ACCT. F/GOVT.&NONPROFIT(LL)W/ACCESS >BI
18th Edition
ISBN: 9781260839494
Author: RECK
Publisher: MCG
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Chapter 13, Problem 20EP
To determine
Identify the activities subject to unrelated business activities.
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Explain when donated materials should be recognized as a contribution and as an expense by a not-for-profit organization.
Why do states and the federal government exercise oversight responsibility over not-for-profit, tax-exempt corporations?
A generous benefactor pledges $1 million to The Smith Foundation, a NPO that promotes the arts. The gift is to be used to provide scholarships for talented musicians at a music camp operated by the Foundation. The gift was given in August 2006 to support the Summer 2007 music program. The Foundation Director argues that the gift is a conditional restricted gift and therefore cannot be recognized as revenue in 2006. The accountant argues that the gift is an unconditional restricted gift and must be recognized in the current year. What is the basis for the Director’s argument? What is the basis for the accountant’s argument? In your answer provide an explanation of the terms conditional, unconditional, restricted and unrestricted.…
Required information
[The following information applies to the questions displayed below.]
The Town of Elizabeth operates an old train station as an enterprise fund. The train station is on the national register of
historic buildings. Because the town has held the building for such a long time, the Central Station Fund has no long-term
debt. The only capital assets recorded by the Central Station Fund are machinery and equipment. Businesses and
individuals rent space in the building for private events, and the town provides all services related to the operation and
maintenance of the building. Following is information related to the fund's operating activities.
1. Rental income of $94,394 was accrued based upon reservations.
2. Cash in the amount of $90,164 was received on accounts.
3. Cash expenses for the period included administrative services, $25,192; maintenance and repairs, $72,844; and utilities,
$30,106.
4. The Central Station Fund was awarded a $11,400 grant for historic…
The Open Museum is an exempt organization that operates a gift shop. The museum’s annual operations budget is $3,200,000. Gift shop sales generate a profit of $900,000. Another $600,000 of investment income is generated by the museum’s endowment fund.
Both the gift shop and the endowment income are used to support the exempt purpose of the museum. The balance of $1,700,000 required for annual operations is provided through admission fees.
Wayne Hsu, a new board member, does not understand why the museum is subject to tax at all, particularly because all of the entity’s profits are used in carrying out the mission of the museum. The museum’s address is 250 Oak Avenue, Peoria, IL 61625.
Calculate the amount of unrelated business income.
Assume instead that the investment income is reinvested in the endowment fund, rather than used to support annual operations. Calculate the amount of unrelated business income.
As the museum treasurer, explain the reason for the tax consequences.
Chapter 13 Solutions
ACCT. F/GOVT.&NONPROFIT(LL)W/ACCESS >BI
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10Q
Ch. 13 - Jan and Dean decided to form a charitable...Ch. 13 - Prob. 17.2EPCh. 13 - Prob. 17.3EPCh. 13 - Prob. 17.4EPCh. 13 - Prob. 17.5EPCh. 13 - Prob. 17.6EPCh. 13 - Prob. 17.7EPCh. 13 - Prob. 17.8EPCh. 13 - Prob. 17.9EPCh. 13 - When a tax-exempt organization dissolves, the...Ch. 13 - Prob. 18EPCh. 13 - Use Illustration 13-4 as a guide in completing...Ch. 13 - Prob. 20EPCh. 13 - Prob. 21EPCh. 13 - Prob. 22EP
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