Question 1

The transactions listed in the following questions occurred in a private, not-for-profit hospital during 20X8. For each transaction, indicate its effect on the hospital's statement of operations for the year ended December 31, 20X8.
Transaction: Acquired investments with cash received in the previous item.
Effect on Statement of Operations:
A) Increases operating income.
B) Decreases operating income.
C) The transaction is reported on the statement of operations, but there is no effect on operating income.
D) The transaction is not reported on the statement of operations.

Accepted Answer

Acquiring investments is a balance sheet transaction and does not affect the statement of operations directly.

Question 2

The disclosure, "net assets released from restrictions," is reported on which of the following financial statements for a voluntary health and welfare organization?
I. The statement of cash flows.
II. The statement of activities.
A) I only
B) II only
C) Both I and II.
D) Neither I nor II.

Accepted Answer

The disclosure "net assets released from restrictions" is reported on the statement of activities for a voluntary health and welfare organization. This disclosure shows the amount of donor-restricted net assets that have been released from restriction during the reporting period, which is important for understanding the organization's financial position and how it is using donor-restricted funds. The statement of cash flows does not include this disclosure.

Question 3

In accordance with ASC 958, pledges, which are temporarily restricted by donors, are reported as increases in temporarily restricted net assets on the statement of activities of a voluntary health and welfare organization when the
A) pledges are received in cash.
B) cash received from the pledges is expended in accordance with the donors' wishes.
C) pledges are made by the donors.
D) cash is received from the pledges is transferred to unrestricted net assets.

Accepted Answer

The answer of In accordance with ASC 958, pledges, which...

Question 4

Which financial statement is(are) required for a voluntary health and welfare organization which is not required for a private, not-for-profit hospital?
I. A statement of operations.
II. A statement of functional expenses.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Accepted Answer

The answer of Which financial statement is(are) required for a...

Question 5

The transactions listed in the following questions occurred in a private, not-for-profit hospital during 20X8. For each transaction, indicate its effect on the hospital's statement of operations for the year ended December 31, 20X8.
Transaction: Received cash contribution from donor who stipulated the contribution be permanently invested.
Effect on Statement of Operations:
A) Increases operating income.
B) Decreases operating income.
C) The transaction is reported on the statement of operations, but there is no effect on operating income.
D) The transaction is not reported on the statement of operations.

Accepted Answer

The transaction is not reported on the statement of operations because it is a permanently restricted contribution, which is recorded directly in the net assets section of the balance sheet.

Question 6

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization. The donor did not place any use restrictions on the amount pledged. The stream of the payments is discounted at 6 percent. The first payment of $5,000 is received at the end of the first year. The present value factor for a five-payment annuity due on June 30, 20X9, at 6 percent is 4.2124.
Based on the preceding information, at the end of the first year, the pledge increased unrestricted net assets by:
A) $25,000.
B) $21,062.
C) $4,212.
D) $5,000.

Accepted Answer

The answer of A donor agrees to contribute $5,000 per...

Question 7

A voluntary health and welfare organization received $200,000 of pledges from donors on February 15, 20X9. The donors did not place either time or use restrictions on the amount pledged. The governing board estimated that 10 percent of the pledges would be uncollectible. During the remainder of fiscal 20X9, cash received from pledges amounted to $184,000. For the year ended June 30, 20X9, what amount should the voluntary health and welfare organization report as Contributions-Unrestricted?
A) $0
B) $200,000
C) $184,000
D) $180,000

Accepted Answer

The organization should report as Contributions-Unrestricted the amount of cash received from pledges during the remainder of fiscal 20X9, which is $184,000. The fact that the governing board estimated a 10 percent uncollectible amount does not affect the recognition of revenue, as long as the organization has a reasonable basis for the estimate. The $200,000 figure represents the total pledge amount, and is not relevant for financial reporting purposes unless some of the pledges were subject to time or use restrictions.

Question 8

On the statement of functional expenses prepared for a voluntary health and welfare organization, depreciation expense is allocated to
I. expenses for program services.
II. expenses for supporting services.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Accepted Answer

Depreciation expense is allocated to both program services and supporting services in a voluntary health and welfare organization's statement of functional expenses. This allocation reflects the use of assets in both direct program activities and activities that support these programs, such as management and fundraising.

Question 9

During the fiscal year ended June 30, 20X9, Global Charities, a voluntary health and welfare organization, received unrestricted cash contributions of $500,000 and temporarily restricted cash contributions of $300,000. All of the temporarily restricted contributions were restricted by the donors for equipment acquisitions. During the year ended June 30, 20X9, equipment costing $250,000 was acquired with the restricted contributions. As a result of these two contributions, Global Charities' statement of cash flows, prepared for the year ended June 30, 20X9, would report an increase in net cash provided by operating activities of:
A) $500,000.
B) $800,000.
C) $750,000.
D) $550,000.

Accepted Answer

The increase in net cash provided by operating activities would be $500,000, which represents the unrestricted cash contributions. Temporarily restricted contributions are not considered operating activities but rather financing or investing activities, depending on how they are used.

Question 10

Note: This is a Kaplan CPA Review Question
Which of the following types of health care organizations follow FASB authoritative literature? 
A) Option A
B) Option B
C) Option C
D) Option D

Accepted Answer

The answer of Note: This is a Kaplan CPA Review...

Question 11

On June 30, 20X9, a voluntary health and welfare organization received pledges from donors amounting to $50,000. The donors did not place any time or use restrictions on the amount pledged. It was estimated that 10 percent of the pledges would not be collected. How should the voluntary health and welfare organization report these pledges on its financial statements prepared at the end of its fiscal year, June 30, 20X9?
A) As fund balance for $45,000.
B) As contribution revenue-unrestricted for $45,000.
C) As contribution revenue-unrestricted for $50,000.
D) As fund balance-unrestricted for $50,000.

Accepted Answer

The pledges should be reported as contribution revenue-unrestricted for $45,000 ($50,000 pledged less 10% estimated uncollectible). Since the donors did not place any restrictions on the amount pledged, the organization can recognize the full amount as unrestricted revenue. Reporting the pledges as fund balance or fund balance-unrestricted would be incorrect, as these are balance sheet categories, not revenue categories.

Question 12

A voluntary health and welfare organization developed and printed informational materials which were intended to both educate the public about how its resources are used to help people in need and to also appeal to the public for much needed support. In this situation, the cost of the informational materials should be
A) accounted for as fund-raising expense.
B) allocated to expenses for program services.
C) allocated between expenses for program services and fund-raising expense.
D) accounted for as management and general expense.

Accepted Answer

The cost of the informational materials is directly related to both fund-raising and program services. Therefore, the cost should be allocated between expenses for program services and fund-raising expense.

Question 13

The transactions listed in the following questions occurred in a private, not-for-profit hospital during 20X8. For each transaction, indicate its effect on the hospital's statement of operations for the year ended December 31, 20X8.
Transaction: Received tuition revenue from hospital nursing program and cash from sales of goods in the hospital gift shop.
Effect on Statement of Operations:
A) Increases operating income.
B) Decreases operating income.
C) The transaction is reported on the statement of operations, but there is no effect on operating income.
D) The transaction is not reported on the statement of operations.

Accepted Answer

The receipt of tuition revenue and cash from sales of goods are both sources of income for the hospital, thus they increase operating income on the statement of operations.

Question 14

Note: This is a Kaplan CPA Review Question
The Weyman Hospital, a private, not-for-profit institution, reported the following information: 
What amount should the hospital report as net patient service revenue?
A) $840,000
B) $880,000
C) $900,000
D) $980,000

Accepted Answer

The answer of Note: This is a Kaplan CPA Review...

Question 15

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization. The donor did not place any use restrictions on the amount pledged. The stream of the payments is discounted at 6 percent. The first payment of $5,000 is received at the end of the first year. The present value factor for a five-payment annuity due on June 30, 20X9, at 6 percent is 4.2124.
Based on the preceding information, the increase in present value of the contributions receivable recognized at the end of the first year equals:
A) $5,000.
B) $1,264.
C) $4,212.
D) $787.

Accepted Answer

The answer of A donor agrees to contribute $5,000 per...

Question 16

A voluntary health and welfare organization received unrestricted cash donations of $20,000 from donors who attended a dinner held for the benefit of the organization. The costs of the dinner, including room rental, and other expenses, amounted to $7,000. On the statement of activities prepared for the voluntary health and welfare organization, the expenses of the dinner should be:
A) reported as management and general expenses.
B) netted against the $20,000 of contribution revenue.
C) reported as fund raising costs.
D) reported as programmatic expenses.

Accepted Answer

The costs of the dinner should be reported as fund raising costs because the purpose of the dinner was to benefit the organization and raise funds, and the costs were incurred in the process of conducting fundraising activities. These expenses are typically reported separately from programmatic expenses and management and general expenses on the statement of activities. Netting these expenses against the $20,000 of contribution revenue would not provide a clear picture of the organization's fundraising activities and their associated costs.

Question 17

A voluntary health and welfare organization received a $300,000 contribution on April 15, 20X9, from a donor who stipulated the donation be invested permanently in stocks and bonds. The donor further stipulated earnings from the investments be spent according to the wishes of the governing board of the voluntary health and welfare organization. Earnings from the investments for the year ended June 30, 20X9, amounted to $6,000. How would the voluntary health and welfare organization report this information for the year ended June 30, 20X9?
A) Increase in permanently restricted net assets of $306,000.
B) Increase in permanently restricted net assets of $300,000, and in temporarily restricted net assets of $6,000.
C) Increase in permanently restricted net assets of $300,000, and in unrestricted net assets of $6,000.
D) Increase in permanently restricted net assets of $300,000, and in board-designated net assets of $6,000.

Accepted Answer

The answer of A voluntary health and welfare organization received...

Question 18

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization. The donor did not place any use restrictions on the amount pledged. The stream of the payments is discounted at 6 percent. The first payment of $5,000 is received at the end of the first year. The present value factor for a five-payment annuity due on June 30, 20X9, at 6 percent is 4.2124.
Based on the preceding information, the journal entry to recognize present value at the time the pledge is received includes:
A) a credit to Pledges Receivable-Temporarily Restricted for $25,000.
B) a debit to Contributions-Temporarily Restricted for $21,062.
C) a debit to Pledges Receivable-Temporarily Restricted for $21,062.
D) a credit to Contributions-Temporarily Restricted for $25,000.

Accepted Answer

The present value of the pledge is $21,062 (5,000 x 4.2124). The journal entry to recognize the present value at the time the pledge is received includes a debit to Pledges Receivable-Temporarily Restricted for $21,062 and a credit to Contributions-Temporarily Restricted for $21,062.

Question 19

The transactions listed in the following questions occurred in a private, not-for-profit hospital during 20X8. For each transaction, indicate its effect on the hospital's statement of operations for the year ended December 31, 20X8.
Transaction: Endowment income was earned. The donor placed no restrictions on the investment earnings.
Effect on Statement of Operations:
A) Increases operating income.
B) Decreases operating income.
C) The transaction is reported on the statement of operations, but there is no effect on operating income.
D) The transaction is not reported on the statement of operations.

Accepted Answer

Endowment income with no donor restrictions is considered unrestricted revenue and increases operating income in a not-for-profit hospital's statement of operations.

Question 20

Note: This is a Kaplan CPA Review Question
Fike Hospital, a private, not-for-profit institution, receives an unrestricted gift of common stock with a fair value of $100,000. The donor had paid $40,000 for the stock five years earlier. The gift should be recorded as an
A) Increase in unrestricted net assets of $40,000.
B) Increase in temporarily restricted net assets of $100,000.
C) Increase in temporarily restricted net assets of $40,000.
D) Increase in unrestricted net assets of $100,000.

Accepted Answer

The gift should be recorded at its fair value at the time of donation, which is $100,000, as an increase in unrestricted net assets because it is an unrestricted gift.

Quiz 19: Not-For-Profit Entities

The disclosure, "net assets released from restrictions," is reported on which of the following financial statements for a voluntary health and welfare organization? I. The statement of cash flows. II. The statement of activities.

In accordance with ASC 958, pledges, which are temporarily restricted by donors, are reported as increases in temporarily restricted net assets on the statement of activities of a voluntary health and welfare organization when the

Which financial statement is(are) required for a voluntary health and welfare organization which is not required for a private, not-for-profit hospital? I. A statement of operations. II. A statement of functional expenses.

On the statement of functional expenses prepared for a voluntary health and welfare organization, depreciation expense is allocated to I. expenses for program services. II. expenses for supporting services.

Note: This is a Kaplan CPA Review Question Which of the following types of health care organizations follow FASB authoritative literature?

Note: This is a Kaplan CPA Review Question The Weyman Hospital, a private, not-for-profit institution, reported the following information: What amount should the hospital report as net patient service revenue?

Note: This is a Kaplan CPA Review Question Fike Hospital, a private, not-for-profit institution, receives an unrestricted gift of common stock with a fair value of $100,000. The donor had paid $40,000 for the stock five years earlier. The gift should be recorded as an