[Anonymous]

I just got he following question wrong on my simulated exam and I feel like I’m losing my mind here…can someone tell me whether I’m crazy or this question is really screwed up…

Top Notch Golf & Country Club is organized as a not-for-profit organization. The club has experienced rapidly declining membership in recent years and its board of directors has made increased membership a major objective. The club incurred the following outlays at the end of the current fiscal year:

• $250,000 in renovations to locker rooms

• $180,000 for new assistant golf professionals

• $220,000 for upgrades to pro shop inventory

• $65,000 for upscale linens and restaurant supplies

• $35,000 for staff dedicated to membership development

• $55,000 for promotional and fund raising brochures

Answer

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Choice 4 is correct. Program services are the activities for which the organization is chartered. Support services include everything not classified as program services, including fund raising, administration and membership development. Expenses are classified as follows:

Program Services

Assistant golf professionals $ 180,000

Upscale linens and supplies 65,000

$245,000

Support Services

Membership development staff $ 35,000

Promotional brochures 55,000

$ 90,000

The remaining costs for renovations and pro shop inventory would be capitalized consistent with commercial accounting.

Choices 1, 2, and 3 are incorrect, per the above.

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Am I crazy? Since when is Upscale linens and supplies a program revenue for a golf course and country club? I would think the Pro Shop should be a program revenue at a gold course, that’s where you buy your balls, clubs, supplies, etc. Sorry if this is a silly post, but really needed to vent and as you may have guessed, my studying isn’t going very well.

[jeff]

Bro – let it go … much more important things to worry about. (I see your point in your post, btw).

[Accounting Pilot]

Ah, non-profit accounting. Always good (along with government accounting) for when you want to bang your head against a wall.

The only reason I can come up with for explaining the classification of Upscale linens and supplies is because, as a country club, those linens and supplies are used for special events and programs. I have not been to many country clubs (not really my crowd) but the few I have been to for various events always had tables covered with nice linens. The restaurant supplies could be used both for golfers and country club member events. As a country club (they are not just a golf course) part of their charter would likely include offering facilities as a conference/meeting center for member events. Hence, linens and restaurant supplies are related to program services.

Regarding the pro-shop inventory, I get the feeling that they are talking about the clubs and golf bags provided for rental. You would not upgrade balls and tees, but you would probably upgrade clubs and bags. And because such equipment provides revenue over the course of several years, it should be capitalized and depreciated. Alternatively, if they are talking about balls and tees, you would not expense the inventory right away; you only expense it after it is sold. Therefore, it should be capitalized into an inventory account and expensed as sales are made. In for-profit accounting, you do not expense inventory as you buy it. Not-for-profit is the same.

EDIT

Darn, why are my posts always so long?

Wisconsin Candidate. NTS 450
BEC - 82 AUD - 85
FAR - 83 REG - 71, 86

[KatieG]

I understand where you're coming from but I work for a firm who specializes in governmental and NFP auditing including several country club. In most country clubs, they have dining rooms and other various restaurants which need linens and other supplies (silverware, dishes, etc.) which end up being capitalized because they'll be used for years and years. With the pro shop inventory, I think Accounting Pilot summarized that best. If it's the actual sale of the inventory, it would be revenue and expense (COGS) but simply buying the inventory needs to go into an asset account. I think the question is not worded well as it is but country club accounting is a little different anyways. Good luck ont the rest of your studying!

Tennessee Candidate

REG - 93
FAR - 86

[Anonymous]

You're not crazy.. it's the nature of the beast 🙂 Keep studying and listen to Jeff 🙂

[Author]

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