1 The Jones family lost its home in a fire
1. The Jones family lost its home in a fire. On December 25, 2010, a philanthropist sent money
to the Amer Benevolent Society, a not-for-profit organization, specifically to purchase furniture
for the Jones family. During January 2011, Amer purchased furniture for the Jones family. How
should Amer report the receipt of the money in its 2010 financial statements?a. As an
unrestricted contribution.b. As a temporarily restricted contribution.c. As a permanently
restricted contribution.d. As a liability.2. Pel Museum is a private not-for-profit organization. If it
received a contribution of historical artifacts, it need not recognize the contribution if the artifacts
are to be sold and it will use the proceeds toa. Support general museum activities.b. Acquire
other items for collections.c. Repair existing collections.d. Purchase buildings to house
collections.3. A not-for-profit organization receives two gifts. One is $80,000 and is restricted for
paying salaries of teachers who help children learn to read. The other is $110,000, which is
restricted for purchasing playground equipment. The organization spends both amounts
properly at the end of this year. The organization records no depreciation this period. It has
elected to view the equipment as having a time restriction. On the statement of activities, what is
reported for unrestricted net assets?a. An increase of $80,000 and a decrease of $80,000.b. An
increase of $190,000 and a decrease of $190,000.c. An increase of $190,000 and a decrease
of $80,000.d. An increase of $80,000 and no decrease.4. AB is a private not-for-profit
organization. It acquires YZ, another private not-for-profit organization.The acquisition value is
$1 million. YZ has net assets with a book value of $600,000 but a fair value of $700,000.
Officials for AB expect that YZ will be predominantly supported by contributions in the future.
After the acquisition, what amount of goodwill will be reported on the combined balance
sheet?a. $–0–.b. $100,000.c. $300,000.d. $400,000.5. BC and OP are both private not-for-profit
organizations. They are combined to create MN, a private not-for-profit organization with an
entirely new board of directors. BC has land with a book value of $300,000 and a fair value of
$400,000. OP has land with a book value of $500,000 and a fair value of $550,000. After MN
has been formed, what is reported for land?a. $800,000.b. $850,000.c. $900,000.d. $950,000.6.
Southwest is a private not-for-profit organization. It acquires Northeast, another private not-
forprofit organization. The acquisition value is $980,000. Northeast has two assets (and no
liabilities): equipment with a book value of $120,000 but a fair value of $150,000 and a building
with a book value of $500,000 but a fair value of $800,000. Northeast is expected to receive a
lot of support through donations and contributions. However, it is not expected to be
predominantly supported by contributions and investment income. After the combination, what
should be reported for goodwill?a. $–0–.b. $30,000.c. $60,000.d. $360,000.7. In the accounting
for health care providers, what are third-party payors?a. Doctors who reduce fees for indigent
patients.b. Charities that supply medicines to hospitals and other health care providers.c.
Friends and relatives who pay the medical costs of a patient.d. Insurance companies and other
groups that pay a significant portion of the medical fees in theUnited States.8. Mercy for
America, a private not-for-profit health care facility located in Durham, North Carolina, charged a
patient $8,600 for services. It actually billed this amount to the patient’s third-party payor. The
third-party payor submitted a check for $7,900 with a note stating that “the reasonable amount
is paid in full per contract.” Which of the following statements is true?a. The patient is
responsible for paying the remaining $700.b. The health care facility will rebill the third-party
payor for the remaining $700.c. The health care facility recorded the $700 as a contractual
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