Roger Chapters 24-25

Question 1

What is the journal entry you need to do for a consolidation?

Answer 1

*Common stock

*APIC

*Retained earnings

*Assets (at FMV)

*Goodwill

*Investment

*Gain

Question 2

When can services be included on the statement of activities?

Answer 2

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)

Question 3

How do you account for acquirer and acquiree in the year of acquisition?

Answer 3

Acquirer: Book income for the whole year

Acquiree: Book income from the date of acquisition (prospective)

Question 4

What is the equation to figure out non-controlling interest?

Answer 4

Market share price x # shares held by non-controlling interest

Question 5

What are the four financial statements required for a not for profit hospital?

Answer 5

1. Statement of financial position (balance sheet)
2. Statement of changes in net assets (or equity)
3. Statement of cash flows
4. Statement of operations (activities)

Question 6

How do you record a contribution if you are an “agent?”

Answer 6

*Cash

*Refundable advance (liability)

Question 7

What types of transactions are included in the financing section on a statement of cash flows for a not for profit?

Answer 7

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

Question 8

What is an unconditional pledge and how is it accounted for?

Answer 8

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.

Question 9

What are the journal entries for when a not for profit receives an endowment and it then earns interest?

Answer 9

When we received the endowment

*cash

*revenues - donor restricted

When we earn interest income

*cash

*revenues - NOT donor restricted

Question 10

What are supporting activities?

Answer 10

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)

Question 11

What are program activities?

Answer 11

Activities that further the mission of the not for profit

Question 12

What are the steps to eliminating an intercompany issuance of bonds?

Answer 12

1. Eliminate the bond payable and associated discount or premium
2. Eliminate the investment on the buyer’s books

Question 13

What is the special rule for art, artifacts, and antiques for a not for profit?

Answer 13

A not for profit can exclued the asset from the financial statements if;

1. The asset is displayed or used for research purpose AND
2. It is cared for by the not for profit AND
3. When it is sold the money is reinvested in collectibles

Question 14

What is the journal entry for when a not for profit receives a contribution with donor restriction?

Answer 14

*cash

*revenues - donor restricted

Question 15

What are the steps to eliminating an intercompany sale of PP&E?

Answer 15

1. Reverse the sale on the seller’s side
2. Reverse the sale on the buyer’s side
3. Reverse any excess depreciation that was taken while the asset was on the buyer’s books

Question 16

How do you get the end number on a statement of operations for a hospital and what does each category include?

Answer 16

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)

Question 17

What types of transactions are included in the investing section on a statement of cash flows for a not for profit?

Answer 17

Investments acquired/sold

PP&E acquired/disposed of

Question 18

What is the calculation to get the end number of a statement of activities?

Answer 18

Public support (donations, grants)

+ Revenues (earned money like membership dues and investment income)

• Program expenses
• Support services

Excess of revenue over expenses

Question 19

What type of transactions are included in the operating section on a statement of cash flows for a not for profit?

Answer 19

Revenues collected (both with or without a donor restriction)

Expenses paid

Divident income

Interest income/expense

Question 20

What is included on the statement of activities for a not for profit?

Answer 20

Revenues, gains, other support (ex: contributions, investment income)

Question 21

What is an conditional pledge and how is it accounted for?

Answer 21

Conditional promise to give.

Book as a liability until you meet the condition. Once the condition is met you can book it as revenue.

Question 22

What is the criteria to deem a service “essential” to a not for profit?

Answer 22

1. It creates or enhances a non-financial asset
2. The service requires a specialized skill

Question 23

What is the equation to figure out goodwill or gain on bargain purchase?

Answer 23

FV consolidation

+ FV previously held in acquiree

+ FV non-controlling interest

• FV net identifiable assets for the acquiree

Goodwil or gain on bargain purchase

Question 24

What are the three basic financial statements for not for profit accounting?

Answer 24

Statement of financial position

Statement of activities

Statement of cash flows

Question 25

What are the steps when applying the acquisition method?

Answer 25

1. Identify acquirer
2. Determine acquisition date
3. Recognize and measure identifiable assets , liabilities, and non-controlling interest in acquireee (measure generally at FMV)
4. Recognize goodwill/gain from bargain purchase

Question 26

How do you account for costs associated with a consolidation?

Answer 26

Expense as incurred unless you are issuing common stock. If you are issuing common stock then it is a REDUCTION in APIC

Question 27

What is and isn’t considered revenue for colleges and universities?

Answer 27

Tuition remissions and scholarships are considered revenues

Tuition refunds are NOT considered revenues

Question 28

How are expenses categorized on a statements of activities for a not for profit?

Answer 28

All expenses are categorized as without donor restriction

Question 29

What is the journal entry for when a not for profit receives a contribution without a donor restriction?

Answer 29

*Cash

*revenue - no donor restriction

Question 30

What are the steps to eliminating an intercompany inventory sale?

Answer 30

1. Eliminate the sales revenue received on the seller’s side
2. Remove the % of profit that remains in ending inventory (% profit x ending inventory)
3. Plug cost of goods sold

Question 31

What are the two criteria used to determine if a contribution is conditional?

Answer 31

1. There is a barrier that must be overcome AND
2. Donor has the right to the return of the assets or a right to be released from the obligation to transfer the assets

Question 32

What are the two categories on a not for profit’s statements of financial position?

Answer 32

Without donor restriction - can be used for whatever purpose

With donor restriction - can only be used for what a donor specifically wants

Question 33

What is the journal entry for property that is a “passthrough” for the charity?

Answer 33

*Expense

*Revenue - not donor restricted