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 to

a. 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 the

United 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 adjustment that it will not collect.

d. The third-party payor retained the $700 and will convey it to the health care facility at the start of the next fiscal period.

9. What is a contractual adjustment?

a. An increase in a patient’s charges caused by revisions in the billing process utilized by a health care entity.

b. A year-end journal entry to recognize all of a health care entity’s remaining receivables.

c. A reduction in patient service revenues caused by agreements with third-party payors that allows them to pay a health care entity based on their determination of reasonable costs.

d. The results of a cost allocation system that allows a health care entity to determine a patient’s cost by department.

10. A private not-for-profit health care entity provides its patients with services that would normally be charged at $1 million. However, it estimates a $200,000 reduction because of contractual adjustments.

It expects another $100,000 reduction because of bad debts. Finally, the organization does not expect to collect $400,000 because this amount is deemed to be charity care. Which of the following is correct?

a. Patient service revenues = $1 million; net patient service revenues = $300,000.

b. Patient service revenues = $1 million; net patient service revenues = $400,000.

c. Patient service revenues = $600,000; net patient service revenues = $300,000.

d. Patient service revenues = $600,000, net patient service revenues = $400,000.