional pledge and how is it accounted for?
It is a unconditional promise to give.
Can be accrued in the period which it was made, but required an allowance of doubtful accounts to offset. Record at present value.
What are the journal entries for when a not for profit receives an endowment and it then earns interest?
When we received the endowment
*cash
*revenues - donor restricted
When we earn interest income
*cash
*revenues - NOT donor restricted
What are supporting activities?
Activities secondary to the mission. Includes:
Membership development (costs associated with members)
Fundraising (printing and mailing pledge cards, maintaining donor list)
Management and General (marketing, tax prep, budgeting)
What are program activities?
Activities that further the mission of the not for profit
What are the steps to eliminating an intercompany issuance of bonds?
- Eliminate the bond payable and associated discount or premium
- Eliminate the investment on the buyer’s books
What is the special rule for art, artifacts, and antiques for a not for profit?
A not for profit can exclued the asset from the financial statements if;
- The asset is displayed or used for research purpose AND
- It is cared for by the not for profit AND
- When it is sold the money is reinvested in collectibles
What is the journal entry for when a not for profit receives a contribution with donor restriction?
*cash
*revenues - donor restricted
What are the steps to eliminating an intercompany sale of PP&E?
- Reverse the sale on the seller’s side
- Reverse the sale on the buyer’s side
- Reverse any excess depreciation that was taken while the asset was on the buyer’s books
How do you get the end number on a statement of operations for a hospital and what does each category include?
Patient service revenue (gross amount)
- Provisions for implicit price concessions and contractual adjustments (medicare, employee discounts)
Net patient service revenues
+ Other operating revenues (donated medical supplies, restricted grants, nonmedical revenue like gift shop)
- Operating expenses (credit losses, drugs, doctor salaries, etc)
Results from operations
+ Nonoperating revenues (donated services, unrestricted donations and grants, etc)
Excess of revenues/gains over expenses/losses (performance indicator)
What types of transactions are included in the investing section on a statement of cash flows for a not for profit?
Investments acquired/sold
PP&E acquired/disposed of
What is the calculation to get the end number of a statement of activities?
Public support (donations, grants)
+ Revenues (earned money like membership dues and investment income)
- Program expenses
- Support services
Excess of revenue over expenses
What type of transactions are included in the operating section on a statement of cash flows for a not for profit?
Revenues collected (both with or without a donor restriction)
Expenses paid
Divident income
Interest income/expense
What is included on the statement of activities for a not for profit?
Revenues, gains, other support (ex: contributions, investment income)
What is an conditional pledge and how is it accounted for?
Conditional promise to give.
Book as a liability until you meet the condition. Once the condition is met you can book it as revenue.
What is the criteria to deem a service “essential” to a not for profit?
- It creates or enhances a non-financial asset
- The service requires a specialized skill
What is the equation to figure out goodwill or gain on bargain purchase?
FV consolidation
+ FV previously held in acquiree
+ FV non-controlling interest
- FV net identifiable assets for the acquiree
Goodwil or gain on bargain purchase
What are the three basic financial statements for not for profit accounting?
Statement of financial position
Statement of activities
Statement of cash flows
What are the steps when applying the acquisition method?
- Identify acquirer
- Determine acquisition date
- Recognize and measure identifiable assets , liabilities, and non-controlling interest in acquireee (measure generally at FMV)
- Recognize goodwill/gain from bargain purchase
How do you account for costs associated with a consolidation?
Expense as incurred unless you are issuing common stock. If you are issuing common stock then it is a REDUCTION in APIC
What is and isn’t considered revenue for colleges and universities?
Tuition remissions and scholarships are considered revenues
Tuition refunds are NOT considered revenues
How are expenses categorized on a statements of activities for a not for profit?
All expenses are categorized as without donor restriction
What is the journal entry for when a not for profit receives a contribution without a donor restriction?
*Cash
*revenue - no donor restriction
What are the steps to eliminating an intercompany inventory sale?
- Eliminate the sales revenue received on the seller’s side
- Remove the % of profit that remains in ending inventory (% profit x ending inventory)
- Plug cost of goods sold
What are the two criteria used to determine if a contribution is conditional?
- There is a barrier that must be overcome AND
- Donor has the right to the return of the assets or a right to be released from the obligation to transfer the assets
What are the two categories on a not for profit’s statements of financial position?
Without donor restriction - can be used for whatever purpose
With donor restriction - can only be used for what a donor specifically wants
What is the journal entry for property that is a “passthrough” for the charity?
*Expense
*Revenue - not donor restricted
