Service businesses provide services for income, while a ...

[eruditmonkey@yahoo.com]

Service businesses provide services for income, while a merchandising business sells merchandise.
 a. True
  b. False
 
   Indicate whether the statement is true or false

Question 2

(Accounting for donations and donor-restricted and board-designated resources)
 
  A not-for-profit hospital uses the following funds to account internally for its resources: General Fund (GF); Specific Purpose Funds (SPF); Plant Replacement and
 
  Expansion Funds (PREF); and Endowment Funds (EF). The hospital is establishing a special trauma unit for brain-related injuries, and is soliciting contributions for this purpose. It reports donations as revenues, rather than gains, because fund-raising is a significant part of its ongoing activities. Record the following transactions, stating the fund or funds used, and whether unrestricted, temporarily restricted, or permanently restricted net assets are affected.
   a. Hospital trustees set aside 100,000 for the purpose of training its nurses to deal with patients in the hospital's trauma unit.
   b. National Products donated trauma equipment having a fair value of 325,000 . Also, Stay-Cool Chemical donated drugs having a fair value of 44,000
   c. The hospital received cash contributions from local donors, who stipulated that the donations must be used for the following purposes involving the trauma unit:
   (1) 10,000, to help pay the salary of Dr. Harlan Elliot, noted brain surgeon; and
   (2) 200,000, to be used solely for the purpose of equipping the trauma unit.
   d. Dr. Cheryl Fusco was hired. His first month's salary was 25,000 . The hospital used the donation received in transaction c(1) to pay part of Dr. Fusco's salary.
   e. The hospital purchased 80,000 of special equipment for the trauma unit. Its policy is to use donated funds to acquire equipment before it uses internally-generated funds.

[miss.ashley]

Answer to Question 1

True

Answer to Question 2

a. GF
Cash - board-designated for nurse training 100,000
Cash 100,000

Unrestricted net assets 100,000
Unrestricted net assets designated
for nurse training 100,000

b. GF
Equipment 325,000
Inventory - drugs 44,000
Other revenue - donated equipment 325,000
Other revenue - donated commodities 44,000

c1 SPF
Cash 10,000
Temporarily restricted support - contributions 10,000

c2 PREF
Cash 200,000
Temporarily restricted support - contributions 200,000

d. SPF
Temporarily restricted asset reclass. out--net
assets released from restriction
used for operations 10,000
Cash 10,000

GF
Patient care expense 25,000
Unrestricted asset reclass. in--net
assets released from restriction
used for operations 10,000
Cash 15,000

e. PREF
Temporarily restricted asset reclass. out--
net assets released from restriction
used for purchase of equipment 80,000
Cash 80,000

GF
Equipment 80,000
Unrestricted asset reclass. in--net
assets released from restriction
for purchase of equipment 80,000