On April 23, Year 4, Anderson, Inc. sold a building and received cash proceeds of $650,000. At the time of sale, the building had a net book value of $700,000. Anderson prepares its statement of cash flows using the indirect method. How should Anderson report the results of this transaction in its Year 4 statement of cash flows?

Private not-for-profit (NFP) entities follow FASB ASC 958, requiring full accrual accounting and specialized financial statements focused on accountability rather than profit. Core reports include the Statement of Financial Position (net assets), Statement of Activities, Statement of Cash Flows, and Statement of Functional Expenses. Net assets are classified into two categories: with donor restrictions and without donor restrictions.  Key Financial Statements (FASB ASC 958) Statement of Financial Position (Balance Sheet): Reports assets, liabilities, and net assets (equity).... Show more

Private not-for-profit (NFP) entities follow FASB ASC 958, requiring full accrual accounting and specialized financial statements focused on accountability rather than profit. Core reports include the Statement of Financial Position (net assets), Statement of Activities, Statement of Cash Flows, and Statement of Functional Expenses. Net assets are classified into two categories: with donor restrictions and without donor restrictions. 

Key Financial Statements (FASB ASC 958)
Statement of Financial Position (Balance Sheet): Reports assets, liabilities, and net assets (equity). Assets/liabilities do not require classification as current or non-current.
Statement of Activities (Income Statement): Details changes in net assets (without donor restriction and with donor restriction).
Statement of Cash Flows: Uses the same three categories as for-profit entities (operating, investing, financing), but with distinct treatment for restricted contributions (e.g., long-term restricted donations are financing).
Statement of Functional Expenses: Mandatory for all voluntary health and welfare organizations, it breaks down expenses by nature (e.g., salaries, rent) and function (program services vs. supporting activities). 

Key NFP Accounting Concepts
Net Asset Classifications: Net assets are classified as either with or without donor restrictions based on external stipulations.
Revenue Recognition: Contributions and promised gifts are recognized as revenue when received, classified based on restriction, and recorded at fair value.
Donated Services/Assets: Donated services are recognized only if they create/enhance non-financial assets or require specialized skills that would typically be purchased. 

CPA FAR Exam Focus
The FAR exam often tests the distinction between NFP accounting and for-profit GAAP, particularly regarding the classification of donations, the functional allocation of expenses, and the classification of net assets.

Show less