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

Question 1

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

Answer 1

False

Question 2

Fixed assets may be recorded by a private not-for-profit as temporarily restricted or unrestricted,depending on the policy of the organization.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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 5

Under FASB Statement No.116,multiyear pledges are to be recorded as a pledge receivable for the total amount and contribution revenue will be recorded proportionally each year of the pledge.

Question 6

According to FASB Statement 124,Accounting for Certain Investments of Not-for-Profit Organizations,requires investments in equity but not debt securities by a not-for-profit to be carried at fair value.

Question 7

A private not-for-profit reports expenses in either the unrestricted net asset class or restricted net asset class,as appropriate.

Question 8

If fixed assets are recorded as temporarily restricted assets,then a reclassification is made each accounting period to unrestricted resources in the amount equal to the depreciation or an allocation based on the time the asset is restricted,whichever is shorter.

Question 9

Contributions of assets other than cash to a private not-for-profit are recorded at the donor's basis.

Question 10

Contributions to a private not-for-profit are recorded at fair market value at the date of receipt.

Question 11

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

Question 12

A private not-for-profit reports all expenses in unrestricted net asset class.

Question 13

A private not-for-profit's expenses are reported by function,program or supporting,in the Statement of Activities or in the notes.

Question 14

Contributions to a private not-for-profit may be restricted as to purpose or for plant acquisition,but not as to time.

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

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

Question 17

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

Question 18

Private 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 19

If a private not-for-profit fails to comply with donor restriction on contributions received,the organization must accrue and disclose a contingent liability following FASB Statement No.5.

Question 20

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

Question 21

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

Question 22

FASB statement 116 requires unconditional pledges of support to be recorded as revenue when the contribution is promised.

Question 23

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 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

All donated services are recognized as revenue.

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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 39

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

Question 40

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

Question 41

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

Question 42

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 43

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

Question 44

Which of the following is part of the treatment of multi-year pledges as required by FASB Statement No.116?

A) The donation is recorded as a receivable at the present value of the future collections but revenue is not recorded until the pledge is received.
B) At the end of each accounting period, the difference between the balance in the receivable account and the new present value is recorded as contribution revenue and the receivable is increased.
C) At the end of each accounting period, the difference between the balance in the receivable account and the new present value is deducted from the amount of the amount received from the donor which is recorded as income.
D) Pledge receivable is recorded for the total amount to be received and revenue is recorded each year as monies are received by the organization.

Question 45

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

Question 46

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

Question 47

A Statement of Functional Expenses is required for tax agencies.

Question 48

Which of the following is not correct with respect to acquisitions under the rules established by FASB Statement No.164,Not-for-Profit Entities: Mergers and Acquisitions?

A) If the combination qualifies as an acquisition, the not-for-profit may acquire control of a business enterprise or other not-for-profit organization and will be accounted for using the acquisition method.
B) Combinations not meeting the definition of a merger are reported as acquisitions.
C) Assets and liabilities of the acquired entity are recorded at fair value on the books of the not-for-profit.
D) Entities that derive their revenues from business-like activities are required to expense the goodwill at the date of acquisition.

Question 49

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

Question 50

Private not-for-profit organizations should have little to no profit.

Question 51

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

Question 52

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

Question 53

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 54

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

Question 55

Which of the following is not correct with respect to mergers under the rules established by FASB Statement No.164,Not-for-Profit Entities: Mergers and Acquisitions?

A) If the combination qualifies as a merger, it will be accounted for using the carryover method.
B) Goodwill is recognized on long term assets only.
C) Assets and liabilities are transferred from both existing entities to the new entity at book value.
D) The entity resulting from the merger is a new reporting entity, with no activity before the date of the merger.

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

A Statement of Functional Expenses is required for state governments.

Question 61

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 62

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 63

Which of the following are the net asset classes required by the FASB for private 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 64

Which of the following statements is not correct with respect to contributions to a private not-for-profit?

A) Contributions to a not-for-profit are recorded at fair market value at the date of receipt.
B) Contributions of assets other than cash to a not-for-profit are recorded at the donor's basis.
C) Contributions to a not-for-profit may be restricted as to purpose or time or for plant acquisition.
D) Revenues, including contributions are considered to be unrestricted unless donor-imposed restrictions apply.

Question 65

Which of the following is not correct with respect collections held by private not-for-profit organizations?

A) If a collection is sold, the proceeds must be reinvested in another collection.
B) If recorded, collections are recorded as permanently restricted assets.
C) If collections are not recorded, note disclosures are required.
D) All of the above are correct.

Question 66

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 67

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 68

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 69

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 notes.
D) Record the scholarship awarded as a reduction of revenue.

Question 70

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 71

With the exception of collections,fixed assets may be recorded by a private not-for-profit as:

A) Temporarily restricted
B) Unrestricted
C) Not recoded if donated
D) A & B are correct

Question 72

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 notes.
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 73

Which of the following is not correct with respect to the reporting of expenses for a private not-for-profit?

A) Expenses can be reported in the unrestricted net asset class or restricted net asset class, as appropriate.
B) Expenses are reported by function in the Statement of Activities or in the notes.
C) The FASB describes functions as either program or supporting.
D) Major program classifications should be shown in the Statement of Activities or in the notes.

Question 74

Which of the following is not a distinguishing characteristic of a private not-for-profit organization according to FASB Statement No.16,Appendix D?

A) Operating purposes other than to provide goods or services at a profit.
B) Absence of ownership interests like those of business enterprises.
C) Contributions of significant amounts of resources from resources providers who do not expect commensurate or proportionate pecuniary return.
D) Upon dissolution of the organization, remaining assets are to be distributed to the original contributors.

Question 75

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 76

Which of the following is true regarding accounting and financial reporting for nongovernmental,not-for-profit organizations?

A) All expenses reduce unrestricted net assets.
B) Expenses must be reported by function, either in the statements or in the notes.
C) Both of the above.
D) Neither of the above.

Question 77

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 78

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 79

FASB Statement 124,Accounting for Certain Investments of Not-for-Profit Organizations:

A) Requires that investments in equity securities be carried at fair value.
B) Requires that investments in debt securities be carried at book value.
C) Requires that investments accounted for under the equity method be adjusted to fair value at the end of the accounting period.
D) Requires that investments in consolidated subsidiaries be carried at book value.

Question 80

Contributed services are recognized as revenue for a private not-for-profit when the service:

A) Is related to administration and fund raising activities.
B) Requires specialized skills, is provided by someone possessing those skills, and typically would be purchased if not provided by donation.
C) A and B are both required for the service to be recorded as revenue
D) None of the above, contributed services are not recorded as revenue