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Not-for-Profit Entities

Not-for-Profit Entities. Chapter 19. Accounting for Endowment Funds. Exercise 19-7 (partial) During 2008

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Not-for-Profit Entities

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  1. Not-for-Profit Entities Chapter 19

  2. Accounting for Endowment Funds Exercise 19-7 (partial)During 2008 1. $2,000,000 was received to establish the fund. The requirements were (a) $100,000 of the endowment fund’s income must be used for research grants each year. (b) The remainder of income is under the discretion of the governing board. (c) The principal is expendable after the donor’s death. It shall be used to purchase equipment. Cash 2,000,000 Revenue Contribution - Restricted 2,000,000

  3. Accounting for Endowment Funds Exercise 19-7 (partial)During 2008 2. The cash received was invested in a number of securities. Investment 2,000,000 Cash 2,000,000

  4. Accounting for Endowment Funds Exercise 19-7 (partial)During 2009 3. Dividends of $100,000 and interest of $300,000 were received. Cash 400,000 Due to General Fund 300,000 Due to Specific Purpose Fund 100,000

  5. Accounting for Endowment Funds Exercise 19-7 (partial)During 2009 4. The income was transferred to the appropriate funds. Due to General Fund 300,000 Due to Specific Purpose Fund 100,000 Cash 400,000

  6. Accounting for Endowment Funds Exercise 19-7 (partial)During 2010 8. The was notified of the donor death. Transfer to Plant Replacement and Expansion Fund 2,000,000 Cash 2,000,000

  7. Accounting for Investments SFAS No. 124, “Accounting for Certain Investments Held by Not-for-Profit Organizations,” Requires NPOs to report investments in equity securities with readily determinable fair values and all debt securities at fair value in unrestricted, temporarily restricted, or permanently restricted net assets. Unrealized and realized gains and losses are to be recognized in the Statement of Activities. To improve effectiveness and flexibility, NNOs often pool investments of different funds into a single portfolio.

  8. Accounting for Loan Funds • Loans to: • Students and staff of colleges and universities, • Employees of hospitals, and • Beneficiaries of the interests of certain ONNOs. (for example, loans to music students by symphony orchestra societies).

  9. Accounting for Loan Funds Exercise 19-4 The following events relate to Grearson University Loan Fund: 1. $100,000 is received from an estate to establish a faculty and student loan fund. Annual interest rates range from 8% for students to 10% for faculty. 2. Loans to students totaled $60,000, and $40,000 was disbursed to faculty members (of the total loans made, 10% are estimated to be uncollectible). 3. Grearson wrote off a $1,000 student loan as uncollectible. 4. The following loans were repaid. Principal Interest Faculty $ 5,000 $500 Student 10,000 800

  10. Accounting for Loan Funds Exercise 19-4 Prepare the journal entries necessary to record these transactions. 1. $100,000 is received from an estate to establish a faculty and student loan fund. Annual interest rates range from 8% for students to 10% for faculty. Cash 100,000 Revenue – Contributions Restricted 100,000

  11. Accounting for Loan Funds Exercise 19-4 Prepare the journal entries necessary to record these transactions. 2. Loans to students totaled $60,000, and $40,000 was disbursed to faculty members (of the total loans made, 10% are estimated to be uncollectible). Loans Receivable – Students 60,000 Loans Receivable – Faculty 40,000 Cash 100,000 Bad Debt Expense 10,000 Allowance for Uncollectible–Students 6,000 Allowance for Uncollectible–Faculty 4,000

  12. Accounting for Loan Funds Exercise 19-4 Prepare the journal entries necessary to record these transactions. 3. Grearson wrote off a $1,000 student loan as uncollectible. Allowance for Uncollectible–Students 1000 Loans Receivable – Students 1000

  13. Accounting for Loan Funds Exercise 19-4 Prepare the journal entries necessary to record these transactions. 4. The following loans were repaid. Principal Interest Faculty $ 5,000 $500 Student 10,000 800 Cash 16,300 Loans Receivable – Students 10,000 Loans Receivable – Faculty 5,000 Interest Income 1,300

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