CH 14 Sol - partial see docx

CH 14 Sol - partial see docx - CHAPTER 14: Answers to...

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CHAPTER 14: ACCOUNTING FOR NOT-FOR-PROFIT ORGANIZATIONS Answers to Questions 14-1. An entity in the not-for-profit sector is different than one in the public sector because it does not have the power to tax citizens; rather, it is dependent on contributions, dues, and charges for services as its revenue sources. A not-for-profit organization (NPO) is different than a business in the for-profit sector because it has no owners who expect a return on their investment. In addition, an NPO operates for purposes other than providing goods and services at a profit. Note that there are governmental NPOs that are not governments, although they are considered part of the public sector because they may have elected officials, the power to issue tax-exempt debt, and be a component unit of a government. Examples: Not-for-profit sector – Girl Scouts of America Public sector – Missoula Mining Museum (in the city of Missoula, Montana) Private, business sector – Microsoft, Inc. 14-2. Public support consists of resources received, either directly from contributors or donors or indirectly from other not-for-profit organizations, in nonreciprocal or nonexchange transactions in which the donor does not receive direct tangible benefit commensurate with resources contributed. Revenues are recognized when resources are received in reciprocal or exchange transactions. In these cases, the party who provides resources receives benefits in exchange for the resources he or she provides. Typical revenue sources are membership dues, program service fees, sales of supplies and services, investment income, and realized gains on investment transactions. Grants from governmental agencies may have aspects of both indirect public support and revenues, and thus, are reported as separate items in the operating statement. Examples of organizations with a high proportion of total support and revenues in: Contributions – American National Red Cross Charges for services – St. Joseph Mercy Hospital Investment income – Mott Foundation, Inc. (a private nonoperating foundation) 14-3. A not-for-profit organization following GAAP must recognize the fair value of donated services if the services enhance nonfinancial assets, or require specialized skills, are provided by an individual with the specialized skills and would otherwise have to be purchased by the organization, according to SFAS No. 116 .
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CH 14 Sol - partial see docx - CHAPTER 14: Answers to...

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