Deck 10: Accounting for Private Not-For-Profit Organizations

Question 1

Cash flows must be presented separately in the Statement of Cash Flows for the three classes (unrestricted, temporarily restricted and permanently restricted).

Answer 1

False

Question 2

The AICPA Not-for-Profit Guide applies to both governmental and nongovernmental not-for-profit organizations.

Answer 2

False

Question 3

While many not-for-profit organizations use funds for internal purposes, the financial statements do not report separate funds.

Answer 3

True

Question 4

Expenditures, encumbrances and budgetary accounts are not used by not-for-profit organizations.

Question 5

The FASB requires not-for-profit organizations to report individual assets and liabilities separated by unrestricted, temporarily restricted and permanently restricted.

Question 6

The financial statements of not-for-profits are intended primarily for use by present and potential donors.

Question 7

Revenues must be presented separately in the Statement of Activities for the three classes (unrestricted, temporarily restricted and permanently restricted).

Question 8

Voluntary health and welfare organizations promote the general health and well-being of the public.

Question 9

Donated fixed assets that have not yet been depreciated may be recorded as either unrestricted or temporarily restricted.

Question 10

The GASB has the authority to establish accounting and financial reporting standards for state and local governments and private sector not-for-profit organizations.

Question 11

Net Assets must be presented separately in the Statement of Financial Position for the three classes (unrestricted, temporarily restricted and permanently restricted).

Question 12

Accounting practices of private sector not-for-profit organizations are influenced by two AICPA audit and accounting guides: Not-for-Profit Organizations and Health Card Organizations.

Question 13

Not-for-profit organizations are required to present a Statement of Functional Expenses instead of a Statement of Cash Flows, as required of businesses.

Question 14

Assets that are restricted by an organization's board can be reported as either temporarily restricted or permanently restricted, according to the board's intentions.

Question 15

Country clubs and labor unions are not included in the category "other not-for-profit" organizations because they provide benefit to their members only and not to the general public.

Question 16

Not-for-profit organizations are not required to record depreciation expense.

Question 17

Expenses must be presented separately in the Statement of Activities for the three classes (unrestricted, temporarily restricted and permanently restricted).

Question 18

Conditional pledges should not be recognized as revenue until the conditions have been met.

Question 19

Contributions to be paid in future periods should be recorded at present value.

Question 20

Examples of voluntary health and welfare organizations would include the Girl Scouts and the American Heart Association.

Question 21

Not-for-profit organizations should have little to no profit.

Question 22

A Statement of Functional Expenses is required for Voluntary health and welfare organizations.

Question 23

FASB statement 116 requires contributions to be recorded as revenue when the contribution is likely to be received.

Question 24

A Statement of Functional Expenses is required for tax agencies.

Question 25

FASB statement 116 requires contributions to be recorded as revenue when the contributed money is actually received.

Question 26

Performing arts organizations are an example of other not-for-profit organizations.

Question 27

The Statement of Cash Flows for a not-for-profit organization, has four different classifications of cash flows.

Question 28

FASB statement 116 requires contributions to be recorded as revenue when the contribution is promised.

Question 29

The Statement of Functional expenses presents a matrix of expenses classified by function (various programs, fund-raising, etc) and by object or natural classification (salaries, supplies, travel, etc.).

Question 30

A Statement of Functional Expenses which is required for voluntary health and welfare organizations, presents a matrix of expenses classified by function and by object or natural classification.

Question 31

With respect to the Statement of Cash Flows for a not-for-profit organization, the purchase of equipment would be considered an investing activity.

Question 32

Donated services should be considered revenue if the service creates or enhances a nonfinancial asset and requires a specialized skill which would have had to be purchased if not donated.

Question 33

With respect to the Statement of Cash Flows for a not-for-profit organization, donor restricted cash that must be used for long term purposes is classified as cash flows from financing activities.

Question 34

Present and potential donors are the primary users of private not-for-profit financial statements.

Question 35

The Statement of Cash Flows for a not-for-profit organization has three different classifications of cash flows.

Question 36

All donated services are recognized as revenue.

Question 37

A Statement of Functional Expenses is required for voluntary health and welfare organizations.

Question 38

A Statement of Functional Expenses is required for public colleges and universities.

Question 39

When preparing the Statement of Cash Flows for a not-for-profit organization, the direct or indirect method of may be used.

Question 40

A Statement of Functional Expenses is required for state governments.

Question 41

What are the financial statements required for all nongovernmental, not-for-profit organizations?

A) Statement of Financial Position, Statement of Activities, Statement of Cash Flows
B) Statement of Financial Position, Statement of Activities, Statement of Functional Expenses
C) Statement of Financial Position, Statement of Activities, Statement of Functional Expenses
D) Statement of Financial Position, Statement of Activities, Statement of Cash Flows, Statement of Functional Expenses

Question 42

Which of the following is not true regarding the treatment of multiyear pledges, according to FASB Statement 116?

A) They are recorded at the present value of future collections
B) They should be reported net of an allowance for estimated uncollectibles
C) They should be recorded as temporarily restricted
D) At the end of each accounting period, the difference between the new and previously recorded present value is recorded as interest revenue

Question 43

A donor gave artwork to a nongovernmental, not-for-profit museum. The artwork qualified as a "collection," under FASB rules. The not-for-profit could:

A) Record the artwork at its fair market value at the time of receipt as an increase in permanently restricted net assets
B) Not record the artwork, but provide information about the artwork in the footnotes
C) Do either of the above, depending upon the policy of the not-for-profit
D) Record the artwork as both a contribution and an expense

Question 44

Unconditional promises to give are recognized when the promise is made net of estimated uncollectible receivables.

Question 45

Which of the following is true regarding the Statement of Activities for nongovernmental, not-for-profit organizations?

A) FASB requires that the change in net assets be reported, for each of the net asset classes and in total
B) Information for the Statement of Activities may be presented in two statements: Statement of Revenues, Expenses and Changes in Unrestricted Net Assets and Statement of Changes in Net Assets
C) Both of the above
D) Neither of the above

Question 46

Which of the following organizations would be subject to the (level b) accounting and reporting requirements of the AICPA's Audit and Accounting Guide: Not-for-Profit Organizations?

A) The International Brotherhood of Electrical Workers
B) St. Jude Children's Hospital
C) Both of the above
D) Neither (a) or (b) above

Question 47

A civic ballet company sells 10 "Benefactor" status memberships for $500 each. The Benefactors each receive a season ticket valued at $200 and a listing in the company's program. How would the ballet company record the sale of these 100 memberships?
A.
$\begin{array}{lll}\text { Cash } & \$ 5,000 & \\ \text { Deferred Revenue } && \$ 5,000 \\\end{array}$

B.
$\begin{array}{lcc}\text { Cash - Restricted } & \$ 3,000 \\\text { Cash - Unrestricted } & 2,000 & \\\quad \text { Contributions - Restricted } & & \$ 3,000 \\\text { Revenue } & & 2,000\end{array}$


C.
$\begin{array}{lll}\text { Cash } & \$ 5,000 & \\ \text { Revenue } && \$ 2,000 \\ \text { Contributions - Restricted } && 3,000\end{array}$

D.
$\begin{array}{l}\text { Cash }& \$ 5,000 \\\text { Deferred Revenue } && \$ 2,000\\\text { Contributions }-\text { Unrestricted } &&3,000 \\\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 48

After the issuing of Statement 117, not-for-profit financial statements are relatively standardized across industries.

Question 49

FASB statement 124 requires that investments in equity securities with readily determinable values be reported at fair market value.

Question 50

If a donor selects a scholarship recipient and then donates cash to a ballet school to fund that scholarship, the ballet school would:

A) Record a liability, as it is acting as an agent for the donation
B) Record the donated cash as a contribution
C) Not record the donation at all, but disclose it in the footnotes
D) Record the scholarship awarded as a reduction of revenue

Question 51

The Statement of Functional expenses can be classified by function (various programs, fund-raising, etc) or by natural classification (salaries, supplies, travel, etc.).

Question 52

Which of the following is true regarding the Statement of Financial Position for nongovernmental, not-for-profit organizations?

A) The Statement must display assets and liabilities separated between the categories of unrestricted, temporarily restricted and permanently restricted
B) The Statement must display totals for net assets separated between the categories of unrestricted, temporarily restricted and permanently restricted
C) Both of the above
D) Neither of the above

Question 53

Which of the following are the net asset classes required by the FASB for not-for-profit organizations?

A) Reserved and Unreserved
B) Invested in Capital Assets, Net of Related Debt, Restricted and Unrestricted
C) Permanently Restricted, Temporarily Restricted, Unrestricted
D) None of the above

Question 54

Which of the following would be a contribution increasing permanently restricted net assets?

A) A contribution by a donor in the amount of $1,000,000, set aside by the governing board as funds not to be expended
B) A contribution by a donor in the amount of $1,000,000, set aside by the donor as funds not to be expended
C) Both of the above
D) Neither of the above

Question 55

An intention to give is the same as an unconditional promise to give and can be recorded as revenue when the intention is made known.

Question 56

Which of the following organizations would be subject to the accounting and reporting requirements of FASB Statements 116 (Accounting for Contributions) and 117 (Financial Reporting for Not-for-Profit Organizations)?

A) The International Brotherhood of Electrical Workers
B) St. Jude Children's Hospital
C) Both of the above
D) Neither (a) or (b) above

Question 57

Which of the following contributed services would probably not be recognized as contribution revenue?

A) An attorney donates her services to defend the Girl Scouts in a lawsuit
B) An electrician donates his services to upgrade the electrical service at a mental health clinic
C) State CPA society members hand out informational booklets at a shopping mall
D) A nurse donates her time to collect blood at an American Red Cross blood drive

Question 58

State governments are required to prepare a Statement of Functional Expenses.

Question 59

Which of the following is true regarding the Statement of Cash Flows for nongovernmental, not-for-profit organizations?

A) Either the direct or indirect method may be used
B) If a not-for-profit organization received a cash contribution for permanently restricted purposes, that cash contribution would be shown as a cash flow from financing activities
C) Both of the above
D) Neither of the above

Question 60

A donor gave $60,000 to a nongovernmental, not-for-profit charity with instructions that the funds be transferred to Sam Smith, an individual who lost his home in a fire. The not-for-profit would:

A) Record the $60,000 cash and credit temporarily restricted revenue
B) Record the $60,000 cash and credit a liability
C) Do either (a) or (b), depending upon the policy of the not-for-profit
D) Not record the transaction

Question 61

Lisa informed her church that she had named the church in her will and later provided a written copy of the will to the church. At what point should the church record the contribution?

A) At the time when the church was informed of her will
B) At the time the church receives a written copy of the will
C) At Lisa's death
D) At the date the probate court declares the will valid following her death

Question 62

Which of the following is a legitimate reason for a not-for-profit organization to have a surplus (increase in net assets)?

A) To establish working capital
B) To retire debt
C) Both (a) and (b) above
D) None of the above, not-for-profits should not have surpluses

Question 63

Henry Highbrow promises to donate $50,000 to his church toward the purchase of a new pipe organ if the church is able to raise matching funds of $50,000 from other contributors. At what point should the church record revenue?

A) When the matching funds are raised
B) When the organ is purchased
C) When Henry makes his pledge
D) When Henry pays the $50,000 to the church

Question 64

Which of the following pledges of support would not be recognized in the year the pledge was made?

A) A pledge with no restrictions, but conditional on receiving matching pledges
B) An unconditional pledge restricted to a particular purpose
C) An unconditional pledge restricted to a particular year in the future
D) None of the above - all would be recognized

Question 65

Which of the following factors, if present, would indicate that a transaction is not a contribution?

A) The resource provider received value in exchange
B) The resource provider entered into the transaction voluntarily
C) The transfer of assets was unconditional
D) The organization has discretion in the use of the assets received

Question 66

Care Foundation is a voluntary health and welfare organization funded by contributions from the general public. Care sold equipment for $30,000 which cost $40,000 and had a book value of $25,000 at the time of sale. In recording the sale, Care should:

A) Record a gain of $ 5,000
B) Record "proceeds from sale of land" of $ 30,000
C) Both (a) and (b) above
D) Neither (a) nor (b) above

Question 67

Uptown Church received a donation of marketable equity securities from a church member. In reviewing the financial press, it is determined that the securities had appreciated during the year. At what amount should Uptown report its marketable equity securities in the year-end balance sheet?

A) Market value at the date of receipt
B) Market value at the balance sheet date
C) Donor's cost
D) The lower of a, b or c

Question 68

A donor made a gift of cash to a not-for-profit organization in 2009 with an expressed purpose restriction. All the funds were expended in 2009. The organization must:

A) Record the gift as a temporarily restricted revenue, reclassify the funds to unrestricted and then report the expense as unrestricted
B) Record the gift and expense as unrestricted
C) Record the gift and expense as temporarily restricted
D) Use either of the methods described in (a) or (b)

Question 69

Under FASB Statement 117, reclassifications of net assets are not made:

A) For satisfaction of time restrictions
B) For satisfaction of program restrictions
C) If the governing board decides to permanently place assets in an endowment
D) None of the above

Question 70

A not-for-profit organization received a gift of $460,000 with purpose restrictions in 2008. In 2009 funds were expended for the purpose outlined in the gift, however, it was not possible to determine whether the restricted funds or unrestricted funds were used. The presumption should be:

A) The restricted funds would have been used first
B) The unrestricted funds would have been used first
C) The restricted funds and unrestricted funds would have been used equally
D) The restricted funds and unrestricted funds would have been used, based on a weighted average of the amounts

Question 71

A donor gave equipment valued at $50,000 at the beginning of 2009 to a not-for-profit organization. The equipment had a 10-year life and depreciation of $5,000 was charged during 2009. At the end of the year, the net assets to be reported in unrestricted net assets related to this equipment would be:

A) $50,000.
B) $45,000.
C) $ 0.
D) Either $45,000 or $0, depending upon the policy of the organization

Question 72

Care Foundation is a voluntary health and welfare organization funded by contributions from the general public. In its Statement of Activities, depreciation expense should:

A) Not be included
B) Be included as an element of support
C) Be included as an element of changes in fund balances
D) Be included as an element of expense

Question 73

Which of the following is true of a Statement of Cash Flows for a private sector, not-for-profit organization?

A) Four categories are used: Operating, Capital Related Financing, Non-capital Related Financing and Investing
B) Either the direct or indirect method is acceptable
C) Cash flows must be presented separately for Unrestricted, Temporarily Restricted and Permanently Restricted categories
D) None of the above; all are true

Question 74

A skilled carpenter repaired the roof for a private not-for-profit free of charge. The not-for-profit would have had to pay $50 for this service if not donated. What entry should the not-for-profit make? $\begin{array}{lccc}\text { A) Building } & 50 \\ \text { Contribution revenue } &&50 \\\end{array}$

$\begin{array}{lccc}\text { B) Service expense } & 50 & \\\text { Contribution revenue } & &50 \\\end{array}$

$\begin{array}{lccc}\text { C) Improvements } &50 \\ \text { Contribution revenue } & &50\end{array}$

$\begin{array}{lccc}\text { D) No entries are necessary for the transaction. }\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 75

In which of the following categories may Investment Income be reported by Not-for-Profit organizations: I Unrestricted net asset II Temporarily restricted net asset III Permanently restricted net asset

A) Only I.
B) Only I & II.
C) Only 1 & III.
D) I, II & III.

Question 76

Which of the following would not be recognized as contribution revenue by a not-for-profit organization?

A) A pledge to support an educational program for the next 3 years
B) A health clinic is paid to perform clinical trials of a new medicine
C) A gift restricted to purchase equipment
D) Dues paid in excess of the fair value of benefits received

Question 77

An unconditional pledge of support is properly recorded as Temporarily Restricted Revenue at the time of the pledge. Changes in the present value of the receivable resulting from the passage of time is reported as:

A) Interest income
B) Contribution revenue
C) Program revenue
D) None of above is correct

Question 78

Which of the following organizations does not follow the AICPA's Not-for-Profit Guide?

A) Colleges and universities
B) Voluntary health and welfare organizations
C) Homeowners' Associations
D) County governments

Question 79

A donor gave $100,000 to a foundation, which is financially related to a nongovernmental, not-for-profit organization. The foundation, which is also a nongovernmental, not-for-profit organization, would record the $100,000 as:

A) A Revenue
B) A Liability
C) Either (a) or (b), depending upon the policy of the foundation
D) Neither (a) or (b); the transaction would not be recorded by the foundation

Question 80

What financial ratio is most commonly used to evaluate charitable organizations?

A) Current assets / current liabilities
B) Increase in net assets / total assets
C) Total expenses / total revenues
D) Program expenses / total expenses