Q&A Hero

Q: Mason Dixon dies on November 30, 2011, leaving a valid will. The will reads as follows:"I leave my boat to my son, George. I leave my automobile to my daughter, Georgia. I leave the income on my estate to be divided equally between George and Georgia. Estate expenses are to be paid from principal, not estate income. All other property, I leave to a trust to care for my wife, Gladys. Any remaining property at the time of her death is to be transferred into a trust to pay college education expenses of my grandchildren until such time as it is used up. I name my wife, Gladys, as executrix of my estate."Gladys prepares an estate inventory for all assets discovered and files the appropriate notice to potential creditors on December 15.Cash $ 90,000Investments 1,200,000Interest Receivable 2,000Life Insurance Receivable 500,000Residence 180,000Automobile 20,000Boat 70,000Total $2,062,000A check for interest is received of $5,000, and estate liabilities (such as funeral expenses, administrative costs, and taxes) are settled for $20,000. The will is administered.Required:Prepare a charge-discharge statement for the estate of Mason Dixon on December 31, 2011. Assume the life insurance proceeds have not been paid out.

Q: Josh Drake died on May 1, 2011. He left his entire estate, with a fair value of $6,200,000 to his sole surviving family member, his daughter, DeeDee.Prior to any distribution of assets, Josh's estate reflected the following details:Funeral expenses $11,300Executor's fees 10,800Estate liabilities 84,000Final medical expenses 40,700Required:Calculate the federal estate tax on Mr. Drake's estate. You may ignore any state-level inheritance taxes and assume that the federal estate tax rate is 45%.

Q: You are serving as the trustee for the Paul Porter testamentary income trust. The trust was created by Paul's will. All of his assets were transferred to the trust to cover the living expenses of his wife, Paula. Upon her death, the assets are to be sold, with the proceeds distributed to his brother, Saul. If Saul is not alive when Paula passes, the proceeds are to go to the Porter Scholarship in Business Administration.The probate court has ruled that all personal effects and household items could be excluded from the estate. All taxes have been paid, and the following assets remain to be transferred to the trust:Asset Cost Fair Market ValueCash $160,000 $160,000Certificates of deposit 75,000 75,000ExTech Company common stock 22,000 216,000Rentall common stock 42,000 40,000Lake house (his share) 149,000 170,000Personal residence (his share) 226,000 280,000Antique sports car 35,000 46,000Coin collection 7,000 12,000Required:Prepare the journal entries for the creation of the trust.

Q: Oscar Lloyd is the trustee for the Petra/Hobbes Trust. The following transactions occurred during 2011. Petra and Hobbes, two cats are going to reside with Oscar Lloyd, the trustee and devoted cat lover.February 18 The Petra/Hobbes Trust was established at First State Bank by depositing $200,000 cash.February 19 $195,000 was deposited into a three-year certificate of deposit earning 6% a year. Interest is paid semi-annually. $5,000 was deposited into a money market account paying 4% annual interest. Interest is paid on the average daily balance for the past year.February 20 Paid $368 for cat food, cat toys, and kitty litter at Cats R Us.February 24 Bought assorted cat DVDs for Hobbes and Petra. The DVDs were a combination of fish, bird, and squirrel movies. Paid $182 for the DVDs.June 25 Paid $405 for cat food, toys, and kitty litter.August 19 Deposited one-half year's interest income of $5,850 into the money market account.December 22 Paid $722 for cat food, cat toys, kitty litter, Christmas presents for Petra and Hobbes.Required:Prepare the necessary journal entries for the above transactions. You may ignore any tax effects.

Q: Silvia Peacock has been appointed to serve as the executor of the estate of Mr. Mickey Babay, who passed away at the age of 104 on April 5, 2011. On April 5, 2011, Mr. Babay's assets consisted of the following: AssetBook ValueFair ValueCash$40,000$40,000Mutual fund investment170,000170,000Selonoid Incorporated common stock22,00028,000Ford Mustang24,00016,000Condo in Phoenix, AZ120,000150,000Residence in Boston, MA150,000280,000Stamp collection4,9008,000Salt and pepper shaker collection1,5004,000Rare hand puppet collection2,3006,700 The probate court has ruled that any other personal effects may be excluded from Mr. Babay's estate inventory. Required:Prepare an inventory of estate assets on April 5, 2011.

Q: You are serving as the executor for the estate of Dr. Mary Carlson. The following transactions occur during August 2011. Dr. Carlson died on July 30, 2011. 1. On August 6, you received interest of $3,000 on State of Colorado general revenue bonds. Interest of $1,600 was earned after the date of death. The balance was earned prior to death, and had been accrued. The bonds were included in the estate's initial inventory. The maturity value and fair market values of the bond are $100,000. 2. On August 11, you issued a check to pay a probate court fee of $1,120. 3. The estate included 10,000 shares of Dasher International's common stock, valued at $40 per share, which were properly included in the estate's initial inventory. On the date of her death, there were no outstanding dividends receivable. On August 14, you read that a dividend of $1 per share was declared. 4. In Mary's will, she wanted $100,000 given to the National Zoo.After examining the assets, you determined that the estate's assets will adequately cover all expenses and specific devises, so on August 23, you issued a check to the Zoo for $100,000. 5. On August 25, you issued a check to pay Mary's final medical expenses of $16,700. 6. On August 28, you received a check for $10,000 for the common stock dividends paid by Dash International. Required:Prepare the necessary journal entries for the above transactions. You may ignore any estate or income taxes.

Q: Mary Contrary is the executor for the estate of Belle Silver. Belle owned a home with a fair value of $200,000. The home has a remaining mortgage amount of $80,000. Mary also has personal effects worth $8,000, an investment portfolio with a fair value of $150,000 on the date of death, and approximately $7,500 in cash in various accounts. The home was left to her daughter in the valid will that Belle had executed prior to her death. Belle did not have a surviving spouse, but her daughter is a minor, who is independently wealthy after inventing a cutting-edge software program. The state in which Belle resided, allows a $15,000 homestead allowance, and a $10,000 personal effects entitlement. After taking an inventory, and converting all of the assets, except for the home and the personal effects, into cash, there is $159,000 for Mary to distribute to the appropriate devises, beneficiaries, and creditors. Mary has identified the following expenses and devises: 1. Belle's unpaid final medical expenses were $24,000. 2. Belle left a devise of $100,000 to her church. 3. The costs and expenses of administering the estate were $21,000. 4. Real estate taxes of $3,600 are past due. 5. The unpaid funeral expenses were $8,700.Required:Prepare a schedule that will list the disbursements of assets. Assume that the state in which Belle resided has adopted the Uniform Probate Code.

Q: You are serving as the executor for the estate of Scott Michaels, who passed away on June 28, 2011. The following transactions occur during the balance of June and July, 2011. 1. On July 11, you issued a check to pay Scott's final medical expenses of $28,000. 2. In Scott's will, he wanted $90,000 given to the American Society for the Prevention of Cruelty to Animals (ASPCA). After examining the assets, you determined that the estate's assets will adequately cover all expenses and specific devises, so on July 13, you issued a check to the ASPCA for $90,000. 3. On July 15, you received a check in the amount of $27,900 from First State Bank of Greenville. It is the maturity value and interest from a certificate of deposit in the amount of $25,000 that was not included in the estate's initial inventory. The CD matured on June 30, 2011. 4. On July 26, you received interest of $2,000 on Greenville City bonds. Interest of $180 was earned after the date of death. The balance was earned prior to death, and had been accrued. The bonds were included in the initial inventory. 5. On July 28, you issued a check to pay Scott's funeral expenses of $7,600. Required:Prepare the necessary journal entries for the above transactions. You may ignore any estate or income taxes.

Q: Philiam Benedict dies on October 1, 2011, leaving his entire estate to his sole surviving niece, Muriel Finster. After all devise distributions and payments for estate expenses and liabilities, the fair value of Philiam's estate is $6,350,000.Required:Calculate the federal estate tax on Philiam's estate, assuming that federal estate taxes are paid at the 45% rate.

Q: John Doe's will states that all assets he had should be transferred to a trust to cover living expenses for his spouse, who he feels will not be able to handle her own financial affairs without advice and supervision. Upon his spouse's passing, the trust will be converted to cash and distributed to their only daughter, Jane. The probate court already ruled on which assets could be excluded from the estate, and all tax issues were addressed, leaving the following inventory of assets from the estate: AssetCostFair ValueCash206,000206,000Certificates of Deposit250,000250,000Investments/Mutual Funds354,1162,780,500Residence34,000190,000Ocean front cottage78,000560,000Pepper mill collection2,0703,900 Required:Prepare the journal entry for the creation of the trust.

Q: Cindy Lou's parents passed away while she was still dependent on them, and their will designated that a trust should be established with their estate proceeds to care for her. The following transactions occurred in the first two months following their deaths. 1. The trust account was opened with the $2,000,000 in funds received from the estate. The funds were deposited into a non-interest bearing checking account to be used for expenses. 2. $1,500,000 was put into a multi-year certificate of deposit which earned 3% annually, with interest paid monthly back to the checking account. 3. One month's interest from the certificates of deposit was received. 4. The bank's trust administration fee was paid for $65. 5. Tuition was paid for the boarding school where Cindy Lou was living for $6,500. Required:Prepare the journal entries for the listed transactions. Disregard the impact of estate and income taxes.

Q: Buddy, a dog, is cared for by a trust set up by his owner's will. The following transactions occurred for the trust. 1. The trust was established with $100,000 from his owner's estate, by deposit to a savings account. 2. A check is written to Paws and Claws Puppy Farm to cover the first month of Buddy's room and board, for $680. 3. A check is received for interest earned on the savings account amounting to $417. 4. Buddy dies. Paws and Claws sends a final room and board bill for $430, with additional charges for Buddy's burial of $270. The invoice is paid. 5. The balance of the trust is turned over to the Humane Society, as prescribed by Buddy's owner's will, and the trust is closed. Required:Prepare the journal entries for the listed transactions. Disregard the impact of estate and income taxes.

Q: Suzanne Quincy passed away on October 25, 2011. Suzanne left behind a limited estate, so there are no tax issues to address, however, she owned a dog, Buddy, and Suzanne provided for Buddy in the will. Suzanne left $100,000 for Buddy's care, and the remainder of her estate was left to her neighbor, Agnes. Suzanne's estate had the following events and transactions in the month following her death. 1. Her assets were converted to cash at their fair value as inventoried: Mutual funds, $270,000; and Residence, $209,000. There were no other reportable assets. 2. Transferred $100,000 to a trust account at Second National Bank to provide care for Buddy, and delivered Buddy to Paws and Claws Pet Farm, his new home. 3. Wrote check to pay for funeral expenses for $9,600. 4. Wrote check to pay for executor fees as designated in the will of $1,000. 5. Wrote check to pay balance of estate to Agnes. Required:Prepare the journal entries for the listed transactions. Disregard the impact of estate and income taxes.

Q: Richard Stands passed away at on September 2, 2011. The probate court ruled that most assets could be excluded from estate inventory. Ty Republic has been appointed to serve as executor for the estate. The estate assets consisted of the following at that date:AssetCostFair ValueCash160,750160,750Certificates of Deposit100,000100,000Investments/Mutual Funds487,1603,506,490Residence185,000368,000Lake cottage12,000123,000Cookie Jar collection8,78574,0001966 Alpha Romeo42,00079,750 Required:Prepare an inventory of estate assets as of September 2, 2011.

Q: Warren Peace passed away, with his will leaving the bulk of all his worldly possessions to his friend Leo. The following transactions occurred with respect to Warren's estate. 1. Warren's estate inventory included 10,000 shares of Newberry Industries, selling at the time of Warren's death at $56 per share. There were no outstanding dividends at the time Warren died, but two weeks later, a $1.00 per share dividend was declared. 2. Warren only designated one item that was not to be left to Leo. Warren's family had a signed, first-edition copy of a classic novel that was valued and included in the estate inventory at $67,000, which Warren left to the local library. The book is located and delivered. 3. Funeral expenses are paid in the amount of $7,880. 4. A statement comes from the insurance company indicating there are multiple charges from Warren's final hospital stay that will not be covered and are the responsibility of the estate. These fees amount to $39,000 and were not known at the time the estate inventory was prepared. The charges are confirmed and will be paid when the separate bills arrive from the hospital and professionals who billed them to the insurance company. 5. A check is received from Newberry Industries for the dividends declared in the first transaction, above. Required:Prepare the journal entries for the listed transactions. Disregard the impact of estate and income taxes.

Q: Rusty Nail died in the summer of 2011. The following transactions occurred relating to Rusty's estate.1. Rusty's estate included a $50,000 Certificate of Deposit. When Rusty died, there was $250 accrued but unpaid interest. When the check was received for the normal semiannual interest payment, it was in the amount of $1,250.2. Rusty's will requested a specific transfer to the local playhouse in the amount of $20,000. Avery's estate should be adequate to cover all obligations and devises, and the amount is paid.3. A fee for probate court is paid amounting to $1,400.4. Funeral expenses are paid amounting to $13,000.5. A bill is received from the anesthesiologist relating to Rusty's last hospital stay for $22,000. The bill is not covered by insurance, and was not included in the estate inventory. The bill is verified and paid.Required:Prepare the journal entries for the listed transactions. Disregard the impact of estate and income taxes

Q: Avery died testate early in 2011. The following transactions occurred relating to Avery's estate.Avery's estate included bonds with a fair (market) value of $120,000. On the date of Avery's death, there was $2,000 of accrued but unpaid interest. Two months after Avery's death, a check arrived in the amount of $3,000, representing the normal semiannual interest payment.Avery's will stated a specific transfer to the Bird Sanctuary in the amount of $10,000. Avery's estate should be adequate to cover all obligations and devises, and the amount is paid.Funeral expenses amounted to $12,500.A bank statement is received from the First National Bank indicating a cash balance of $8,600. This bank account was not known or included on the estate inventory.Probate fees are paid to the court amounting to $900.Required:Prepare the journal entries for the listed transactions. Disregard the impact of estate and income taxes.

Q: What is the dollar amount of the federal lifetime maximum gift tax exclusion?A) $24,000B) $600,000C) $1,000,000D) $2,000,000

Q: What is the current annual gift amount that can be left to an individual donee, without being subject to a federal gift tax?A) $6,500B) $13,000C) $19,500D) $26,000

Q: In reference to the potential taxation of an estate, which of the following statements is correct?A) An estate may be subject to taxation at both the state and federal level.B) The taxable amount of an estate is based on the book values of all estate assets at the date of death.C) The estate value is not reduced by such expenses as funeral expenses, bequests to qualified charities, or state-level taxes.D) Taxable estate assets do not include proceeds from life insurance policies.

Q: Which type of trust is created pursuant to a will?A) A testamentary trustB) A Crummey trustC) A generation-skipping trustD) A life estate trust

Q: What is the document prepared by the executor or administrator to show accountability for estate property received and maintained or disbursed in accordance with the will?A) The Administrator/Executor's Fiduciary ReportB) The charge-discharge statementC) The Administrator/Executor's Testamentary ReportD) The Administrator/Executor's Principal/Income Report

Q: Under the Revised Uniform Principal and Income Act, gains or losses incurred on investments that occur after the death of the decedentA) are considered to be income of the estate.B) are included in the inventory fair value at the time of death.C) are taxed separately from other estate income.D) are adjustments to the principal of the estate.

Q: In reference to estate principal and income, which of the following statements is correct?A) A primary reason for dividing estate principal and estate income is that the beneficiaries are often different.B) In accounting for the decedent's estate, the receipts earned but not yet received at the date of death are considered estate income.C) After death, earnings from income-producing property owned at the time of death are considered estate principal.D) Expenses incurred after death to administer the estate are first charged against income earned after death.

Q: Which of the following are entitled to the remainder of the estate after all other rightful claims on the estate have been satisfied?A) Remainder beneficiariesB) Residual beneficiariesC) Alternate beneficiariesD) Secondary beneficiaries

Q: If estate assets are insufficient to pay all claims in full, under the Uniform Probate Code which of the following would be paid first?A) Reasonable funeral expensesB) Necessary medical and hospital expenses of the last illness of the decedentC) Unsecured debtsD) The costs and expenses of administration of the estate

Q: Under the Uniform Probate Code, the personal representative must publish for what time period a notice in a newspaper of general circulation in the county in which the decedent resided?A) For one weekB) For two weeksC) For three weeksD) For five weeks

Q: In reference to the Uniform Probate Code, which of the following statements is correct?A) The Code entitles the surviving spouse to a homestead allowance that is exempt from, and has priority over, all claims against the estate.B) The Code provides a homestead allowance to the surviving spouse of $100,000.C) The Code provides an allowance for dependents, after other claims have been settled.D) The Code entitles the surviving spouse to claim 100% of the estate after claims to third-parties are settled.

Q: The executor or administrator of a will is required to prepare and file an inventory of property owned by the deceased within what time period?A) One month of appointmentB) Two months of appointmentC) Three months of appointmentD) 45 days of appointment

Q: Under the amended Uniform Probate Code, if the decedent dies intestate, and if there are descendants from a prior marriage or relationship, the surviving spouse receives what?A) $25,000 and 2/3 of the remaining intestate estateB) $200,000 and 1/3 of the remaining intestate estateC) $50,000 and 1/2 of the remaining intestate estateD) $100,000 and 1/2 of the remaining intestate estate

Q: Which of the following is a gift of an object to a devisee?A) A general deviseB) A specific deviseC) A testamentary allocationD) An administrative devise

Q: Under the Uniform Probate Code, the personal representative must inform the heirs and devisees of his or her appointment and provide other selected information within how many days of the appointment?A) 10 daysB) 20 daysC) 30 daysD) 60 days

Q: In reference to the probate process, which of the following statements is correct?A) The personal representative of the deceased can file a petition with the appropriate probate court requesting that an existing will be probated.B) The Uniform Probate Code varies from state to state.C) The Uniform Probate Code is applied to all wills found to be valid, and to wills found to be invalid in probate court.D) The Uniform Probate Code is applied to all wills found to be valid, but not to wills found to be invalid in probate court.

Q: Under the Uniform Probate Code, the term "personal representative" refers to which of the following?A) An executor, but not an administratorB) An administrator, but not an executorC) Neither an executor nor an administratorD) Either an executor or an administrator

Q: In reference to estates, which of the following statements is correct?A) An estate comes into existence at the death of an individual.B) If the deceased person had a valid will at the time of death, he or she is said to have died intestate.C) The heir receiving the largest portion of the estate is typically appointed the executor.D) Claims may be made for up to seven years against an estate.

Q: In reference to accounting for trusts or estates, which of the following statements is correct?A) Estates are subject to taxation, but trusts are not.B) Estates are subject to probate laws that vary widely across the fifty states.C) Estates are subject to income taxes at the federal level, but not at the state level.D) Estates and trusts are taxed regardless of size.

Q: Which of the following phrases is frequently used to refer to estate or trust accounting?A) Non-profit accountingB) Testamentary accountingC) Fiduciary accountingD) All of the above phrases are used to refer to estate or trust accounting.

Q: Record the following transactions for Porter Hospital, a private, nonprofit hospital:1. Gross patient services revenues: $25,000,000. Billed to patients. 2. Included in the above revenues are: charity services, $500,000; contractual adjustments, $11,000,000; and estimated uncollectible amounts, $250,000. 3. Purchased equipment by issuing a 5-year note for $200,000. 4. Received cash donations restricted for a capital building addition program, $5,100,000. 5. Incurred and paid $1,700,000 of contractor billings for the capital building program.

Q: Match each of the following descriptions with the correct category for a private, not-for-profit hospital. Each term may be used more than once.Categories:A. RevenueB. Deduction from RevenueC. ExpenseD. Gains / Losses_____1. Courtesy allowances provided to hospital patients_____2. Premium fees_____3. Fees paid to the doctors_____4. Charges to patients for patient services_____5. Wages paid to nursing staff_____6. Contractual allowances arranged with third-party payors_____7. Cafeteria sales_____8. Wages paid to hospital janitors_____9. Depreciation expense on hospital equipment_____10.Other operating revenueunrestricted

Q: A private, not-for-profit university received donations of $800,000 in 2011 that were restricted to capital improvements of the football stadium. The university spent $670,000 on capital improvements for the stadium in 2011 and recorded depreciation of $130,000.In 2011, an alumnus contributed a $1,500,000 endowment for football scholarships with all endowment income restricted for that purpose. Endowment income totaled $75,000 for the year and scholarship awards were $68,000.Required:Prepare the appropriate journal entries for the university for these transactions.

Q: The following information is available about the operations for a private, not-for-profit university. 1. The university sold $20,000,000 of 5% bonds to finance the construction of a new building for the business school. The bonds were sold on January 1 and pay interest on December 31 of each year. The bonds were sold at par and mature in 20 years. 2. The university received $7,500,000 cash in alumni and corporate donations for the new business school building. 3. The building was constructed at a total cost of $22,000,000 and the contractor was paid in full. 4. Interest was paid on the bonds. 5. Depreciation on the new building the first year was $275,000. Required:Prepare the appropriate journal entries for the university for these transactions.

Q: A private, not-for-profit university received donations of $1,000,000 cash in 2011 that were restricted to certain research projects on sustainability, with an emphasis on reducing the campus waste. The university incurred and paid $450,000 of expenses on this research in 2011. In 2011, an alumnus contributed a $700,000 endowment for energy research with all endowment income restricted for that purpose. Income totaled $35,000 for the year. Energy research expenses incurred and paid were $22,000. Required:Prepare the appropriate journal entries for the university for these transactions.

Q: Prepare journal entries to record the following transactions for a private, not-for-profit university. 1. Tuition and fees assessed total $10,000,000, 80% of which was collected by year-end; tuition scholarships were granted for $1,300,000, and $650,000 was expected to be uncollectible. 2. Revenues collected from sales and services by the university bookstore were $1,450,000. 3. Salaries and wages paid were $5,600,000, $300,000 of which was for employees of the university bookstore. 4. Financial aid funds of $700,000 were received from the Pell Grant program; the funds were then disbursed to the appropriate students. 5. Contributions of $600,000 were received; $30,000 was restricted for the athletic department and the balance was unrestricted. An additional $70,000 was pledged to the athletic department by the alumni. 6. Athletic equipment was purchased with $42,000 previously set aside for that purpose.

Q: Childrens Hospital is a private, not-for-profit hospital. The following information is available about the operations. 1. Gross patient services charges totaled $6,400,000. 2. Included in the above revenues are: charity services, $210,000; contractual adjustments, $2,400,000; and courtesy allowances, $37,000. 3. Received a donation of marketable securities with a fair value of $165,000 for the purchase of new diagnostic equipment. 4. The marketable securities were sold for $182,000 and diagnostic equipment was purchased at a cost of $210,000. 5. Revenue from the hospital gift shop was $58,000 and from the cafeteria revenues were $227,000. Received cash from both enterprises. 6. Incurred and paid nursing service costs of $1,700,000 and general service costs of $400,000. Required:Prepare journal entries for the aforementioned transactions.

Q: General Hospital is a private, not-for-profit hospital. The following information is available about the operations.1. Gross patient services charges totaled $3,700,000.2. Included in the above revenues are: charity services, $360,000; contractual adjustments, $1,200,000; courtesy allowances, $20,000; and estimated uncollectible amounts, $250,000.3. Premium fees receipts were $110,000.4. Purchased $75,000 of hospital supplies on account, with payments on that account, $36,000.5. Received cash donations for a new hospital wing of $2,500,000.6. Paid contractor $275,000 for billed costs toward the new hospital wing.Required:Prepare journal entries for the aforementioned transactions.

Q: Marshfield Hospital is a private, not-for-profit hospital. The following transactions occurred: 1. Unrestricted cash gifts that were received last year, but designated for use in the current year, totaled $180,000. The cash gifts were used in the current year in accordance with restrictions. 2. Unrestricted pledges of $800,000 were received. Ten percent of the pledges typically prove uncollectible. Additional cash contributions during the year totaled $300,000. 3. Gifts in kind were received that were sold at a silent auction for $23,000. The fair value of the donated gifts in kind could not be reasonably determined. 4. Expenses were incurred and paid as follows: Salary of doctor, $190,000; facility rental, $36,000; purchases of supplies, $8,000; and utility costs, $10,000. 5. Marketable securities with a fair value of $650,000 were received as a donation with a stipulation that the hospital use the funds to purchase suitable land for the hospital. Required:Prepare journal entries for the aforementioned transactions.

Q: Coats for Kids is a private, not-for-profit organization that provides free coats for children in the suburbs of a large city. Coats for Kids had the following transactions in 2011. 1. Unrestricted cash gifts that were received last year, but designated for use in the current year, totaled $50,000. The cash gifts were used in 2011. 2. Unrestricted pledges of $40,000 were received. They are expected to be collected in 2011. Ten percent of the pledges typically prove uncollectible. Additional cash contributions during the year totaled $65,000. 3. A donor donated investments with a fair value of $10,000. The investments can be sold and used only for the purchase of coats for children. 4. The following expenses were incurred and paid: Salary of director, $15,000, classified as supporting services. The remaining expenses of $47,500 were classified as program services. 5. Pledges of $250,000 were received during the year. The pledges were restricted for use in purchasing new delivery vans. All of these pledges are expected to be collected in the next fiscal year. Ten percent are estimated to be uncollectible.Required:Prepare the journal entries for the aforementioned transactions.

Q: The following information was taken from the accounts and records of the Helping Hands Foundation, a private, not-for-profit organization classified as a VHWO. All balances are as of June 30, 2011, unless otherwise noted.Unrestricted Support - Contributions $2,000,000Unrestricted Support - Membership Dues 640,000Unrestricted Revenues - Investment Income 80,000Temporarily restricted gain on sale of investments 25,000Expenses - Program Services 1,860,000Expenses - Supporting Services 350,000Expenses - Supporting Services 550,000Temporarily Restricted Support - Contributions 640,000Temporarily Restricted Revenues - Investment Income 60,000Permanently Restricted Support - Contributions 100,000Unrestricted Net Assets, July 1, 2010 450,000Temporarily Restricted Net Assets, July 1, 2010 2,100,000Permanently Restricted Net Assets, July 1, 2010 60,000The unrestricted support from contributions was received in cash during the year. The expenses included $1,350,000 paid from temporarily-restricted cash donations.Required:Prepare Helping Hands' Statement of Activities for the fiscal year ended June 30, 2011.

Q: The Trasque Hospital is a nongovernmental, not-for-profit hospital. During 2011, they had the following transactions. 1. Trasque's standard charges for services rendered amounted to $550,000. Contractual adjustments on those amounts with third-party payors amounted to $230,000. Bad debts on the remaining balance are estimated to be 10%. 2. The hospital received a cash donation of $20,000 to be used for medical equipment. 3. The hospital also received rent from a local shelter that uses the basement of their facility for overflow housing, amounting to $6,000 per year. 4. The hospital paid the following costs: Professional fees (doctors and physician assistants), $80,000; Nursing services, $70,000; and administrative services, $40,000. 5. The hospital paid for pharmaceuticals and medical supplies amounting to $110,000. The hospital had an agreement with the pharmaceutical and medical supply vendors to carry all inventory on consignment, due to their not-for-profit status. As a result, items are only paid for as consumed, and all inventory belongs to the vendors. Required:Prepare the journal entries for Trasque for 2011.

Q: Carousel Clothes is a voluntary health and welfare organization that provides gently-used second-hand clothes to those in need. They had the following transactions in 2011.1. Cash gifts were received in the amount of $60,000, of which $13,000 had been pledged in the prior year. 2. Pledges made in the current year but not yet fulfilled amounted to $39,000. Ten percent of the pledges typically prove to be uncollectible. Pledges are made for 2011. 3. An office supply company donates office furniture to the VHWO. The fair value of the furniture is $40,000. No restrictions were placed on the donation. 4. The following expenses were incurred and paid: director's salary, $15,000; facility rental, $18,000; cleaning and repair costs for clothes, $29,000; and purchase of supplies consumed in tagging and distribution of clothes, $5,000. The director's salary is categorized as Support Services and the rest of the costs are Program Services. 5. Restricted pledges were received during the year for $450,000. The pledges are restricted for the construction of a new facility.Required:Prepare the journal entries for Carousel for 2011.

Q: Albatross University, a not-for-profit, nongovernmental university, had the following transactions in 2011. 1. Tuition bills were sent amounting to $8,000,000, with 70% collected before the end of the fiscal year; tuition waivers were granted on the total amount of $400,000, and $220,000 was expected to be uncollectible. 2. Cafeteria sales, all cash, were $1,400,000. 3. Salaries and wages were paid amounting to $5,500,000, of which $370,000 was for cafeteria staff. 4. Long-term debt payments were made from general funds amounting to $800,000, of which $130,000 was for interest. 5. Equipment was purchased for the engineering department with funds previously set aside for that purpose, amounting to $180,000. Required:Prepare the journal entries for 2011 for Albatross University.

Q: Wilhelman University, a not-for-profit, nongovernmental university, had the following transactions in 2011.1. Tuition bills were sent amounting to $4,000,000, with tuition waivers granted on that amount of $200,000.2. State funding was received in the amount of $2,000,000.3. The bookstore and cafeteria sales amounted to $1,600,000, and their cost of sales was $1,500,000. Assume cash sales and cash purchases for these auxiliary operations.4. Endowment income amounted to $100,000 that was restricted to chair the accounting department, and $200,000 of unrestricted income.5. Expenses were incurred and paid as follows: faculty, $3,800,000 (including faculty chair, paid in part by endowment income); Student services, $250,000; Facilities operations, $350,000; and scholarships (excluding tuition waived), $400,000.Required:Prepare the journal entries for 2011 for Wilhelman University.

Q: Southtown Community Hospital (SCH) shows the following balances on its trial balance at June 30, 2011, their fiscal year end. SCH is a not-for-profit, nongovernmental hospital. $260,000 cash was spent on equipment from donations restricted for that purpose.Debits:Administrative services expense 200,000Contractual allowances 1,200,000Depreciation expense 700,000Employee discounts 300,000General services expense 900,000Loss on sale of fixed assets 100,000Nursing services expense 4,000,000Resident and visiting professional services expense 3,000,000Provision for bad debts 600,000Credits:Income from investment in clinic 120,000Patient service revenues 10,000,000Pharmacy 400,000Cafeteria services 200,000Unrestricted contributions 350,000Unrestricted income from endowment funds 280,000Restricted donations for equipment purchases 500,000Required:Prepare a statement of operations for Southtown Community Hospital at June 30, 2011.

Q: A small town in a rural area has an organization that serves the local community when there is a financial need. Among the services they provide is free groceries, clothes and furniture, along with transportation to doctors' appointments when the doctor is out of town. This voluntary health and welfare organization (VHWO) accepts most donations of goods, all donations of cash, and has developed a relationship with the local grocer who helps them obtain needed food items. The VHO has one paid administrator who tracks and coordinates the donations, performs application reviews to determine eligibility, and schedules transportation for those in need. Volunteers unload and pack grocery items, sort clothes and furniture, and drive those who need transportation. Gasoline costs are reimbursed to the driver based on mileage. The local CPA provides bookkeeping and tax services for free, and designates 90% of expenses incurred to community services and 10% to management and general.The VHWO had the following transactions in 2011:1. The administrator is paid $11,000 salary.2.The accountant services are valued at $6,000 based on their normal billable rate.3. The landlord of the building they use for their operations has waived their rent and provided the bill of $6,000 for their records. The VHWO paid utilities and property taxes of $3,000.4. Office furniture was donated with an estimated fair value of $9,400.5. The VHWO received cash donations of $20,000, $5,000 of which was an unpaid pledge from the prior year. The beginning pledges receivable balance was $6,000, and no amount had previously been estimated to be uncollectible. The prior year balance will now be written off. In addition, $12,000 was pledged to be donated in 2012. Based on recent history, the VHWO knows that 10% of the new pledges will not be collected.Required:Prepare the journal entries for the transactions noted above.

Q: Will Wealth made three charitable donations in 2011. Each was for $500,000, however they were made to three different organizations as follows:1. Will donated to a local voluntary health and welfare organization (VHWO), and indicated that the funds could be used as the VHO wanted.2. Will donated to a local private, not-for-profit university, designating the funds to be used for scholarships and student aid.3. Will donated to the local not-for-profit, nongovernmental hospital, designating the funds to be used for purchase of diagnostic equipment.Required:For each of the above three situations:A. Prepare the journal entry that each organization would prepare at the time of the contribution.B. Prepare the journal entry that each organization would prepare at the time of the subsequent spending of the funds. Assume that the spending is in accordance with any restrictions that Will placed on the donation.

Q: In a not-for-profit, private university, the federal grant funds given directly to students for financial aid are an example ofA) a bequest.B) an agency transaction.C) unrestricted revenue.D) a restricted contribution.

Q: An alumnus made a donation of adjoining land to a not-for-profit, nongovernmental university. The donor made no specifications regarding the time period or use of the land. The university would record the gift asA) an endowment asset.B) temporarily restricted revenue.C) unrestricted revenue.D) permanently restricted support.

Q: Not-for-profit, private colleges classify student unions, dining halls, and residence halls asA) educational and general services.B) auxiliary enterprises.C) independent operations.D) restricted enterprises.

Q: An alumnus of a nonprofit, nongovernmental university establishes an endowment of $50,000. When the university receives the endowment from the donor, what account will the university credit?A) Temporarily restricted revenuesB) Temporarily restricted supportC) Permanently restricted revenuesD) Permanently restricted support

Q: In a nongovernmental, nonprofit hospital, contractual adjustments areA) the discounted rate given to hospital employees.B) discounts arranged with third-party payors.C) recorded as a deduction from revenue or as an expense.D) additional amounts paid by select group participants.

Q: In a nonprofit, nongovernmental hospital, courtesy allowances areA) charity care services.B) revenue deductions.C) expenses.D) revenues earned even if the standard charge is above or below the allowance.

Q: The gift shop of a nonprofit, private hospital has cash revenue of $24,000. What account will the hospital credit?A) Unrestricted supportB) Unrestricted revenueC) Temporarily restricted revenueD) Other operating revenue - unrestricted

Q: Voluntary health and welfare organizations (VHWO) measure contributions at fair value unlessA) fair value is less than the original cost of the item.B) the contributed item is not intended to be re-sold by the VHWO.C) fair value cannot be reasonably determined.D) the contributions are not in cash or cash equivalents.

Q: Voluntary health and welfare organizationsA) may not have paid executives or staff.B) are governed by separate GASB statements.C) use fund accounting, following the rules for proprietary fund reporting.D) are supported by, and provide voluntary services to, the public.

Q: Voluntary health and welfare organizations classify fund-raising costs asA) costs of services sold.B) program services.C) auxiliary expenses.D) supporting services.

Q: Which one of the following statements is not required for voluntary health and welfare organizations?A) A statement of financial positionB) A statement of activitiesC) A statement of functional expensesD) A statement of changes in net assets

Q: Voluntary health and welfare organizations must report expenses classified byA) restriction.B) function and natural classification.C) restriction and natural classification.D) restriction, function and natural classification.

Q: A gift-in-kind, for which the not-for-profit entity has no discretion on disposition, should be accounted for by the not-for-profit, nongovernmental entity asA) a special purpose contribution.B) an exchange transaction.C) an agency transaction.D) a conditional promise to give.

Q: For nonprofit, nongovernmental organizations, unconditional promises to give that include promises of payments due in future periods (next year or later) are reported asA) unrestricted revenues.B) unrestricted support.C) deferred revenues until payment is received.D) restricted revenues.

Q: For a Voluntary Health and Welfare Organization, what entry is prepared when the restriction on a cash donation is met?A) Debit Unrestricted Net Assets, Credit Restricted Net AssetsB) Debit Unrestricted Fund Balance, Credit Restricted Fund BalanceC) Debit Restricted Fund Balance, Credit Unrestricted Fund BalanceD) Debit Temporarily Restricted Net Assets - Reclassifications out, Credit Unrestricted Net Assets - Reclassifications in

Q: A donor gives a Voluntary Health and Welfare Organization(VHWO) $1,000 cash that is restricted for a research project. What account does the VHWO credit when the VHWO receives the money?A) Nonoperating RevenueB) Permanently Restricted RevenueC) Unrestricted SupportD) Temporarily Restricted Support

Q: A nongovernmental, not-for-profit entity is subject to:I. GASBII. FASBA) I onlyB) II onlyC) a combination of I and II depending on the entity's purposeD) neither I or II

Q: On January 1, 2011, a Voluntary Health and Welfare Organization (VHWO) receives an unconditional promise to give $6,000. The money is not collectible until 2012. The VHWO estimates that 10% of pledges are uncollectible. On January 1, 2011, the VHWO will creditA) Unrestricted Support - Contribution, $6,000.B) Allowance for Uncollectible Contributions $600, and Unrestricted Support - Contribution, $5,400.C) Allowance for Uncollectible Contributions $600, Temporarily Restricted Support - Contribution, $5,400.D) Allowance for Uncollectible Contributions $600, Contribution Revenue $5,400.

Q: 1) Which of the following is not true?A) A not-for-profit entity operates for purposes other than to provide goods or services at a profit.B) A not-for-profit entity may be governmental or non-governmental.C) A not-for-profit entity may possess ownership interests like a corporation.D) A not-for-profit entity receives resources from resource providers who do not expect commensurate or proportionate pecuniary return.

Q: In a Statement of Cash Flows for a proprietary fund, what are the primary categories of cash flow activities?A) Operating, Financing, InvestingB) Operating, Noncapital Financing, Capital and Related Financing, InvestingC) Operating, Financing, Noncapital Investing, Capital and Related InvestingD) Noncapital Operating, Capital and Related Operating, Investing, Financing

Q: On January 1, 2011, the Enterprise Fund for a local city receives an operating grant of $100,000 cash from the state government. Upon receipt of the cash, qualifying expenses of $200,000 for the operating grant have been incurred. What journal entry did the Enterprise Fund prepare on January 1, 2011?A) Debit Cash $100,000, credit Deferred Revenue $100,000B) Debit Cash $100,000, credit Contributed Capital $100,000C) Debit Restricted Cash $100,000, credit Nonoperating Revenues $100,000D) Debit Restricted Cash $100,000, credit Other Financing Sources - operating grant $100,000

Q: The fixed assets and long-term liabilities associated with Proprietary Funds are reported on theA) financial statements of governmental funds.B) financial statements of fiduciary funds.C) financial statements of proprietary funds.D) financial statements of trust funds.

Q: The accounting equation for the enterprise fund isA) assets = liabilities.B) current assets + current liabilities = fund balance.C) current assets - current liabilities = net assets.D) current assets + noncurrent assets - current liabilities - noncurrent liabilities = net assets.

Q: On January 1, 2011, the General Fund contributes $200,000 cash to the Internal Service Fund. On January 1, 2011, the General Fund also loans $100,000 cash to the Internal Service Fund. On January 1, 2011, what journal entry does the Internal Service Fund prepare?A) debit Cash $300,000, credit Other Financing Sources $300,000B) debit Cash $300,000, credit Other Financing Sources $200,000, credit Advance from General Fund $100,000C) debit Cash $300,000, credit Advance from General Fund $300,000D) debit Cash $300,000, credit Nonreciprocal Transfer from General Fund $200,000, credit Advance from General Fund $100,000

Q: Enterprise funds are accounted for in a manner similar toA) internal service funds.B) capital project funds.C) special revenue funds.D) debt service funds.