Problem 01:

1. Financial accounting (financial reporting) applies to which of the following?

2. A non-profit organization receives donation of services in-kind from an accountant who was consulted regarding the
NPO’s financial reporting system. The NPO will most likely recognize those services as
a. assets and revenues
b. liabilities and revenues
c. expenses and revenues
d. none of these

3. According to US GAAP, the accounting requirement unique to Voluntary Health and Welfare Organizations (VHWO) is
the
a. accounting for marketable securities which are subsequently measured at the lower of cost and market value.
b. non-depreciation of property, plant and equipment.
c. provision of a statement of functional expenses that reports expenses by both functional and natural classifications.
d. recognition criteria for assets, which allow the recognition of items with improbable inflows of resources embodying
economic benefits.
4. Private not-for-profit organizations should report a statement of cash flows using the
a. Direct method.
b. Indirect method
c. Working capital method
d. a or b

5. On the statement of operations of a health care organization, expenses are deducted from (use SFAS 117 in answering
this question)
a. Temporarily unrestricted revenues.
b. Unrestricted revenues.
c. Unrestricted revenues and temporarily unrestricted revenues.
d. Permanently restricted revenues.

6. On the statement of activities of a private university, expenses are reported by (use SFAS 117 in answering this
question)
a. Character
b. Department
c. Object
d. Function

Problem 02:
Consider the following transactions for the University of Baguio, a private university:
a. On January 1st, a gift of P100,000 was received from an alumnus. She requested one half be used for student
loans and the other as a pure endowment contribution.
b. Loans totaling P25,000 are made to students. Collections from other loans made to students totaled P30,000
plus P3,000 interest.
c. During the year, investments of P20,000 were sold for P30,000. Any gain is restricted for improvements in
classroom instruction.
d. During the year, interest charges of P5,000 were earned and collected on late student fee payments.
 e. A student loan of P500 is deemed uncollectible.
f. During the year, operating expenses of P150,000 were recorded. At the end of the year, P25,000 remains
unpaid.
Required: Prepare journal entries necessary to record the transactions.

Problem 03:
Use the following information for the next three questions:
An NPO disclosed the following in its 20x1 notes to financial statements:
a. Received shares valued at ₱2,000,000 to be retained with the dividends used to support current operations.
b. Net resources of ₱1,000,000 invested in plant assets.
c. Received equipment valued at ₱5,000,000 which is to be sold with the proceeds used to renovate the children’s
playground.
d. Board-designated funds of ₱600,000.
e. Received ₱20,000 cash from a donor who did not specify any use restrictions on the contribution; however, the donor
specified that the donation should not be used until 20x2.
f. Received ₱800,000 from a donor who stipulated that the contribution shall be invested indefinitely and that the earnings
shall be used for research purposes. Investment income in 20x1 amounted to ₱50,000.
7. How much is included in unrestricted net assets?
8. How much is included in temporarily restricted net assets?
9. How much is included in permanently restricted net assets?
10. Provide journal entries from a to f.

Problem 04:
On December 1, 20x1, ABC Organization, a non-profit entity, had the following transactions:
• Purchased a vehicle costing ₱150,000 using unrestricted cash
• Received a vehicle with fair value of ₱120,000 from donation
ABC estimates that both of the vehicles have useful lives of 5 years and no residual value. ABC has an accounting policy
implying a time restriction on gifts of long-lived assets.
11. In ABC’s 20x1 statement of activities, what amount of depreciation expense should be included under changes in
unrestricted net assets?

Problem 05:
ABC Organization, a not-for-profit entity, received the following donations during 20x1:
• Land with fair value of ₱10,000,000 to be sold to acquire a bus.
• Shares of stocks with fair value of ₱3,000,000 to be retained indefinitely. The dividends from the shares will be
used to support current operations.
12. As a result of the donations above, how much should ABC report as increase in temporarily restricted net assets?

Problem 06:
Use the following information for the next two questions:
An NPO received the following contributions in 20x1:
• ₱100,000 cash for the purchase of equipment.
• ₱250,000 cash restricted for the renovation of an old building owned by the NPO.
None of the contributions were used in 20x1. However, in 20x2, the entity acquired an equipment for ₱110,000.
13. How much contributions revenue is recognized in 20x1?
14. How much “net assets released from restrictions” is reported in the 20x2 statement of activities?

Problem 07:
Use the following information for the next four questions:
On December 31, 20x1, ABC Organization, a not-for-profit entity, received the following donations:
• Ms. Alpha made a pledge (promise) to give ₱12,000 to ABC Organization each year for the next five years starting on
December 31, 20x2. The appropriate discount rate is 10%. The pledge is unconditional.
• Ms. Beta made a pledge (promise) to provide half of the funds needed to construct a new building for ABC Organization
if ABC could get the remaining half of the needed funds from other donors by March 1, 20x2. As of December 31, 20x1,
ABC has already accumulated 47% of the needed construction funds from donations and ABC’s Board of Trustees
strongly believes that the remaining 3% will be received by the end of January 20x2. The estimated total costs of
construction is ₱1,000,000.
• Mr. Charlie made a pledge (promise) to give ABC Organization a used offset printing equipment if ABC acquires a paper
cutting equipment. The offset printing equipment has a fair value of ₱1,200,000. Because of recent cash flow problems,
ABC’s Board of Trustees believes that it will not be able to acquire a paper cutting equipment in the near term.
• Mr. Delta gave ABC Organization ₱500,000 as a challenge grant. ABC Organization can keep the ₱500,000 if it can
raise an additional ₱500,000 by the end of March 20x2. If ABC Organization fails to comply with the condition, it shall
return the amount received to Mr. Delta.
15. The entry to record the promise of Ms. Alpha is
16. The entry to record the promise of Ms. Beta is
17. The entry to record the promise of Mr. Charlie is
18. The entry to record the promise of Mr. Delta is

Problem 08:
The following information was taken from the accounts and records of the Astronomy Foundation, a private, not-for-profit
organization. All balances are as of December 31, 2005, unless otherwise noted.
Unrestricted Support - Contributions ...........................................................$5,000,000
Unrestricted Support - Membership Dues ................................................... 600,000
Unrestricted Revenues - Investment Income............................................... 96,000
Temporarily restricted gain on sale of investments ...................................... 9,000
Expenses - Research .................................................................................. 3,200,000
Expenses - Fund Raising ............................................................................ 700,000
Expenses - Management and General ........................................................ 300,000
Restricted Support - Contributions .............................................................. 600,000
Restricted Revenues - Investment Income .................................................. 50,000
Permanently Restricted Support - Contributions ......................................... 60,000
Unrestricted Net Assets, January 1, 2005 ........................................................500,000
Temporarily Restricted Net Assets, January 1, 2005 .................................. 6,000,000
Permanently Restricted Net Assets, January 1, 2005 ................................. 50,000
19. The unrestricted support from contributions was received in cash during the year. The expenses included $1,300,000
payable from donor -restricted resources. What is the balance of net assets by the end of the year? 8,765,000

Problem 09:
The following information was taken from the accounts and records of the Archive Foundation, a private, not-for-profit
organization. All balances are as of June 30, 2006, unless otherwise noted.
Unrestricted Support - Contributions ...........................................................$3,000,000
Unrestricted Support - Membership Dues ................................................... 700,000
Unrestricted Revenues - Investment Income............................................... 76,000
Temporarily restricted gain on sale of investments ...................................... 19,000
Expenses - Research .................................................................................. 2,200,000
Expenses - Fund Raising ............................................................................ 400,000
Expenses - Management and General ........................................................ 500,000
Restricted Support - Contributions .............................................................. 600,000
Restricted Revenues - Investment Income .................................................. 40,000
Permanently Restricted Support - Contributions ......................................... 70,000
Unrestricted Net Assets, July 1, 2005 ..............................................................450,000
Temporarily Restricted Net Assets, July 1, 2005 ......................................... 2,100,000
Permanently Restricted Net Assets, July 1, 2005...............................................60,000
The unrestricted support from contributions was received in cash during the year. The expenses included $800,000
payable from donor - restricted resources.
20. What is the net increase in unrestricted net assets for the year? 1,476,000
21. From the preceding number, what is the net increase in net assets for the year? 1405000

Problem 10:
Selected ledger account balances (in Alphabetical order) of a not for-profit private hospital for the year ended
December 31, 2003, follow:
Debit Credit
Administrative expense P280,000
Depreciation expense 340,000
Doubtful accounts expense 80,000
General services expense 540,000
Net assets released from restrictions P140,000
Nursing expense 560,000
Other operating revenue 180,000
Other professional service expenses 400,000
Patient expenses revenue 1,560,000
Research expenses (expended from temporarily 140,000
restricted net assets)
Unrestricted contributions 380,000
Unrestricted income (from permanently restricted 280,000
resources)
22. The increase (decrease in unrestricted net assets shown in the Statement of Activities for the year ended December 31,
2003 is: P200,000