Chapter 16 Summary:



Although the PFRSs are designed to apply to business entities, they can also be
applied to non-profit organizations.
Non-profit organizations carry out socially desirable needs of the community or
its members without the intention of making profit. NPOs can be classified into
the following: (1) Health Care Organizations, (2) Private, non-profit, universities
and colleges, (3) Voluntary Health and Welfare Organizations, and (4) Other nonprofit organizations.
Accounting principles under US GAAP:
- Contributions are classified based on donor’s restrictions as: (1) unrestricted,
(2) temporarily restricted, and (3) permanently restricted. These
classifications are also applied to the net assets. Internally-restricted funds
are unrestricted.
- Unconditional promises to give contributions are recognized when the
promise is received from the donor. Conditional promises are recognized only
when the performance of the attached condition is reasonably certain.
- Cash and other non-cash assets received as contributions are recognized as
assets and revenue measured at fair value.
- Services in-kind that enhance a non-financial asset or require specialized
skills are recognized as revenue and expense. Other services are not
recognized.
- Works of art and similar items received as donation are generally not
recognize, unless they meet the asset recognition criteria.
- Contributions received by an NPO acting as an agent are recognized as
liabilities.
- Net assets released from restrictions are presented as a decrease in
temporarily restricted net assets and an increase in unrestricted net assets.
- NPOs shall prepare the following financial statements: (1) Statement of
financial position, (2) Statement of Activities, (3) Statement of Cash Flows,
and (4) Notes.
- Expenses are presented using the following functional classification: (1)
Program services and (2) Supporting activities.
- For a health care organization:
a. Net patient revenue = Gross patient service revenue less contractual
adjustments, employee discounts and billed charity care.
b. Premium revenue = revenues from capitation agreements.
c. Other revenues = all other unrestricted revenues.
 Restricted contributions are presented separately from the
revenues section of the statement of operations
- For a private, non-profit, universities and colleges: Net revenue from tuition
and fees = Total assessments less refunds and scholarship grants that are
not granted as compensation for services rendered by the grantee. All other
types of scholarships are expensed.
PROBLEMS
Problem 16-1: Multiple Choice
1. Which of the following statements is correct?
a. The PFRSs are not applicable to non-profit organizations.
b. The financial statements of non-profit entities need not to be audited.
c. The preparation of a complete set of financial statements is optional for
non-profit organizations.
d. Although the PFRSs are designed to be applied by business entities, they
can also be applied by non-profit organizations.
2. It is the organization that carries out socially desirable needs of the community or
its members without the intention of making profit.
a. NPO
b. NFP
c. NCO
d. All of these
3. According to PAS 1 Presentation of Financial Statements, a non-profit entity that
applies the PFRSs
a. Must adopt all of the terminologies and principles under the PFRSs
without any exception.
b. Need not present an additional statement of financial position in cases
where the entity applies an accounting policy retrospectively, restate its
financial statements retrospectively, or make reclassification adjustments
during the period
c. May need to amend the description used for particular line items in the
financial statements and for the financial statements themselves.
d. May suffer negative consequences.
4. According to the Preface to International Financial Reporting Standards, nonprofit entities
a. Are prohibited from using the IFRSs
b. Are discouraged from using the IFRSs
c. May find the IFRSs appropriate
d. None of these
5. Which of the following principles used by business entities is not applicable to
non-profit organizations?
a. Accrual basis of accounting
b. Going concern
c. Use of fair value measurement
d. Disclosure of earnings per share
6. For a non-profit entity, the operating activities section of the statement of cash
flows can be proved using
a. Direct method
b. Indirect method
c. A or B
d. Not prepared
7. Which of the following financial statements are prepared by non-profit
organizations?
I. Statement of Financial Positions
II. Statement of Activities
III. Statement of Cash Flows
IV. Notes
a.
b.
c.
d.
I and II
I, III and IV
I, II and IV
All of these
8. In current practice, the financial reporting for non-profit organizations (choose the
incorrect statement)
a. Is essentially similar to that of business entities
b. Focuses on fund accounting
c. Focuses on the reporting entity concept
d. Adopts PFRS principles
9. The statement of cash flows of a non-profit entity classifies cash flows into
a. Program services and support activities
b. Unrestricted, temporarily restricted, and permanently restricted
c. Direct and indirect
d. Operating, investing and financing activities
10. Which of the following is not application to non-profit entities?
a. The statement of cash flows classifies movements in cash and cash
equivalents during the period into operating activities, investing activities
and financing activities
b. Use of accrual basis of accounting
c. Presenting cash flows from operating activities in the statement of cash
flows using either direct or indirect method
d. Measuring investments in equity securities using the lower of cost and
market value.
11. Which of the following is not applicable to non-profit organizations?
a. Depreciating an equipment using the sum-of-the-years’ digits method.
b. Amortizing an intangible asset with finite useful life.
c. Recognizing impairment loss when an asset’s carrying amount exceeds its
recoverable amount.
d. Reporting extraordinary items in the financial statements.
12. Which of the following is not applicable to non-profit organizations?
a. Accounting for combinations of entities using the principles provided under
PFRS 3 Business Combinations.
b. Measuring investments in marketable securities at fair value and
recognizing changes in fair values as unrealized gains and losses in the
statement of activities.
c. Use of present value techniques for financial assets and financial
liabilities.
d. Treating organizations costs as assets to be amortized over a period not
exceeding 5 years.
13. Which of the following may appropriately be applied by a non-profit organization
when accounting for a lease contract that does not qualify as a donation?
a. SFAS No. 116
b. SFAS No. 117
c. PFRS 16
d. All of these
14. According to SFAS No. 116, restricted contributions received y an NPO are
recognized
a. When the performance of the condition is reasonably certain
b. Only in the notes
c. As liabilities
d. As restricted revenues
15. According to SFAS No. 116, a restricted fund for the acquisition of a plant asset
which was disbursed during the period
a. Increases temporarily restricted net assets
b. Decreases unrestricted net assets
c. Decreases temporarily restricted net assets
d. Does not affect unrestricted net assets
Problem 16-2: Multiple Choice
Instruction: Use US GAAP principles in answering the succeeding questions.
1. What is the current period effect of a fund received in the previous period that
was restricted for the payment of salaries of personnel which was totally
disbursed in the current period?
a.
b.
c.
d.
Net increase in temporarily restricted net assets
Net decrease in unrestricted net assets
Net decrease in permanently restricted net assets
Zero net effect on unrestricted net assets
2. Unconditional promises to give contributions are recognized by the done NPO
a. When the promise is received from the donor.
b. When the condition becomes unconditional.
c. When the performance of the condition is reasonably certain.
d. B or C
3. Conditional promises to give are recognized by the done NPO
a. When the promise received is from the donor.
b. When the condition becomes unconditional.
c. When the performance of the condition is reasonably certain.
d. B or C
4. Contributions are measured at
a. Cost to the donor
b. Fair value
c. Lower of cost or fair value
d. Fair value less costs to sell
5. Cash and other non-cash assets received as contributions are recognized by a
non-profit organization as
a. Asset
b. Revenue
c. A and B
d. Not recognized
6. Donations of services that enhance a non-financial asset or require specialized
skills are recognized by a non-profit organization as
a. Asset
b. Revenue
c. Expense
d. B and C
7. Services received as donations that do not enhance a non-financial asset or
were not provided by a professional are recognized by a non-profit organization
as
a. Asset
b. Revenue
c. Expense
d. Not recognized
8. Contributions received by a non-profit organization in the form of works of art and
similar items
a. Are always capitalized
b. Need not be capitalized if they do not meet the recognition criteria for an
asset
c. Are expensed immediately if they do not meet the recognition criteria for
an asset
d. B or C
9. Contributions received by an NPO acting as an agent are recognized as
a. Asset
b. Revenue
c. A or B
d. Liability
10. These refer to costs incurred by a non-profit organization on activities that
directly result to the fulfillment of the organization’s purpose
a. Program services
b. Supporting activities
c. Losses
d. Cost of goods sold
11. Restricted assets acquired during the period that are used for long-term
purposes because of donor restrictions are classified in an NPO’s statement of
cash flows as
a. Operating activities
b. Investing activities
c. Financing activities
d. Supporting activities
12. Which of the following is a deducted when computing for a health care
organization’s net patient revenue?
a. Contractual adjustments
b. Tuition refunds on cancelled enrollments
c. Uncollectible accounts
d. Direct costs on capitation agreements
13. Dividends received by a health care organization is classified in the statement of
operations as
a. Net patient revenue
b. Premium revenue
c. Other revenues
d. Any of these
14. Which of the following is deducted when computing for a private, non-profit,
colleges or university’s net revenue on tuition and fees?
a.
b.
c.
d.
Contractual adjustments
Charity care
Tuition refunds on cancelled enrollments
Uncollectible accounts
15. Scholarships and fellowships granted by a private, non-profit college or
university are deducted when computing for net revenues on tuition and fees
a. The scholarships and fellowships were granted as compensation for
services rendered by the grantee.
b. The scholarships and fellowships were granted to faculty members or their
dependents.
c. The scholarships and fellowships were granted because of academic
excellence rather than as compensation for services rendered.
d. Scholarship grants are not deducted but rather recognized as expenses.
Problem 16-3: Multiple Choice
Accounting for contributions
Use the following information for the next seven questions:
Budoy Organization, a non-profit organization, received the following donations
during the period:




January 1, 20x1: Land with fair value of 4,000,000 to be used at the
discretion of Budoy Organization.
February 15, 20x1: Cash of 8,000,000, restricted for the acquisition of a
truck. The truck will be used n Budoy Organization’s outreach programs.
March 1, 20x1: Investment in equity securities with fair value of 2,000,000
to be held indefinitely. Only the investment income shall be used by Budoy
Organization in its current operations.
May 1, 20x1: JPIA members from various universities contributed services
in a tree-planting activity initiated by Budoy Organization Although the
volunteers rendered their services for free, Budoy Organization estimates
that the fair value of these services would amount to 20,000.
On June 30, 20x1, Budoy Organization acquired a truck for 8,000,000 and
received dividends of 240,000 from the equity securities.
1. How much is the unrestricted contributions revenue?
a. 4,240,000
b. 4,000,000
c. 6,020,000
d. 4,020,000
2. How much is the temporarily restricted contributions revenue?
a. 8,000,000
b. 12,000,000
c. 12,020,000
d. 10,000,000
3. How much is the permanently restricted contributions revenue?
a. 2,240,000
b. 6,000,000
c. 10,000,000
d. 2,000,000
4. How much is the “net assets released from restrictions” in 20x1?
a. 8,240,000
b. 2,000,000
c. 8,000,000
d. None
5. How much is the net effect of the transactions in the year-end unrestricted net
assets? Ignore depreciation? Increase (Decrease)
a. 20,240,000
b. 12,240,000
c. (12,240,000)
d. 20,000,000
6. How much is the net effect of the transactions in the year-end temporarily
restricted net assets? Ignore depreciation? Increase (Decrease)
a. 4,000,000
b. (4,000,000)
c. 4,240,000
d. 0
7. How much is the net effect of the transactions in the year-end permanently
restricted net assets? Ignore depreciation? Increase (Decrease)
a. 2,000,000
b. 2,240,000
c. (6,000,000)
d. 0
Classification of contributions
Use the following information for the next three questions:
Doggy Organization, a non-profit entity, disclosed the following in its 20x1 notes
to the financial statements:






Received shares valued at 8,000,000 to be retained with the dividends
used to support current operations.
Net resources of 4,000,000invested in plant assets.
Received equipment valued at 20,000,000 which is to be sold with the
proceeds used to renovate the children’s playground.
Board-designated funds of 2,400,000.
Received 80,000 cash from a donor who did not specify any, use
restrictions on the contribution; however, the donor specified that the
donation should not be used until 20x2
Received 3,200,000 from a donor who stipulated that the contribution shall
be invested indefinitely and that the earnings shall be used for
scholarships. Investment income in 20x1 amounted to 200,000.
8. How much is included in the unrestricted net assets?
a. 6,400,000
b. 14,400,000
c. 6,480,000
d. 14,480,000
9. How much is included in the temporarily restricted net assets?
a. 20,080,000
b. 20,000,000
c. 20,200,000
d. 20,280,000
10. How much is included in the permanently restricted net assets?
a. 11,200,000
b. 11,400,000
c. 11,280,000
d. 11,480,000
Non-cash assets
11. Bogart Organization, a non-profit entity, received the following donations during
20x1:
 Land with fair value of 40,000,000 to be sold to acquire a bus.
 Shares of stock with fair value of 12,000,000 to be retained indefinitely.
The dividends from the shares will be used to support current operations.
As a result of the donations above, how much should Bogart report as increase
in temporarily restricted net assets?
a. 40,000,000
b. 52,000,000
c. 12,000,000
d. 0
Services
12. A short-circuit destroyed the offset printing machine of Scooby Organization, a
non-profit entity. Mr. Doug, a professional offset mechanic, repaired the machine
for free. The fair value of the services is estimated at 40,000. The entry to record
the transaction includes
a. Debit to asset and credit to contributions revenue for 40,000
b. Debit to contributions revenue and credit to asset for 40,000
c. Debit to expense and credit to contributions revenue for 40,000
d. Only a memorandum entry shall be made
Contributions revenue
13. Aw-aw Organization, a non-profit entity, received the following during 20x1:
 80,000 restricted by the donor to be used as allowance of members of Awaw’s choir.
 480,000 proceeds from sales of calendars, mugs, T-shirts, and other
souvenir items. The fair value of the items sold is 300,000 while the cost is
200,000.
 4,000,000 to be used only upon the completion of a new jam room that
was only 40% complete as of December 31, 20x1. If the facility is not
completed by May 21, 20x2, the cash shall be returned to the donor.
How much contribution revenue shall Aw-aw recognize from the cash receipts
listed above?
a.
b.
c.
d.
180,000
4,380,000
560,000
260,000
Net assets released from restrictions
Use the following information for the next two questions:
Arf-arf Organization, a non-profit entity, received the following contributions
during 20x1:

400,000 cash restricted for the purchase of equipment.

1,000,000 cash restricted for the renovation of an old building owned by Arf-arf
Organization.
Arf-arf made the renovation in 20x2 and acquired the equipment in 20x3.
14. How much revenue is recognized on the contributions in 20x1?
a. 400,000
b. 1,400,000
c. 1,000,000
d. 0
15. How much “net assets released from restrictions” is reported in Arf-arf’s 20x2
statement of activities?
a. 400,000
b. 1,400,000
c. 1,000,000
d. 0
Net effect on net assets
Use the following information for the next two questions:
K9 Organization, a non-profit entity, had the following transactions during 20x1:


Received contribution of 800,000 to be used for student scholarships. Of this
amount, 480,000 was expended during the year.
Expended 200,000 for student scholarships from a 240,000 grant received in the
previous year.
16. What is the net effect of the transactions above in K9’s 20x1 unrestricted net
assets? Increase (decrease)
a. (120,000)
b. 120,000
c. 680,000
d. 0
17. What is the net effect of the transactions above in K9’s 20x1 temporarily
restricted net assets? Increase (decrease)
a. 120,000
b. (680,000)
c. 320,000
d. 0
Receipts of resources as an Agent
18. Green Leaves Organization, a non-profit entity, received relief goods to be
distributed to typhoon victims in a specified area. Green Leaves has no discretion
in determining the parties to be benefited; it must deliver the resources to the
specified beneficiaries (i.e., typhoon victims). The relief goods have a fair value
of 400,000 and a cost of 250,000. How much contributions revenue shall be
recognized on the goods received?
a. 400,000
b. 250,000
c. 150,000
d. 0
Intermediary between donor and done
19. Astig organization, a non-profit entity, is formed to oversee the welfare of battered
husbands. Astig encourages these pitiful husbands to seek legal advice. To provide
these services, Astig develops and maintains a list of lawyers and law firms that are
interested in providing free legal services to victims. Astig then encourages individuals
in need of these services to contact Astig for referral to lawyers that may be willing to
serve them. The lawyer decides on whether and how to serve a specific individual.
During the year, Astig Organization referred Mr. Darrell, Mr. Raymund, Mr. Rex, and Mr.
Rhad Vic, all suffering from serious physical injuries inflicted by their respective wives,
to Macmod & Areno Law Firm, which provided these husbands free legal services. The
husbands would have paid a total of ₱10M if they asked legal advice from other
lawyers.
How much is the contribution revenue to be recognized by Astig Organization for the
legal services provided to the victims?
a.
10M
b.
2M
c.
5M
d.
0
Restricted contribution
20. Schneider Hospital, a non-profit entity, had the following receipts during the year:
Sales from canteen
Investment income
Contributions for the renovation of the Hospital
1,000,000
200,000
300,000
How much shall be reported as other revenues on the statement of operations?
a. 1,000,000
c. 300,000
b. 1,200,000
d. 1,500,000
PROBLEM 16-4: MULTIPLE CHOICE
Unconditional and Conditional promises to give
Use the following information for the next five questions:
On December 31, 20x1, Kulasa Organization, a not-for-profit entity, had the following
transaction:
Ms. Alpha made an unconditional pledge to give Kulasa Organization ₱48,000 each
year over the next five years starting on December 31,20x2. The appropriate discount
rate in 10%.
Ms. Beta promised to provide half of the funds needed to construct a new building if
Kulasa can get the remaining half of the needed funds from other donors by March1,
20x2. As of December 31, 20x1, Kulasa has already accumulated 48% of the needed
construction funds. Kulasa’s Board of Trustees strongly believes that remaining 2% will
be received by the end of January 20x2. The estimated total costs of construction is
₱4,000,000.
Mr. Charlie promised to give Kulasa Organization a used offset printing equipment if
Kulasa acquires a paper cutting machine. The offset printing equipment has a fair value
of ₱4,800,000. Because of recent cash flow problems, Kulasa’s Board of Trustees
believes that it will not be able to acquire a paper cutting equipment in the near term.
Mr. Delta gave Kulasa Organization cash of ₱2,000,000as a challenge grant. Kulasa
Organization can keep the ₱2,000,000 if it can raise an additional ₱2,000,000 by the
end of Mach 20x2. If Kulasa Organization fails to comply with the condition, it shall
returnthe amount received to Mr. Delta.
How should the transaction with Ms. Alpha accounted for by Kulasa?
As an unrestricted support for ₱181,958
As a temporarily restricted for ₱ 181,958
As asset and liability measured at ₱181,958
Not accounted for but disclosed only in the notes
How should the transaction with Ms. Beta be accounted for by Kulasa?
As an unrestricted support for ₱2,000,000
As a temporarily restricted support for ₱2,000,000
As asset and liability measured at ₱2,000,000
Not accounted for but disclosed only in the notes
How should the transaction with Mr. Charlie be accounted for by Kulasa?
a.
As an unrestricted support for ₱4,800,000
b.
As a temporarily restricted support for ₱4,800,000
c.
As asset and liability measured at ₱4,800,000
d.
Not accounted for but disclosed only in the notes
How should the transaction with Mr. Delta be accounted for by Kulasa?
a.
As an unrestricted support for ₱2,000,000
b.
As a temporarily restricted support for ₱2,000,000
c.
As asset and liability measured at ₱2,000,000
d.
Not accounted for but disclosed only in the notes
What is the total net effect of the transaction above in Kulasa’s net assets?
a.
Increase in temporarily restricted net assets
b.
Decrease in temporarily restricted net assets
c.
Decrease in unrestricted net assets
d.
No effect on net assets
Endowments
During 20x1, Blacky organization, a not-for-profit entity, received the following
donations:
On December 1, 20x1, Mr. Meow established a ₱4,000,000 endowment fund in favor of
Blacky Organization by appointing Whitey Bank and Trust Co. as the trustee. The
income from the fund is to be paid to Blacky Organization for use in its current
operations. Income from the fund is dependent on the investment performance of the
fund.
On December 31, 20x1, Blacky Organization received ₱400,000 in cash from Ms.
Mingming Too under a charitable remainder annuity trust agreement designating Blacky
Organization as the trustee and charitable remainder beneficiary. The terms of the trust
agreement require Blacky Organization, as trustee, to invest the trust assets and pay
₱20,000 each year, starting on December 31, 20x2, to Mr. Cute Puppy, the annuitant
(i.e., income beneficiary) for the remainder of Mr. Cute Puppy’s life. Upon death of Mr.
Cute Puppy, Black Organization may use its remainder interest for any Purpose
consistent with its mission. The appropriate discount rate is 10% and the life expectancy
of Mr. Cute Puppy is 5 years.
What is the total net effect of the transactions above in Blacky's net assets?
increase in temporarily restricted net assets by P324,184
increase in temporarily restricted net assets by P4,324,184
increase in temporarily restricted net assets by P75,816
no effect
Functional classification of expenses
Use the following information for the next seven questions:
Ranger Organization, a non-profit entity, had the following expenditures during the year:
Child care services provided for indigent families
Work to help elderly citizens
Administrative salaries
Fund-raising costs
560,000
600,000
200,000
100,000
How much is classified as "program" expenses?
a.
300,000
b.
1,260,000
c.
200,000
d.
1,160,000
How much is classified as "support" expenses?
a.
1,160,000
b.
200,000
c.
300,000
d.
1,260,000
Net patient service revenue
9. Gary Hospital, a non-profit entity, rendered ₱2,400,000 in services to patients,
₱2,000,000 of which is charged to PhilHealth. It is estimated that only ₱2,120,000 will
be collected. Of the ₱280,000 difference, ₱140,000 is the estimated contractual
adjustments with PhilHealth, ₱20,000 is allowance for discounts to hospital employees,
₱80,000 is charity care and ₱40,000 is the uncollectible accounts. How much is the net
patient service revenue?
a.
2,120,000
b.
2,260,000
c.
2,160,000
d.
2,180,000
Capitation agreement
10. Sparky Hospital, a non-profit entity, signed an agreement with Melay, Inc. to provide
medical services to each of Malay’s 100 employees for ₱2,000 per month, per
employee. During the month of April 20x1, only 20 employees availed of the medical
services. How much is the premium revenue recognized in April 20x1?
a. 200,000
b. 40,000
c. 60,000
d. 0
Other revenues
11. Heart Hospital, a non-profit entity, had the following transactions during the period:
Sales of ₱480,000 from gift shop and cafeteria.
Received ₱80,000 dividends from donated shares. Use of the dividends is unrestricted.
A computer consultant provided free services on the upgrading of Heart's information
system. Heart would have paid ₱200,000 for these services if they had not been
donated.
Purchased medicines from a pharmaceutical company for ₱40,000. However, the
pharmaceutical company did not charge Heart Hospital for the purchase because the
medicines were being donated to Heart Hospital.
How much is classified as other revenues in Heart Hospital's statement of operations?
a. 520,000
b. 600,000
c. 800,000
d. 0
Net patient service revenue
12. Umpong Hospital, a non-profit entity, had the following receipts during the year:
Billing to patients
Sales from canteen
Undesignated gifts (Unrestricted contribution)
Contractual adjustments
Billings on capitation agreements
Interest income
Uncollectible accounts
Salaries of the doctors
4,800,000
1,000,000
200,000
1,200,000
240,000
80,000
400,000
1400,000
How much is the net patient service revenue?
a. 3,840,000
b. 3,600,000
c. 4,040,000
d. 2,440,000
Net revenues from tuition and fees
13. For the current semester, Piper University, a non-profit entity, assessed its students
₱4,000,000 for tuition and fees. The following information was also determined:
Refunds for class cancellations and withdrawals of enrolment
Student scholarships granted to academic scholars
Student scholarships granted to student assistants
Student scholarships granted to faculty members
enrolled in the post-graduate program
Student scholarships granted to faculty members'
dependents
Estimated uncollectible accounts
80,000
200,000
480,000
120,000
240,000
320,000
How much is the net revenues from tuition and fees?
a. 3,920,000
b. 2,880,000
c. 2,560,000
d. 3,720,000
Accounting for marketable securities
14. Pipita Organization, a non-profit entity, acquired short-term investment in shares of
stocks for ₱800,000 using unrestricted net assets. During the year, Pipita received cash
dividends of ₱40, 00. At year-end, the shares have a fair value of ₱880,000. What is the
effect of the transactions described above on the year-end statement of activities of
Pipita?
a. 120,000
b. 80,000
c. 40,000
d. 0
Depreciation
15. On January 1, 20x1, Toby Organization, a non-profit entity, had the following
transactions:
Purchased a vehicle costing P600,000 using unrestricted cash
Received a vehicle with fair value of P480,000 from donation
Both vehicles have estimated useful lives of 5 years and no residual value. Toby has an
accounting policy implying a time restriction on gifts of long-lived assets. In Toby's 20x1
statement of activities, what amount of total depreciation expense should be included
under changes in unrestricted net assets?
a. 1,080,000
b. 120,000
c. 216,000
d. 0
Statement of cash flows
Brownie Organization, a non-profit entity, had the following cash flows during the year:
₱200,000 unrestricted contributions.
₱2,400,000 from fundraising activities to support current operations.
₱400,000 from a donor who stipulated that the money be spent in accordance with the
wishes of Brownie's governing board.
₱800,000 cash dividends restricted for the purchase of equipment
₱800,000 expenditure to acquire equipment with the cash dividends above.
₱1,200,000 from a donor who stipulated that the contribution shall be invested
indefinitely. Income from the contribution may be used in furtherance of Brownie's
mission.
16. How much is the net cash flows from operating activities?
a. 2,200,000
b. 2,600,000
c. 3,000,000
d. 1,800,000
17. How much is the net cash flows from investing activities?
a. (800,000)
b. 400,000
c. 2,000,000
d. 0
18. How much is the net cash flows from financing activities?
a. 400,000
b. 2,000,000
c. 1,200,000
d. 0
PROBLEM 16-5: FOR CLASSROOM DISCUSSION
Recognition and measurement
An NPO receives unconditional donations of ₱300,000 cash and equipment with fair
value of ₱2,000,000 and carrying amount of ₱1,000,000. What is the journal entity to
record the receipt of the donations?
On January 1, 20x1, an NPO receives the following donations:
Cash of P3,000,000 to be used to acquire an equipment.
Investment in equity securities with fair value of ₱1,000,000 to be held indefinitely. Only
the investment income shall be used by the entity in its operations.
On December 31, 20x1, the entity acquires an equipment for ₱3,000,000 and receives
cash dividends of ₱50,000 from the equity securities.
、
Requirement: Provide the journal entries.
Unconditional and Conditional promises
On January 1, 20x1, Entity A receives the following promises:
Donor X promises to give an unconditional donation of ₱200,000 on January 15, 20x1.
Donor Y promises to donate construction materials with fair value of ₱300,000 if Entity A
starts the construction of a children's playground.
Entity A receives the donation of Donor X on January 15, 20x1 and the donation of
Donor Y on February 1, 20x1, although the construction of the playground is not yet
started.
Requirement: Provide the journal entries.
Fund Accounting
Entity A receives the following donations:
Cash of ₱2M to be used at the discretion of Entity A's management
Cash of ₱3M restricted for the acquisition of equipment.
Trust fund of ₱5M which Entity A shall never use; only the income therefrom.
Entity A acquires an equipment for ₱3M and receives cash dividends of ₱200,000 from
the investment at the end of the period.
Requirements:
Record the transactions above under a fund accounting system.
Compute for the ending balances of unrestricted, temporarily restricted, and
permanently restricted net assets.
Other forms of contributions
5. The receipt of which of the following will give rise to the recognition of a revenue by
a non-profit organization?
a. Services in-kind provided by non-professionals.
b. Donation of work of art to be held for public exhibition, must be preserved and never
to be sold.
c. Services in-kind that enhance a non-financial asset or require specialized skills.
d. Relief goods to be distributed to flood victims in a specified area.
Financial statements
6. Which of the following financial statements is generally not required of non-profit
organizations?
a. Statement of activities
b. Statement of changes in equity.
c. Statement of cash flows
d. Notes
Presentation of Expenses
7. According to SFAS No. 117, the functional classifications of expenses of non-profit
organizations are
a. Program services and Supporting activities
b. Selling and Administrative costs
c. Nature and Function expenses
d. Cash and Non-cash expenses
8. According to SFAS No. 117, this functional classification of expenses of non-profit
organizations pertains to activities that result in goods and services being distributed to
beneficiaries, customers, or members that fulfill the purposes or mission for which the
organization exists.
a. Distribution costs
b. Program services
c. Supporting activities
d. Consumption activities
Net patient service revenue
9. ABC Hospital, a non-profit entity, had the following receipts during the year:
Billings to patients
Sales from canteen
Undesignated gifts (Unrestricted contributions)
Contractual adjustments
Billings on capitation agreements
Interest income
Uncollectible accounts
Employee discounts
Charity care, included in billings
1,200,000
250,000
50,000
300,000
60,000
20,000
100 000
50,000
20,000
Requirement: How much is the net patient service revenue?
Performance indicator
10. A Health Care Organization uses revenues and gains over expenses and losses as
its performance indicator. Which of the following items would be included in the
calculation of this indicator?
Sales from the hospital's canteen
Unrealized gains on marketable securities
Net assets released from restriction used for operating expenses
Contributions received from a donor in the current year that cannot be spent until the
following year.
a. I and III
b. I and II
c. L, III and IV
d, I, III and IV
Private, non-profit, Colleges and Universities
11. For the current semester, a non-profit university, assessed its students ₱2,000,000
for tuition and fees. Additional information follows:
Refunds for class cancellations and withdrawals of enrolment
Student scholarships granted to academic scholars
Student scholarships granted to student assistants
Student scholarships granted to faculty members
enrolled in the post-graduate program
Student scholarships granted to faculty members
Dependents
Estimated uncollectible accounts
40,000
100,000
240,000
60,000
120,000
160,000
Requirement: How much is the net revenues from tuition and fees?