Modern Advanced Accounting

CHAPTER 16
NONPROFIT ORGANIZATIONS
The title of each problem is followed by the estimated time in minutes required for completion and by a
difficulty rating. The time estimates are applicable for students using the partially filled-in working papers.
Pr. 161
Seaside Hospital (30 minutes, easy)

Preparation of statement of activities for a nonprofit hospital that has only a general fund.
Pr. 162 Holley School (30 minutes, medium)
Journal entries for transactions and events of a nonprofit private secondary school, in
unrestricted fund, quasi-endowment fund, and plant fund.
Pr. 163 Nonprofit Trade Association (30 minutes, medium)
Preparation of a statement of activities and a statement of financial position for a nonprofit
trade association that does not use fund accounting.
Pr. 164 Suburban Welfare Services (50 minutes, medium)
Working paper to compute original and revised equity percentages for funds of a nonprofit
voluntary health and welfare organization in an investment pool. Journal entries for
unrestricted fund for operations of the investment pool.
Pr. 165 Harbor Hospital (50 minutes, medium)
Journal entries for transactions and events of general fund, restricted fund, and annuity fund of
a nonprofit hospital.
Pr. 166 Wigstaff Foundation (50 minutes, medium)
Preparation of a statement of cash flows for a nonprofit research and scientific organization, in
the indirect method format.
Pr. 167 Mid-City Sports Club (50 minutes, medium)
Preparation of journal entries (explanations omitted) for events and transactions of a nonprofit
social club. Also, preparation of a statement of activities and a statement of financial position.
Pr. 168 State University (60 minutes, strong)
Journal entries for transactions and events of a nonprofit university's unrestricted fund,
restricted fund, and endowment fund.
Pr. 169 Resthaven Hospital (60 minutes, strong)
Journal entries for transactions and events of a nonprofit hospital's general fund, plant
replacement and expansion fund, and endowment fund.
Pr. 1610 Libra College (60 minutes, strong)
Journal entries for unrestricted fund and restricted fund of a nonprofit college; preparation of
statement of changes in fund balances.
Pr. 1611 Disadvantaged Children Association (60 minutes, strong)
Preparation of financial statements, excluding a statement of cash flows, for a nonprofit
voluntary health and welfare organization.
The McGraw-Hill Companies, Inc., 2006

184
Modern Advanced Accounting, 10/e
ANSWERS TO REVIEW QUESTIONS

1.
2.
3.
4.
5.
6.
A nonprofit organization is an entity that is usually operated for the benefit of society as a whole,
rather than for the benefit of an individual proprietor or a group of partners or stockholders. The
concept of "net income" is not meaningful for a nonprofit organization.
Among the types of nonprofit organizations in the United States are the following (only four
required):
Cemetery organizations
Private and community foundations
Civic organizations
Private elementary and secondary schools
Colleges and universities
Professional associations
Cultural institutions
Public broadcasting stations
Fraternal organizations
Religious organizations
Hospitals
Research and scientific organizations
Labor unions
Social and country clubs
Libraries
Trade associations
Museums
Voluntary health and welfare organizations
Performing arts organizations
Zoological and botanical societies
Political parties
Each of the AICPA Accounting and Auditing Guides or Industry Audit Guides dealing with
nonprofit organizations contains a section that indicates that the accounting concepts included
therein have the substantial authoritative support required for generally accepted accounting
principles.
Characteristics of nonprofit organizations resembling those of governmental entities include the
following (only three are required):
(1) Service to society. Nonprofit organizations render services to society as a whole.
(2) No profit motivation. Nonprofit organizations do not operate with the objective of earning a
net income.
(3) Financing by the citizenry. Most nonprofit organizations depend on the general population for
a substantial portion of their support because revenues from services generally do not cover all
their operating costs.
(4) Stewardship for resources. Because a substantial portion of the resources of a nonprofit
organization is contributions, the organization must account for the resources on a stewardship
basis.
(5) Importance of budget. The annual budget is important for a nonprofit organization because of
the four preceding characteristics.
Characteristics of nonprofit organizations that resemble those of business enterprises include the
following:
(1) Governance by board of directors. A nonprofit organization is governed by elected or
appointed directors, trustees, or governors.
(2) Measurement of cost expirations. Cost expirations, or expenses, rather than expenditures,
generally are reported in the statement of activities of a nonprofit organization.
(3) Use of accrual basis of accounting. Nonprofit organizations employ the accrual basis of
accounting.
Both hospitals and universities (nonprofit organizations) accrue their basic revenue charges to
patients and students, respectively, at gross amounts, before reductions for allowances, remissions,
and the like. The latter are recorded in revenue-offset accounts by hospitals and generally with
expenses for student aid by universities.

185
7.
8.
9.
10.
11.
12.
13.
a. A nonprofit organization records contributed material in its accounting records at the current
fair value of the material when contributed. Failure to record contributed material would
understate assets and revenues at the time of the contribution and would understate expenses
when the material was used in operations.
b. A nonprofit organization records contributed services in its accounting records only if the
services were rendered to the organization under specified conditions. The contributed services
are recorded as salaries expense and as revenues at an appropriate rate, less any meals or
living costs incurred by the organization for the donor of the services.
Expenses of a nonprofit organization that receives significant support from the public are classified
on a functional basis that differentiates between program services expenses and supporting
services expenses.
Unpaid amounts of grants that may be revoked by the board of trustees of a nonprofit performing
arts organization are not recognized as expenses until they are paid.
Collections often are not assigned a value in the financial statements of a nonprofit museum.
Instead, the "Collections" caption in the statement of financial position is referenced to a note in the
financial statements that describes the collections.
A nonprofit organization's annuity fund records assets contributed with the requirement that the
organization pay specified fixed amounts periodically to named recipients, for a stipulated time
period. A nonprofit organization's life income fund records assets contributed with the stipulation
that income from the assets be paid periodically to named recipients during their lifetimes.
a. Designated Fund Balance is a ledger account in a nonprofit organization's unrestricted fund
that is used to record the board of directors' earmarking of unrestricted fund resources for a
specific purpose.
b. A third-party payor is an organization that is liable for payment of many hospital receivables,
instead of the patients receiving the hospital's services. Examples of third-party payors are the
U.S. government (Medicare and Medicaid programs), Blue Cross, and private medical
insurance carriers.
c. A pledge is a commitment by a prospective donor to contribute a specific amount of cash or
property to a nonprofit organization on a future date or in installments.
d. Charity care is health services provided by nonprofit hospitals to indigent patients, there being
no expectation of resultant cash flows to the hospital.
e. A term endowment fund is a fund whose principal may be expended by the nonprofit
organization after the passage of a period of time or the occurrence of an event specified by the
donor of the endowment principal.
The financial statements issued by a nonprofit organization are a statement of activities, a
statement of financial position, and a statement of cash flows.
SOLUTIONS TO EXERCISES
Ex. 161
1. d
2. c
3. a
4. c
5. b
6. a
7. a
Ex. 162
Journal entries for Neighborhood Hospital, May 31, 2006:

Accounts Receivable
Patient Service Revenues
Solutions Manual, Chapter 16
8. a
9. c
10. e ($620,000 $80,000 = $540,000)
11. c
12. c
13. d
860,000
860,000

186
Accounts Receivable
50,000
50,000
Contractual Adjustments
Accounts Receivable
140,000
140,000
Doubtful Accounts Expense

Allowance for Doubtful Accounts
Ex. 163
Ex. 164
20,000
20,000
Financial statement presentation of Redwood Hospital for month of Sept., 2006:

In statement of activities
Patient service revenues (net of contractual adjustments, $18,500)
$223,000
In statement of financial position

Accounts receivable (net of allowance for doubtful accounts, $14,600)
$208,400
Journal entries for Recuperative Hospital, Oct. 31, 2006:

Accounts Receivable
200,000
200,000
Accounts Receivable
Ex. 165
Ex. 166
Ex. 167
6,000
6,000
Accounts Receivable
32,000

24,000
32,000
24,000
Journal entry for University of South Park Unrestricted Fund, June 15, 2006:
Library Books
16,000
Contributions Revenue
To record contribution of library books by various publishers.
Journal entry for Cordova Hospital General Fund, Mar. 31, 2006:
Inventories
To record difference between current fair value ($6,400) and
nominal cost ($200) of medicine and drugs as support from
contributed material.
Journal entry for Warner College Unrestricted Fund, Oct. 31, 2006:
Salaries Expense ($3,400 $180)
To record contributed services at current fair value, less value of
meals provided to donors. (Tax withholdings are disregarded.)

187
16,000
6,200
6,200
3,220
3,220
Ex. 168
Journal entries for Modern Museum, June 30, 2006:

Salaries Expense
To record contributed services of docents for the year.
68,000
68,000
Rent Expense
To record current fair value of rental of storage facilities whose
use was contributed.
Ex. 169
96,000
96,000
Journal entries for Community Welfare, Inc. Unrestricted Fund, Nov. 30, 2006:
Pledges Receivable
500,000
Provision for Doubtful Pledges ($500,000 x 0.20)

Allowance for Doubtful Pledges
100,000
500,000
100,000

Pledges Receivable
30,000
30,000
Cash
240,000
Pledges Receivable
240,000
Ex. 1610 Adjusting entry for Wabash Hospital General Fund, June 30, 2006:
Pledges Receivable
Provision for Doubtful Pledges
Allowance for Doubtful Pledges ($60,000 x 0.12)
Contributions Revenue ($300,000 $275,000)
Fund Balance ($50,000 $15,000)
To adjust accounting for pledges from cash basis to accrual basis
of accounting required for nonprofit hospitals.
60,000
7,200
7,200
25,000
35,000
Ex. 1611 Journal entries for Wilmington College Restricted Fund, June 30, 2006:
Investments in Securities ($10,000 x 0.25)
Gains on Securities Investments
To record 25% share ($90,000 $360,000 = 25%) of realized
and unrealized gains of investment pool for the year.
2,500
2,500
Cash ($18,000 x 0.25)

4,500
Interest and Dividends Revenue
To record 25% share of earnings of investment pool for the year.
Journal entries for Wilmington College Quasi-Endowment Fund, June 30, 2006:
3,500
Gains on Securities Investments
To record 35% ($126,000 $360,000 = 35%) of realized and
unrealized gains of investment pool for the year.
Cash ($18,000 x 0.35)
Interest and Dividends Revenue
To record 35% share of earnings of investment pool for the year.
Journal entry for Wilmington College Annuity Fund, June 30, 2006:
Cash ($18,000 x 0.40)
Annuity Payable
4,500
3,500
6,300
6,300
4,000
7,200
11,200

188
To record 40% share ($144,000 $360,000 = 40%) of realized

and unrealized gains and earnings of investment pool for the year.
Ex. 1612 Journal entries for Artistry Unlimited:
2006
July 1
Cash
Contribution Revenue
To record gift restricted to scholarships for students of
ballet.
Sept. 1
Grants Expense
Cash
To record grants awarded to nine students of ballet.
50,000
50,000
45,000
45,000
Ex. 1613 Journal entry for Technology Specialists, July l, 2006:

Grants Expense
Cash
To record payment of first installment of revocable three-year
grant to Martin Grey.
Ex. 1614
NO-PROF HOSPITAL
Statement of Financial Position
June 30, 2006
(amounts in thousands)
Assets
Cash and cash equivalents
Accounts receivable (net)
Inventory of supplies
Short-term prepayments
Cash and investments restricted to acquisition of plant assets
Plant assets (net)
Total assets
Liabilities & Net Assets
Liabilities:
Notes payable
Accounts payable and accrued liabilities
Advances from third-party payors
Deferred revenues
Housing and mortgage bonds payable
Total liabilities
Net Assets (unrestricted):
Fund balance designated for plant assets
Undesignated fund balance
Total net assets
Total liabilities and net assets
10,000
10,000
$ 100
900
200
50
600
3,100
$4,950
$ 300
550
200
100
900
$2,050
$ 600
2,300
$2,900
$4,950
CASES
Case 161 The action by the board of directors of Roakdale Association is unsupportable; it might be
interpreted as a deliberate attempt to mislead users of the organization's financial statements.
All unrestricted revenues, regardless of source, must be recorded in the Unrestricted Fund of
Roakdale Association. By definition, a restricted fund is appropriate only for recording
contributions restricted for specific expenditures by the donors. If the board of directors of
Roakdale Association desires to earmark a portion of Unrestricted Fund assets for some
189
Case 162
Case 163
Case 164
Case 165
Case 166
purpose, the directors may designate a portion of the Undesignated Fund Balance ledger
account of the Unrestricted Fund.
Following are answers to the questions of Toledo Day Care Center's board of trustees:
(l) Generally, only the revenues of an endowment fund are expendable for current operations,
assuming that no restrictions were placed on the revenues by the donor of the endowment.
However, the principal of a term endowment may be expended after the passage of a
period of time or the occurrence of an event specified by the donor. The principal of a
quasi-endowment fundone that is established by the board of trustees rather than by a
donormay be expended on authorization by the trustees.
(2) The principal of a permanent endowment never may be expended; it must be maintained
by the nonprofit organization in perpetuity. However, as indicated in (1), the principal of a
term endowment is expendable when specified by the donor, and the principal of a quasiendowment fund may be expended at any time as authorized by the board of trustees.
(3) Separate accounting records should be established for each individual endowment fund. It
is not proper to account for endowment funds in a single restricted fund of a voluntary
health and welfare organization.
The method used by Science Unlimited to present unsold products in its balance sheet is
incorrect. First, all unsold products expected to be sold during the forthcoming operating cycle
or one year, whichever is longer, should be displayed with the current asset inventory. The
"base stock" concept of inventory is not in accordance with generally accepted accounting
principles, for either nonprofit organizations or business enterprises. Second, the appropriate
method of valuing inventories for which selling prices are less than production costs is net
realizable value, defined as estimated selling price less estimated costs of completion and
disposal. Arbitrary valuation methods are unacceptable under generally accepted accounting
principles. For Science Unlimited, distribution and handling costs of unsold products constitute
disposal costs; storage costs should be recognized as expenses when incurred.
The method used by Station KKLL to value the radio station antenna tower is not in
accordance with generally accepted accounting principles for nonprofit organizations.
Contributed plant assets received by a nonprofit organization should be valued at current fair
value, not at a nominal cost. Otherwise, both revenues in the year of the donation and
depreciation expense in subsequent years are understated.
The proposal of the accountant for Nonprofit Religious Organization is not in accordance with
generally accepted accounting principles for nonprofit organizations. According to FASB
Statement No. 116, "Accounting for Contributions Received and Contributions Made" (par.
9), contributed services are to be recognized only if they create or enhance nonfinancial assets
or they require special skills that would be purchased if not contributed by individuals
possessing those skills.
The chief accountant of Vol-Wel cannot ethically comply with the president's instruction to
recognize as contributions revenue the $60,000 estimated value of services rendered by fundraising volunteers. Section ET 203.05 of AICPA Professional Standards, vol. 2, states that
AICPA members who sign communications such as a transmittal letter accompanying financial
statements are subject to Rule 203 of the AICPA Code of Professional Conduct, which in
essence requires members to comply with generally accepted accounting principles. Included in
those principles is FASB Statement No. 116, "Accounting for Contributions Received and
Contributions Made," paragraph 9 of which limits the recognition of contributions of services
to services that create or enhance nonfinancial assets or require specialized skills, such as those
of accountants. Fund-raising activities require no such specialized skills.
The president's request to transfer a substantial part of his $100,000 annual salary to program
expenses and fund-raising expenses from management and general expenses may be complied
with if the chief accountant can obtain evidence supporting the president's participation in
programs and fund raising. A source of evidence might be the president's appointments
calendar or expense reimbursement requests. However, the chief accountant should point out to
the president that Vol-Wel, as a voluntary health and welfare organization, is also required to

190
report expenses by their natural classification, in accordance with paragraph 26 of FASB

Statement No. 117, "Financial Statements of Not-for-Profit Organizations." (See also
paragraph l59, Note F, thereof.)

191
30 Minutes, Easy
Seaside Hospital
Pr. 161
Seaside Hospital
Statement of Activities
For Year Ended June 30, 2006
(amounts in thousands)
Revenues:
Patient service revenue (net)
Other operating revenue
Contributions
Investment revenue
$ 1 4
1
3
2
Total revenues
Expenses:
Nursing services
Other professional services
General services
Fiscal services
Administrative services
Depreciation
Doubtful accounts
Total expenses
Increase in unrestricted net assets
2
8
8
8
0
0
0
0
$ 2 2 6 0
$ 5
2
3
1
2
3
6
6
6
8
8
4
8
0
0
0
0
0
0
0
$
2 0 6 0
2 0 0

192
30 Minutes, Medium
Holley School
Pr. 162
Holley School Quasi-Endowment Fund
Journal Entry
(3) Cash
1 1 0 0 0 0
Investments in Securities
Payable to Unrestricted Fund
To record sale of investments at a gain, the use of
which is unrestricted.
1 0 0 0 0 0
1 0 0 0 0
Holley School Plant Fund

Journal Entries
(1) Equipment
Fund Balance
To record acquisition of computers by Unrestricted
Fund.
(4) Buildings
5 0 0 0 0
5 0 0 0 0
2 0 0 0 0 0 0
Cash
Mortgage Note Payable
To record construction of new building financed in part
by 5% mortgage note payable.
2 5 0 0 0 0
1 7 5 0 0 0 0
Holley School Unrestricted Fund

Journal Entries
(1) Undesignated Fund Balance
Cash
To record acquisition of computers to be carried in
Plant Fund.
(2) Cash
5 0 0 0 0
5 0 0 0 0
2 0 0 0 0 0
To record receipt of unrestricted gift.
(3) Receivable from Quasi-Endowment Fund
Investment Income
To record investment gain receivable from QuasiEndowment Fund.

193
2 0 0 0 0 0
1 0 0 0 0
1 0 0 0 0
30 Minutes, Medium
Nonprofit Trade Association
Pr. 163
Revenues and gains

Membership dues
Conferences and meetings
Publication and advertising sales
Special assessments
Investment revenue and net gains
$ 1 8 4 0
3 2 1 0
1 4 3 0
5 0 0
1 1 0
Total revenues and gains

Expenses:
Member services
Conferences and meetings
Technical services
Communications
General administration
Membership development
0
0
0
0
0
0
0
0
0
0
$ 7 0 9 0 0 0
$
5 6
1 6 6
2 1 8
6 1
1 5 4
2 7
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Total expenses
Net assets, beginning of year
6 8 2 0 0 0
2 7 0 0 0
2 8 5 0 0 0
Net assets, end of year
$ 3 1 2 0 0 0

June 30, 2006
Assets
Current assets:
Cash
Short-term investments in securities
Accounts receivable, less allowance for doubtful accounts,
$3,000
Publications inventory
Total current assets
Long-term investments in securities
Plant assets, less accumulated depreciation $22,000
Other assets
Total assets
7 0 0 0
2 1 7 0 0 0
2 5 0 0 0
6 1 0 0 0
$ 3 1 0
1 2 0
3 3
2 8
0
0
0
0
0
0
0
0
0
0
0
0
$ 4 9 1 0 0 0
Current liabilities:
Deferred membership dues
Total current liabilities

Net assets (unrestricted)
$ 1 7 9 0 0 0
3 1 2 0 0 0
Total liabilities & net assets
4 8 0 0 0
1 3 1 0 0 0
$ 4 9 1 0 0 0

194
50 Minutes, Medium
Suburban Welfare Services
a. (1)
Pr. 164
Computation of Original Equity Percentages for Investment Pool

July 1, 2005
Unrestricted Fund
Restricted Fund
Plant Fund
Arnold Life Income Fund
Totals
5
2
8
1 0
Cost
0 0
0 0
0 0
0 0
0
0
0
0
0
0
0
0
$ 2 5 0 0 0 0
(2)
Current
fair value
$
5 9 4 0
1 6 2 0
8 9 1 0
1 0 5 3 0
0
0
0
0
$ 2 7 0 0 0 0
Original
equity, %
2 2 . 0
6 . 0
3 3 . 0
3 9 . 0
0
0
0
0
1 0 0 . 0 0

Computation of Revised Equity Percentages for Investment Pool
January 2, 2006
Unrestricted Fund
Plant Fund
Arnold Life Income Fund
Edwards Endowment Fund
Totals
5
8
1 0
7
Cost
3 3
4 9
5 8
0 0
0
5
5
0
0 (1)
0 (3)
0 (5)
0
$ 3 1 4 1 0 0
Current
fair value
$
6 6 0 0
9 9 0 0
1 1 7 0 0
7 8 0 0
0 (2)
0 (4)
0 (6)
0
$ 3 6 0 0 0 0
Revised
equity, %
1 8 . 3
2 7 . 5
3 2 . 5
2 1 . 6
3
0
0
7
1 0 0 . 0 0
Computations:
(1) $50,000 + ($15,000 x 0.22) = $53,300
(2) $300,000 x 0.22 = $66,000
(3) $80,000 + ($15,000 x 0.33) = $84,950
(4) $300,000 x 0.33 = $99,000
(5) $100,000 + ($15,000 x 0.39) = $105,850
(6) $300,000 x 0.39 = $117,000

195
Suburban Welfare Services (concluded)

b.
Pr. 164
Suburban Welfare Services Unrestricted Fund

Journal Entries
20 05
Dec
31 Investments in Securities
Cash
Gains on Securities Investments ($15,000 x 0.22)
Interest and Dividends Revenue ($25,000 x 0.22)
Payable to Restricted Fund [($15,000 + $25,000)
x 0.06]
Payable to Plant Fund [($15,000 + $25,000) x 0.33]
Payable to Arnold Life Income Fund [($15,000 +
$25,000) x 0.39]
To record realized and unrealized gains and earnings
of investment pool for six months ended Dec. 31,
2005, and liabilities to other funds.
1 5 0 0 0
2 5 0 0 0
3 3 0 0
5 5 0 0
2 4 0 0
1 3 2 0 0
1 5 6 0 0
31 Payable to Restricted Fund

2 4 0 0
Payable to Plant Fund
1 3 2 0 0
Payable to Arnold Life Income Fund
1 5 6 0 0
1 1 7 0 0
Cash ($25,000 x 0.78)
1 9 5 0 0
To record allocation of investments and payment of
cash to other funds of investment pool.
20 06
Jan
2 (No entry required for withdrawal of Restricted Fund from investment pool; custody of the Restricted Funds
investments is returned to it.)
June
30 Investments in Securities
Cash
Gains on Securities Investments ($40,000 x 0.1833)
Interest and Dividends Revenue ($60,000 x 0.1833)
Payable to Plant Fund [($40,000 + $60,000) x
0.2750]
Payable to Arnold Life Income Fund [($40,000 +
$60,000) x 0.3250]
Payable to Edwards Endowment Fund [($40,000 +
$60,000) x 0.2167]
To record realized and unrealized gains and earnings
of investment pool for six months ended June 30,
2006, and liabilities to other funds.
4 0 0 0 0
6 0 0 0 0
30 Payable to Plant Fund

Payable to Arnold Life Income Fund
Payable to Edwards Endowment Fund
Cash ($60,000 x 0.8167)
To record allocation of investments and payment of
cash to other funds of investment pool.
2 7 5 0 0
3 2 5 0 0
2 1 6 7 0
7 3 3 2
1 0 9 9 8
2 7 5 0 0
3 2 5 0 0
2 1 6 7 0
3 2 6 6 8
4 9 0 0 2

196
50 Minutes, Medium
Harbor Hospital
a.
Pr. 165
Harbor Hospital General Fund
Journal Entries
October, 2006
(1) Accounts Receivable

To record gross patient service revenue for month of
October at full rates.
8 0 0 0 0
8 0 0 0 0
Accounts Receivable
To record amount receivable from Bovard Welfare
Organization for charity care.
2 5 0 0
Accounts Receivable
To record contractual adjustments allowed to Medicaid
for October.
6 0 0 0

To provide for doubtful accounts for October.
8 0 0 0
2 5 0 0
6 0 0 0
8 0 0 0
(2) Salaries Expense

To record donated services by volunteer nurses for
October, at going salary rates ($10,000), less cost of
meals served to volunteer nurses at no charge ($200).
9 8 0 0
(3) Pledges Receivable

To record pledges received from donors during
October.
5 0 0 0
Cash
9 8 0 0
5 0 0 0
3 5 0 0
Pledges Receivable
To record pledges collected in cash during October.
3 5 0 0
Provision for Doubtful Pledges

To provide for doubtful pledges for October.
8 0 0
(4) Receivable from Arline E. Walters Annuity Fund

Cash
To record payment of Arline E. Walters annuity for
October.
5 0 0
8 0 0
5 0 0
(Continued on page 454.)

197
Harbor Hospital (concluded)
Pr. 165
Harbor Hospital General Fund
Journal Entries (concluded)
October, 2006
(5) Cash
3 0 0 0
Fund Balance
To record receipt of cash from Charles Watson
Restricted Fund for new surgical equipment.
Plant Assets
Cash
To record acquisition of new surgical equipment.
b.
3 0 0 0
3 0 0 0
3 0 0 0
Harbor Hospital Arline E. Walters Annuity Fund

Journal Entry
October, 2006
Annuity Payable
Payable to General Fund
To record liability to General Fund for payment of
Arline E. Walters annuity for October.
5 0 0
5 0 0
Harbor Hospital Charles Watson Restricted Fund

Journal Entry
October, 2006
Fund Balance
Cash
To record payment to General Fund for acquisition of
new surgical equipment
3 0 0 0
3 0 0 0

198
50 Minutes, Medium
Wigstaff Foundation
Pr. 166
Wigstaff Foundation
Statement of Cash Flows (indirect method)
Net cash provided by operating activities (Exhibit 1)

Cash flows from investing activities:
Acquisition of furniture and equipment
Acquisition of long-term investments in securities
Net cash used in investing activities
Cash flows from financing activities:
Payment of long-term debt
Net cash used in financing activities
$ 2 6 6 0 0 0
2 2 0 0 0
6 0 0 0 0
( 8 2 0 0 0 )
$ 1 6 4 0 0 0 *
( 1 6 4 0 0 0 )
Net increase in cash

Cash, beginning of year
Cash, end of year
2 0 0 0 0
6 3 0 0 0 0
$ 6 5 0 0 0 0
*($164,000 + $794,000) ($176,000 + $618,000) = $164,000

Exhibit 1 Cash flows from operating activities:
Adjustments to reconcile increase in unrestricted net assets to net cash
provide by operating activities:
Depreciation expense
Increase in accounts receivable (net)
Increase in unbilled contract revenue and reimbursable grant costs
Increase in short-term prepayments
Increase in accounts payable and accrued liabilities
Increase in restricted grant advances
Net cash provided by operating activities

199
$ 1 8 8 0 0 0
1 4 8 0
( 3 2 0
( 1 9 6 0
( 4 0
6 0 0
1 0 2 0
0
0
0
0
0
0
0
0 )
0 )
0 )
0
0
$ 2 6 6 0 0 0
50 Minutes, Medium
Mid-City Sports Club
Pr. 167
a.

Journal Entries
(1) Cash
2 0 0 0 0
Dues Revenue
(2) Cash
2 0 0 0 0
2 8 0 0 0
Snack Bar and Soda Fountain Revenue

(3) Cash
2 8 0 0 0
6 0 0 0
Interest Revenue
6 0 0 0
(4) Clubhouse Expense

Inventories
General and Administrative Expense
Accounts Payable
1 7 0 0 0
2 6 0 0 0
1 1 0 0 0
(5) Accounts Payable

Cash
5 5 0 0 0
(6) Assessments Receivable

1 0 0 0 0
(7) Cash
5 4 0 0 0
5 5 0 0 0
1 0 0 0 0
5 0 0 0
Gifts Revenue
(8) Clubhouse Expense
Snack Bar and Soda Fountain Expense
General and Administrative Expense
Accumulated Depreciation of Building
Accumulated Depreciation of Furniture and
Equipment
(9) Snack Bar and Soda Fountain Expense ($5,000 +
$26,000 $1,000)
Inventories
5 0 0 0
9 0 0 0
2 0 0 0
1 0 0 0
4 0 0 0
8 0 0 0
3 0 0 0 0
3 0 0 0 0

200
Mid-City Sport Club (concluded)
Pr. 167
b.

Revenues and gains:

Dues
Snack bar and soda fountain
Interest
Gifts and contributions ($10,000 + $5,000)
Total revenues and gains
Expenses:
Clubhouse ($17,000 + $9,000)
Snack bar and soda fountain ($2,000 + $30,000)
General and administrative ($11,000 + $1,000)
Total expenses
(Decrease) in unrestricted net assets
Cumulative increase in net assets, beginning of year
Cumulative increase in net assets, end of year
$
$
$
$
$
2 0 0
2 8 0
6 0
1 5 0
6 9 0
0
0
0
0
0
0
0
0
0
0
2
3
1
7
(
1
1
0
0
0
0
0
0
0
0
0
0
0
0 )
0
0
6
2
2
0
1
2
1
0
0
0
0
0
0
0

June 30, 2006
Assets
Current assets:
Cash ($9,000 + $20,000 + $28,000 + $6,000 $55,000 + $5,000)
Investments in securities
Assessments receivable
Inventories
Total current assets
Plant assets:
Land
Building
Furniture and equipment
Subtotal
Less: Accumulated depreciation ($130,000 + $4,000 + $46,000 + $8,000)
Net plant assets
Total assets
Current liabilities:
Accounts payable ($12,000 + $54,000 $55,000)
Net assets:
Membership certificates, 100 at $1,000 each (no change during the year)
Cumulative increase in net assets
Total net assets (unrestricted)

201
1 3 0 0
5 8 0 0
1 0 0 0
1 0 0
8 2 0 0
1
1 6
5
$ 2 2
1 8
$
4
$ 1 2
0
4
4
8
8
0
2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1 1 0 0 0
$ 1 0
1
$ 1 1
$ 1 2
0
1
1
2
0
0
0
0
0
0
0
0
0
0
0
0
60 Minutes, Strong
State University
Pr. 168
State University
Journal Entries
Transaction
no.
(1)
Ledger accounts
Unrestricted
Restricted
Fund
Fund
Fund
dr (cr)
dr (cr)
dr (cr)
Cash
Fund Balance
5 0 0 0 0
( 5 0 0 0 0 )
Investment in Securities
Cash
(2)
(3)
5 0 0 0 0
( 5 0 0 0 0 )
5 0 0 0 0
( 5 0 0 0 0 )
Cash
Deferred Revenue
Accounts Receivable [$1,900,000
($1,686,000 + $66,000)]
Revenues
1 6 8 6 0 0 0
6 6 0 0 0
1 4 8 0 0 0
(1 9 0 0 0 0 0 )
Cash
Deferred Revenues
1 5 8 0 0 0
( 1 5 8 0 0 0 )
Cash
Accounts Receivable
3 4 9 0 0 0
1 0 0 0
( 3 5 0 0 0 0 )
Expenses
3 0 0 0
( 3 0 0 0 )
(4)
Cash
Revenues
6 0 0 0
( 6 0 0 0 )
(5)
Cash
State Appropriation Receivable
7 5 0 0 0
( 7 5 0 0 0 )
State Appropriation
Revenues
5 0 0 0 0
( 5 0 0 0 0 )
Receivable
(6)
Cash
Revenues
(7)
Cash
Fund Balance
2 5 0 0 0
( 2 5 0 0 0 )
2 6 0 0 0
( 2 1 0 0 0 )
( 5 0 0 0 )
Cash
Fund Balance
(8)
Endowment
Expenses
Cash ($1,777,000 $59,000)
Accounts Payable
1 9 0 0
( 1 9 0 0 )
1 7 7 7 0 0 0
(1 7 1 8 0 0 0 )
( 5 9 0 0 0 )

202
State University (concluded)
Pr. 168
State University
Transaction
no.
(9)
Ledger accounts
Unrestricted
Restricted
Fund
Fund
Fund
dr (cr)
dr (cr)
dr (cr)
Expenditures
Cash
1 3 0 0 0
( 1 3 0 0 0 )
Fund Balance
Revenues
1 3 0 0 0
( 1 3 0 0 0 )
(10) Accounts Payable

Cash
(11) Cash
Fund Balance

203
Endowment
4 5 0 0 0
( 4 5 0 0 0 )
7 0 0 0
( 7 0 0 0 )
60 Minutes, Strong
Resthaven Hospital
Pr. 169
Resthaven Hospital
Journal Entries
For Year Ended December 31, 2006
Plant
General
Replacement and
Fund
Expansion Fund
Fund
dr (cr)
dr (cr)
dr (cr)
Transaction
no.
Ledger accounts
(1)
Accounts Receivable
(2)

Accounts Receivable
3
1
( 3
( 1
(3)
Mortgage Bonds Payable

Cash
1 8 0 0 0
( 1 8 0 0 0 )
(4)
Cash
Unrestricted Gift Revenue
Unrestricted Revenue from
Endowment Fund
5 6 5 0 0
( 5 0 0 0 0 )
(5)
1 1 0 1 0 0 0
(1 1 0 1 0 0 0 )
0
5
0
5
0
0
0
0
0
0
0
0
0
0
0 )
0 )
( 6 5 0 0 )
Cash
Fund Balance
6 5 0 0
( 6 5 0 0 )
Fund Balance
Cash
6 5 0 0
( 6 5 0 0 )
Fund Balance
Cash
Equipment
Fund Balance Designated for
Plant Assets
Cash
Accumulated Depreciation of
Equipment ($24,000 $2,400)
Loss on Disposal of Plant Assets
($2,400 $500)
Equipment
(6)
Endowment
Administrative Services Expense

Interest Expense
General Services Expense
Nursing Services Expense
Other Professional Services Expense
Inventory of Supplies
Accrued Liabilities
Accounts Payable
2 6 0 0 0
( 2 6 0 0 0 )
2 6 0 0 0
( 2 6 0 0 0 )
5 0 0
2 1 6 0 0
1 9 0 0
( 2 4 0 0 0 )
1 2
9
2 2
5 2
1 6
6
0
5
5
0
5
0
6
(1 1 9 1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0 )

204
Resthaven Hospital (concluded)
Pr. 169
Resthaven Hospital
For Year Ended December 31, 2006
Plant
Transaction
no.
(7)
Ledger accounts
Cash
Accounts Receivable
Accounts Receivable
(8)
Accounts Payable
Cash
(9)
Nursing Services Expense

Inventory of Supplies
General
Replacement and
Fund
Expansion Fund
Fund
dr (cr)
dr (cr)
dr (cr)
9 8 5 0 0 0
( 9 8 5 0 0 0 )
1 1 0 0 0
( 1 1 0 0 0 )
8 2 5 0 0 0
( 8 2 5 0 0 0 )
3 7 0 0 0
( 3 7 0 0 0 )
(10) Interest Receivable

Fund Balance
(11) Depreciation Expense
Buildings
Equipment
(12) Interest Expense
Accrued Liabilities

205
Endowment
8 0 0
( 8 0 0 )
1 1 7 0 0 0
( 4 4 0 0 0 )
( 7 3 0 0 0 )
6 1 0 0
( 6 1 0 0 )
60 Minutes, Strong
Libra College
Pr. 1610
Libra College
Journal Entries
Unrestricted
Transaction
no.
Ledger accounts
0
3
5
1
0
6
0
3
Fund
dr (cr)
dr (cr)
(1)
Cash
Accounts Receivable, Tuition and Fees
Tuition and Fees Revenue
Deferred Revenues
(2)
Deferred Revenues
Tuition and Fees Revenue
2 5 0 0 0
( 2 5 0 0 0 )
(3)
Allowance for Doubtful Accounts ($360,000 + $15,000

$362,000)
Accounts Receivable, Tuition and Fees
1 3 0 0 0
( 1 3 0 0 0 )
Doubtful Tuition and Fees Expense [$10,000

($15,000 $13,000)]
3
(
(2
(
Restricted
Fund
0
2
0
8
0
0
0
0
0
0
0
0
0
0 )
0 )
0 )
8 0 0 0
( 8 0 0 0 )
(4)
State Appropriation Receivable

Government Grants Revenue
6 0 0 0 0
( 6 0 0 0 0 )
(5)
Cash
Private Gifts Revenue
8 0 0 0 0
( 8 0 0 0 0 )
Fund Balance
Cash
3 0 0 0 0
( 3 0 0 0 0 )
(6)
(7)
Cash
Fund Balance
1 8 0 0 0
( 1 8 0 0 0 )
Cash
Investment in Securities
Fund Balance
3 1 0 0 0
( 2 5 0 0 0 )
( 6 0 0 0 )
Cash
4 0 0 0 0
( 4 0 0 0 0 )
Educational and General Expenses

Accounts Payable
2 5 0 0 0 0 0
(2 5 0 0 0 0 0 )
Accounts Payable ($100,000 + $2,500,000 $75,000)

Cash
2 5 2 5 0 0 0
(2 5 2 5 0 0 0 )

206
Libra College (concluded)
Pr. 1610
Libra College
Unrestricted
Transaction
no.
Ledger accounts
Fund
dr (cr)
dr (cr)
(8)
Accounts Payable
Cash
(9)
Payable to Other Funds

Cash
4 0 0 0 0
( 4 0 0 0 0 )
(10)
Educational and General Expenses ($40,000 x )

Short-Term Prepayments
1 0 0 0 0
( 1 0 0 0 0 )

207
Restricted
Fund
5 0 0 0
( 5 0 0 0 )
60 Minutes, Strong
Disadvantaged Children Association
Pr. 1611
Changes in unrestricted net assets:

Revenue and gains:
Contributions
Membership dues
Program service fees
Investment revenue and gains
$ 3 2
2
3
1
Total unrestricted revenues and gains

Expenses:
Program
Management and general ($45,000 + $2,000)
Fund raising
0
5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$ 3 8 5 0 0 0
$ 2 7 0 0 0 0
4 7 0 0 0
8 0 0 0
Total expenses
Changes in temporarily restricted net assets:
Contributions
Management and general expenses
Fund-raising expenses
$ 3 2 5 0 0 0
$
6 0 0 0 0
$
1 5 0 0 0
( 4 0 0 0 )
( 1 0 0 0 )
Increase in temporarily restricted net assets

Increase in net assets
Net assets, beginning of year ($12,000 + $26,000 +
$3,000)
$
$
1 0 0 0 0
7 0 0 0 0
Net assets, end of year
$ 1 1 1 0 0 0
4 1 0 0 0

June 30, 2006
Assets
Cash ($40,000 + $9,000)
Bequest and interest receivable ($5,000 + $1,000)
Pledges receivable (net) ($12,000 $3,000)
Investments in securities, at fair value
Total assets
4 9
6
9
1 0 0
0
0
0
0
0
0
0
0
0
0
0
0
$ 1 6 4 0 0 0

Liabilities:
($50,000 + $1,000)
Deferred revenues
Total liabilities
Net assets:
Unrestricted ($38,000 + $60,000)
Temporarily restricted ($3,000 + $10,000)
Total net assets
5 1 0 0 0
2 0 0 0
5 3 0 0 0
9 8 0 0 0
1 3 0 0 0
$ 1 1 1 0 0 0
$ 1 6 4 0 0 0

208

Modern Advanced Accounting

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CHAPTER 16

Seaside Hospital (30 minutes, easy)

The McGraw-Hill Companies, Inc., 2006