Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
Publisher: McGraw Hill Education
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Chapter 18, Problem 13Q
To determine
Determine the condition under which the cost of mailing should be recorded as program service instead of a fund raising cost.
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To send a mailing, a private not-for-profit charity spends $100,000. The mailing solicits donations and provides educational and other information about the charity. Which of the following is true?
No part of the $100,000 can be reported as a program service expense.
Some part of the $100,000 must be reported as a program service expense.
No authoritative guidance exists, so the organization can allocate the cost as it believes best.
Under certain specified circumstances, the organization should allocate a portion of the $100,000 to program service expenses.
A charitable organization relies for its funding on donations from the general public, which is mainly in the form of cash collected in the streets by volunteers and cheques sent by post to the charity’s head office. Wealthy individuals occasionally provide large donations, sometimes on condition that the money is used for specific purpose. The constitution of the charity specifies the purpose of the charity, and also states that no more than 15% of the charity’s income each year may be spent on administration costs.Identify the inherent risks for this charitable organization that an auditor of its financial statements would need to consider.
A charitable organization relies for its funding on donations from the general public, which is mainly in the form of cash collected in the streets by volunteers and cheques sent by post to the charity's head office. Wealthy individuals occasionally provide large donations, sometimes on condition that the money is used for specific purpose.
The constitution of the charity specifies the purpose of the charity, and also states that no more than 15% of the charity's income each year may be spent on administration costs.
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Required
Identify the inherent risks for this charitable organization that an auditor of its financial statements would need to consider.
Chapter 18 Solutions
Soft Bound Version for Advanced Accounting 13th Edition
Ch. 18 - Prob. 1QCh. 18 - Prob. 2QCh. 18 - Prob. 3QCh. 18 - What are temporarily restricted net assets?Ch. 18 - What are permanently restricted net assets?Ch. 18 - Prob. 6QCh. 18 - Prob. 7QCh. 18 - Prob. 8QCh. 18 - Prob. 9QCh. 18 - Prob. 10Q
Ch. 18 - Prob. 11QCh. 18 - Prob. 12QCh. 18 - Prob. 13QCh. 18 - Prob. 14QCh. 18 - Prob. 15QCh. 18 - When should membership dues be considered revenue...Ch. 18 - Prob. 17QCh. 18 - Prob. 18QCh. 18 - Prob. 19QCh. 18 - Prob. 20QCh. 18 - Prob. 21QCh. 18 - Prob. 1PCh. 18 - Prob. 2PCh. 18 - Prob. 3PCh. 18 - Prob. 4PCh. 18 - A donor gives Charity 1 50,000 in cash that it...Ch. 18 - Prob. 6PCh. 18 - Prob. 7PCh. 18 - Prob. 8PCh. 18 - Prob. 9PCh. 18 - Prob. 10PCh. 18 - Prob. 11PCh. 18 - Prob. 12PCh. 18 - Prob. 13PCh. 18 - Prob. 14PCh. 18 - Prob. 15PCh. 18 - Prob. 16PCh. 18 - Prob. 17PCh. 18 - Prob. 18PCh. 18 - Prob. 19PCh. 18 - Prob. 20PCh. 18 - Prob. 21PCh. 18 - Prob. 22PCh. 18 - Prob. 23PCh. 18 - Prob. 24PCh. 18 - Prob. 25PCh. 18 - Prob. 26PCh. 18 - Prob. 27PCh. 18 - Prob. 28PCh. 18 - Prob. 29PCh. 18 - Prob. 30PCh. 18 - Prob. 31PCh. 18 - Prob. 32PCh. 18 - Prob. 33PCh. 18 - Prob. 34PCh. 18 - Prob. 35PCh. 18 - Prob. 36PCh. 18 - Prob. 37PCh. 18 - Prob. 38PCh. 18 - Prob. 39PCh. 18 - A private not-for-profit entity is working to...Ch. 18 - Prob. 41PCh. 18 - The University of Danville is a private...Ch. 18 - Prob. 43PCh. 18 - Prob. 44PCh. 18 - Prob. 45PCh. 18 - Prob. 46PCh. 18 - Prob. 47PCh. 18 - Prob. 48PCh. 18 - Prob. 49PCh. 18 - At the beginning of Year 1, the entity above...Ch. 18 - Prob. 51PCh. 18 - Prob. 52PCh. 18 - Prob. 53PCh. 18 - Prob. 54PCh. 18 - Prob. 1DYSCh. 18 - Prob. 2DYSCh. 18 - Prob. 3DYSCh. 18 - Prob. 4DYSCh. 18 - Prob. 5DYSCh. 18 - Prob. 6DYS
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- To send a mailing, a private not-for-profit charity spends $100,000. The mailing solicits donations and provides educational and other information about the charity. Which of the following is true? Choose the correct.a. No part of the $100,000 can be reported as a program service expense.b. Some part of the $100,000 must be reported as a program service expense.c. No authoritative guidance exists, so the organization can allocate the cost as it believes best.d. Under certain specified circumstances, the organization should allocate a portion of the $100,000 to program service expenses.arrow_forwardThe following questions concern the accounting principles and procedures applicable to a private not-for-profit entity. Write answers to each question. What is the difference between revenue and public support? What is the significance of the statement of functional expenses? What accounting process does a private charity use in connection with donated materials? What is the difference in the two types of restricted net assets found in the financial records of a private not-for-profit organization? Under what conditions should the entity record donated services? What is the proper handling of costs associated with direct mail and other solicitations for money that also contain educational materials? A not-for-profit receives a painting. Under what conditions can this painting be judged as a work of art? If it meets the criteria for a work of art, how is the financial reporting of the entity affected?arrow_forwardHow does a voluntary health and welfare organization account for donated goods and cash contributed for operating purposes ? What types of revenues are recognized by voluntary health and welfare organizations ?arrow_forward
- Which statement below best describes the entities that can accept donations from the public and provide donors with documentation to allow them to claim a tax deduction in respect of their donation?  a. A local state school.  b. A private hospital.  c. Only entities classified as a deductible gift recipient (DGR) as they meet the necessary requirements to be registered by the ATO.  d. Any not for profit organisation.arrow_forwardDonations in cash are easy to measure. What is the treatment that not-for-profit organizations use for the contribution of non finacancial assets?arrow_forwardThe following questions concern the accounting principles and procedures applicable to a private not-for-profit entity. Write answers to each question.a. What is the difference between revenue and public support?b. What is the significance of the statement of functional expenses?c. What accounting process does a private charity use in connection with donated materials?                  d. What is the difference in the two types of restricted net assets found in the financial records of a private not-for-profit organization?e. Under what conditions should the entity record donated services?f. What is the proper handling of costs associated with direct mail and other solicitations for money that also contain educational materials?g. A not-for-profit receives a painting. Under what conditions can this painting be judged as a work of art? If it meets the criteria for a work of art, how is the financial reporting of the entity affected?arrow_forward
- The board of directors of Earth Rock's!, a nonprofit organization focused on environmental protection, hypothesizes that individuals are more likely to donate if they see evidence that their donations are used primarily for program activities rather than administrative and fund-raising costs. To get a sense of how its own cost structure compares to other groups, the board decides to benchmark the financial performance of Earth Rocks! against several other environmental organizations. The data for Earth Rocks! and the other environmental organizations appear below  Program Expenditures Fund-raising Costs Administrative Costs Total Costs Earth Rocks 374,900 98,000 121,400 594,300 Weed Lovers 421,000 104,300 98,350 623,650 Flora and Fauna 353,000 97,600 71,840 522,840 Leaf It Be 501,900 89,000 109,750 700,650 Nature's Gift 455,470 71,000 82,450 608,920 Use these data to benchmark Earth Rocks! against the other environmental organizations. How does Earth Rocks! compare to…arrow_forwardA local citizen gives a not-for-profit entity a cash donation that is restricted for research activities. The money should be recorded in: Choose the correct: a. Unrestricted Net Assets.b. Temporarily Restricted Net Assets.c. Permanently Restricted Net Assets.d. Deferred Revenue.arrow_forwardUrban Hospice (UH) is a not-for-profit organization. It receives some funding from the government, but most of its funding comes from donations and bequests. It uses the deferral method to account for contributions and an encumbrance system to control expenditures. For simplicity, UH accounts for all of its activities through an operations fund. UH has provided the following selected transactions for the current year: a. At the beginning of the year, UH unexpectedly received $1,000,000 from the government to purchase three monitoring machines. UH immediately purchased the machines. Since UH purchased the machines as soon as the funds were received, it did not prepare a purchase order for them. At the end of the year, UH took depreciation of $200,000 on the machines. b. UH's annual Christmas fundraising gala generated $3,011,000 in cash and $820,000 in pledges. Based on previous years' experiences, UH estimates that 85 percent of the pledges will be collected in the first three months…arrow_forward
- Under FASB standards, expenses of a not-for-profit organization can only be shown as reductions of net assets without donor restrictions. O True O Falsearrow_forward1. Explain with examples the differences between grants and donations?  2. Explain with examples the FASB and GASB treatment of grants? 3. Be specific in providing your explanation with examples. 4. Explain with a couple of examples on not-for-profit organizations' issues with cash donations? 5. Be specific in providing your explanation with examples.arrow_forwardWhich of the following statements is true?a. All not-for-profit organizations must include a statement of functional expenses.b. Donor-restricted contributions whose restrictions have been met in the reporting period may be reported as unrestricted support.c. Statements should focus on the individual unrestricted and restricted funds of the organization.d. FASB ASC 958-605 contains requirements that are generally more stringent than those relating to for-profit organizations.arrow_forward
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