A private college receives the following pledges of support. 1. As part of its annual fund drive, alumni and friends of the college pledge $8 million. The college estimates that about 15 percent of the pledges will prove uncollectible. 2. A CPA firm promises to establish an endowed chair in the accounting department by donating $500,000. The chair agreement will provide that the funds be used to purchase investment grade securities and that the income from the securities be used to supplement the salary of the chair holder and support his or her academic activities. 3. A private foundation promises to donate $100,000 to be used to support a major revision of the college’s accounting curriculum. 4. An alumnus pledges $25,000 to the college’s loan fund, which is used to make loans to students requiring financial assistance. 5. The college is seeking support for construction of a new athletic fieldhouse. A local real estate investor promises to donate 10 acres of land on which a fieldhouse could be built if the college is able to raise the funds required to construct the building. The land has a market value of $1 million. Indicate the category of net assets (unrestricted, temporarily restricted, or permanently restricted) in which each of the contributions should be recorded and the amount of revenue, if any, that should be recognized when the pledge was made. Briefly explain your response.
> What are auxiliary enterprises? How are they accounted for?
> A government has outstanding $100 million of 20‐year, 10 percent bonds. They were issued at par and have 16 years (32 semiannual periods) until they mature. They pay interest semiannually. 1. Suppose current prevailing interest rates had decreased to 8 p
> Why are revenues presented on the financial statements net of scholarships and discounts?
> Please go to www.Guidestar.org, and download the Form 990 of three health care organizations for the most recent year available. Note that you will need to create a free account to access the forms: 1. Harris Country Healthcare Alliance 2. Southern Illin
> At the end of the year O’Toole General Hospital, which carries no medical malpractice insurance had the following list of malpractice claims: 1. Mr. Seymour Green, a heart patient, filed a claim for $600,000. Based on Mr. Green’s medical records, the hos
> On June 30, 2018, a county (government) hospital bought 3,000 shares of stock for $94,000 intending to hold the investment for its proposed expansion of its trauma center. The market value of the stock on August 31, 2015, the hospital’s fiscal year-end,
> Prepare journal entries for the following transactions. 1. Mt. Helen Hospital billed the state Medicaid program $365,000 for services provided at its standard billing rate. The prospective payment system gives Medicaid a 38 percent discount from these ra
> A not-for-profit residential assisted living center engaged in the following transactions during the year. Prepare appropriate journal entries. 1. It billed residents for $6,200,000. Of this amount it estimates that $3,000,000 will be paid by third-party
> In a particular month Northwest Medical Clinic reported the following: 1. It provided direct care services to patients, billing them $400,000. Of this amount it received $120,000 in cash, but as a consequence of bad debts it expects to collect a total of
> What are “general” compliance requirements? Provide several examples.
> Select the best answer. 1. A not-for-profit hospital signs a contract with an insurance company in which the company agrees to pay it $6 million in capitation fees for the year July 1, 2017, through June 30, 2018. Between July 1, 2017, and December 31,
> Select the best answer. 1. A not-for-profit hospital pays $150,000 interest on its bonds outstanding. The bonds were issued to finance construction of a new hospital wing. In its statement of cash flow, the interest should be shown as a cash outflow fr
> Did the government issue additional long‐term debt to support governmental activities during the year? Did it repay any long‐term debt used to support governmental activities? Did it engage in any in‐substance defeasances?
> The Dave Health Care Center (DHCC) was created in 2017 to provide medical services to low-income residents of Dave Town. DHCC had the following transactions during the year: 1. Received a pledge from a donor for $20,000, payable in equal installments of
> Below are the abridged operating statements of two not-for-profit hospitals that serve similar populations. 1. What is the performance indicator of the hospitals? 2. Using the performance indicator, which hospital reported better operations? Does anythin
> The data on pages 657–658 pertaining to two not-for-profit hospices were taken from GuideStar, an online database (www.guidestar.org) that provides information about not-for-profit organizations. Names and dates have been changed. The f
> J.M.H. (a not-for-profit) Rehabilitation Center engaged in the following transactions during the year ending December 31, 2018. 1. Michael Vincent donated $625,000 to the hospital to help pay for the purchase of new physical rehabilitation equipment. 2.
> The December 31, 2017, Statement of Net Assets of Mosholu Medical Center, a major urban hospital and research center The following transactions and events occurred in 2018: 1. The hospital received unrestricted pledges of $372,600 and temporarily restric
> The following represent a hospital’s inflows and outflows of cash: • Patient service fees received • Government grants for operating purposes • Government grants for specific research programs • Contribution restricted to construction of a new building •
> Mosby Memorial Hospital, a private, not-for-profit hospital, engaged in the following transactions. 1. At the beginning of the year, the hospital received a bequest in the form of equity securities. Mosby is required to hold the securities in perpetuity,
> A public university receives approximately 20 percent of its revenue from state appropriations. In which category of revenues (operating or nonoperating) should it report the state appropriations and why?
> What are the two main components of a single audit?
> What is the Yellow Book, and why has it influenced audits both of state and local governments and of not‐for‐profit organizations?
> Select one of the more recently established (and larger) capital projects funds (a major fund, if there is one). a. From where did the fund receive most of its resources? b. Did the city acquire or construct new capital assets using resources of this fun
> Kevin Watkins is a manager of a CPA firm. At the recommendation of the partner‐in‐charge he applied, and was accepted, for membership on the Accounting Standards Committee of the Government Finance Officers Association. Committee members are selected on
> Merrill Sachs is an accountant with the treasurer’s office of a midsize city. The city is about to issue $50 million in general obligation bonds to construct a new office complex. The treasurer has recommended that the city negotiate the sale of the bond
> In what significant ways would each of the three major statements of a government hospital differ from those of a private not-for-profit hospital?
> State law requires that school district budgets be balanced. After having worked for weeks to reduce expenditures to the minimum that would be educationally acceptable and politically feasible, the school board and the superintendent found the budget sti
> Five (of 10) members of a town council returned from the three‐day national convention of town council members in Las Vegas and submitted their expenses for reimbursement. The bills they presented indicated that they had stayed in luxurious suites, had l
> As business officer of a school district, Charles Bidright is required to sign off on all purchase orders over $1,000. Under state law and district policy all orders over $5,000 must be put out for bid. Government agencies are required to accept the low
> Henry Green is the assistant to a county’s comptroller. During the year he becomes aware of several accounting and budgeting practices that, taken together, clearly establish a pattern that the county is attempting to turn both budget and reporting defic
> In verifying the capital asset records of the electric utility department, Jean Hanson, staff auditor of a city’s internal audit department, noted that several trucks and pieces of equipment were out of service and apparently unrepairable. Therefore, the
> The Office of the Treasurer maintains an investment pool for several quasi‐independent governments, such as housing authorities and development boards, affiliated with a city. Michelle Ruiz, a senior manager in the treasurer’s office, recently became awa
> In June 2018, Jason King completed his audit of a 2017 grant that a city made to Field of Dreams, a private, not‐for‐profit organization that sponsors recreational programs for disadvantaged teens. In the course of his testing, King discovered that mater
> How are the capital projects and debt service funds reported in the government‐wide statement of net position?
> In a management letter following its year‐end audit of the North Country Hospital, the not‐for‐profit hospital’s independent audit firm questioned the adequacy of the hospital’s accounts receivable allowance for contractual adjustments. It noted that owi
> Why is it advantageous to budget for capital outlays apart from operating expenditures?
> Describe at least three limitations, both actual and potential, of SEA indicators, and tell how they might be overcome.
> Discuss the financial and nonfinancial measures that are important in evaluating the fiscal wherewithal of health care organizations.
> Why is it more important for governments and not‐for‐profit organizations than for businesses to report on service efforts and accomplishments?
> Indicate four significant criteria that “operational objectives” should satisfy.
> Rosewood Cancer Hospital, a county hospital, has the following assets: 1. $4 million restricted by third-party reimbursement agreements to be used to replace radiology equipment. 2. Cash and investments totaling $925,000 that the hospital board designate
> In what significant ways would each of the three major statements of a public university differ from those of a private university?
> What are the key reporting options for private colleges and universities?
> What key reporting options are available to government colleges and universities?
> How many debt service funds does the government maintain? How can you tell? Are any of these major funds? If so, for what types of obligations are they maintained?
> Review the 2014 financial statements of Hamilton College in Chapter 2, and respond to the following questions: 1. What percentage of the college’s total revenues (including nonoperating items and revenues of all funds) is attributable to tuition and fees
> In January 2017, Kirkland University receives a pledge of $200,000 to be used exclusively to support research in a specialized area of communication disorders. The university’s fiscal year ends on July 31. In December 2017 (the following fiscal year), Ki
> The following events and transactions relate to a single contribution. 1. A high-tech firm pledged to contribute $1 million in the company’s common stock to a university’s business school if the school would establish a new program in the management of i
> Discuss the different kinds of information a user of a hospital’s financial information can obtain from its financial statements. How would this information differ for a nongovernmental versus a governmental hospital?
> The fund balance sheet of Sundown State University, a public institution, is presented below. For purposes of external reporting, the university has opted to report as a special-purpose entity that engages in business type activities. As best the data pe
> A university maintains several plant funds as shown in the condensed balance sheets presented below. The fund structure and presentation are consistent with the AICPA college and university reporting model. Although this model has been superseded by FASB
> A balance sheet of Brown University, issued prior to the effective date of FASB Statement No. 117, is presented below. Recast the fund balance (net asset) section of the balance sheet so that it presents the fund balances in the three categories required
> A foundation promises to donate $1 million to a local public broadcasting station (a not-for-profit organization) in one year. When, and in what amount, should the station recognize revenue? The station applies a discount rate of 10 percent to all pledge
> A not-for-profit organization receives a restricted gift. When, and in which type of fund, should it recognize the revenue? When, and in which type of fund, should it recognize the related expense? What is the reason for the apparent inconsistency betwee
> How many capital projects funds does the government maintain? How can you tell? Are any of these major funds? If so, for what purposes are they maintained?
> The GASB has established a “60-day” rule for the recognition of property taxes in governmental funds. On what basis can you justify such a rule for property taxes but not for other revenues? Do you think the 60-day rule should be extended to all revenues
> In 2018, the Bakersville Independent School District incurred $12 million in expenditures for teachers’ salary and benefits. In that year, the legislature of the state in which the district is located voted to enhance the pension benefits of all teachers
> In October 2018, the Village of Mason levied $80 million of property taxes for its 2019 fiscal year (which is the same as the calendar year). The taxes are payable 50 percent by December 31, 2018, and 50 percent by June 30, 2019. The village collected $5
> The board of trustees of an independent school district is contemplating several policy changes and other measures, all of which it intends to implement within the fiscal year that ends August 31, 2018. It requests your advice on how the changes would af
> The Foundation for Educational Excellence has decided to support the Tri-County School District’s series of teacher training workshops intended to improve instruction in mathematics. The foundation is considering four ways of wording the grant agreement,
> For each of the following grants and awards, indicate whether the recipient government should recognize revenues and expenditures. In a sentence or two, justify your response. 1. As the result of damaging floods, the state of New York receives disaster a
> A city received two state grants in fiscal 2018. The first was an award for a maximum of $800,000, over a two-year period, to reimburse the city for 40 percent of specified costs incurred to operate a job opportunity program. During 2018, the city incurr
> The Metropolitan Housing Authority is charged with providing housing to low‐income residents. The authority is currently assessing two options, each of which would provide homes for 100 families. Under the first option the authority would renovate an exi
> Kyle Township charges residents $100 per year to license household pets. As specified in a statute enacted in 2018, residents are required to purchase a license by October 1 of each year; the license covers the period October 1 through September 30. The
> Manor County was awarded a state grant to establish evening athletic programs for at-risk youth. The $3.6 million award, to cover the calendar year 2018, was announced on November 15, 2017. According to the terms of the grant, the county will be reimburs
> A state imposes a sales tax of 6 percent. The state’s counties are permitted to levy an additional tax of 2 percent. The state administers the tax for the counties, forwarding the proceeds to the counties 15 days after it receives the proceeds from the m
> A city levies property taxes of $4 billion in June 2018 for its fiscal year beginning July 1, 2018. The taxes are due by January 31, 2019. The following (in millions) indicates actual and anticipated cash collections relating to the levy: June 2018………………
> The town of Blair determines that it requires $22.5 million in property tax revenues to balance its budget. According to the town’s property tax assessor, the town contains taxable property that it assessed at $900 million. However, the town permits disc
> Nonexchange revenues can be of four types. The GASB has identified four classes of nonexchange revenues: • Derived tax • Imposed • Government mandated • Voluntary For each of the following revenue transactions affecting a city, identify the class in whic
> For each of the following indicate the amount of revenue that Beanville should recognize in its 2017 (1) government-wide statements and (2) governmental fund statements. Provide a brief justification or explanation for your responses. 1. The state in w
> For each of the following situations, indicate the amount of revenue that the government should recognize in an appropriate governmental fund as well as in its government-wide statement of activities in its fiscal year ending December 31, 2018. Briefly j
> Why may flexible budgets be more important to a government’s business‐type activities than to its governmental activities?
> What are the main sources of the government’s revenues, including those from both governmental and business-type activities?
> The Pleasant Valley School District, which leases its buses from a private transportation company, has determined that the direct costs of operating a bus (including rental fees, driver, and fuel) is $40,000 per year. The district currently operates 30 b
> What is the purpose and effect of reinstating year‐end encumbrances on the books at the beginning of the following year?
> In what way will budgetary entries and encumbrances affect amounts reported on year‐end balance sheets or operating statements?
> The variances reported in the “final” budget‐to‐actual comparisons incorporated in the financial statements of many governments may be of no value in revealing the reliability of budget estimates made at the start of the year. Why? How can you rationaliz
> Why may a government’s year‐end results, reported in accordance with generally accepted accounting principles, not be readily comparable with its legally adopted budget?
> A political official boasts that the year‐end excess of revenues over expenditures was significantly greater than was budgeted. Are “favorable” budget variances necessarily a sign of efficient and effective governmental management? Explain.
> Why do most governments and not‐for‐profits budget on a cash or near‐cash basis even though the cash basis does not capture the full economic costs of the activities in which they engage?
> Why may flexible budgets be more important to a government’s business‐type activities than to its governmental activities?
> Why is it important that governments and not‐for‐profits coordinate their processes for developing appropriations budgets with those for developing capital budgets?
> Generally accepted accounting principles require governments to include in their annual reports a comparison of actual results with the budget for each governmental fund for which an annual budget has been adopted. This information is generally presented
> The Disability Research Institute receives its funding mainly from government grants and private contributions. In turn, it supports research and related projects carried out by universities and other not-for‐ profits. Most of its government grants are r
> For each of the following organizations, propose at least one measure of outputs and two of outcomes. 1. The admissions office of a selective private college 2. The sales tax division of a city government 3. A private foundation that provides college sch
> Does the government encumber goods or services that have been ordered but have not yet been received? How, if at all, are encumbrances reflected on the governmental fund balance sheet? How, if at all, are they reflected on the government‐wide statement o
> Does the CAFR include budget‐to‐actual comparisons of nonmajor funds? If so, in what section?
> In which section of the Comprehensive Annual Financial Report (CAFR) are the budget‐to‐actual comparisons of the major funds? a. Which accounting basis did the City follow to prepare its annual operating budget? b. Are the actual amounts on a GAAP or a b
> Distinguish between nonspendable, restricted, committed, and assigned fund balance.
> Distinguish among the three categories of restrictiveness into which the net assets of not‐for‐profit organizations must be separated for purposes of external reporting. By whom must these restrictions be imposed for resources to be considered restricted
> What is a CAFR? What are its main components?
> In what way, if any, does the accounting equation as applied in governmental and not‐for‐profit accounting differ from that as applied in business accounting?
> From what two perspectives must the financial statements under the GASB No. 34 reporting model be prepared? How do the two differ from each other?
> What is permanent about a permanent fund?
> What are fiduciary funds? What are the two main types, and what is the distinction between them?
> The “object classification” budget of a police department includes the following expense categories: • Salaries • Employee benefits • Supplies • Equipment • Vehicle maintenance, gas, etc. • Dues and subscriptions Based on your lay knowledge of the operat
> As will be emphasized later in this text, depreciation is recorded in proprietary funds but not in governmental funds. What is the rationale for recording depreciation in proprietary funds?
> Distinguish between funds as the term is used in governmental as contrasted with business accounting
> Why are there generally no capital projects (work in progress or other long‐lived assets) in governments’ capital projects funds? Why are there generally no long‐term debts in debt service funds?
