Question 1

When might it be appropriate for a not-for-profit organization to report a surplus (increase in net assets)?

Accepted Answer

There are a number of reasons why a not-for-profit organization would need to generate a surplus (positive change in net assets).These include establishing working capital,expanding or replacing physical facilities,retiring debt,or continuing a program beyond the period that initial funding is provided.If these needs are satisfied,a not-for-profit organization may also find it desirable to draw upon earlier surpluses and operate at a deficit for a period of time.For these reasons,a positive change in net assets is neither inherently a good or bad condition.

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

In 2014,Susan tells The Art Museum,a private not-for-profit organization,that she has named the museum in her will.When should the organization recognize the contribution revenue?

Accepted Answer

A)   Only after Susan dies and the will is declared valid.
B)   Ratably over a five year period beginning in 2015.
C)   All in 2014.
D)   When the Museum receives the contribution. A

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

A private not-for-profit organization received a gift of $460,000 with purpose restrictions in 2013.In 2014 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:

Accepted Answer

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 8

A Statement of Functional Expenses presents a matrix of expenses classified by function and by object or natural classification.

Accepted Answer

A) True 
 B)False

Question 9

What are the revenue recognition requirements for:
(1)unconditional promises to give (i.e.pledges),
(2)conditional promises to give,
(3)multi-year pledges,
(4)donated services,and
(5)Donated materials or fixed assets.

Accepted Answer

The answer of What are the revenue recognition requirements for:
(1)unconditional...

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The entry to record the expiration of program restrictions includes which of the following?

Accepted Answer

A)   Debit Reclassification from Temporarily Restricted Net Assets.
B)   Credit Performance Expense.
C)   Debit Reclassification to Unrestricted Net Assets.
D)   Credit Reclassification from Temporarily Restricted Net Assets.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

An intention to give (such as being named in a will)is the same as an unconditional promise to give and can be recorded as revenue when the intention is made known.

Accepted Answer

A) True 
 B)False

Question 16

Assume Towne Center Art Museum received the following contributions in 2014.Prepare journal entries to record these events and any year-end adjusting journal entries resulting from the events.
(a)Unrestricted pledges of support were received in the amount of $240,000.All of these are due within the year and it is estimated that 6% will ultimately prove to be uncollectible.
(b)600 Memberships were sold to the public in the amount of $40 each.Membership provides the individual with a monthly magazine and other benefits.The estimated fair value of member benefits is $15.The member year runs from July 1 to June 30.
(c)A local carpenter donated supplies and labor with values of $24,000 and $17,000 (respectively)to construct a new exhibition area.Fixed assets are classified as unrestricted net assets.
(d)On March 1,2014 a local businessman made a pledge payable in a future period.The pledge is restricted in purpose and has a present value of $104,000 (effective interest rate of 6%).

Accepted Answer

The answer of Assume Towne Center Art Museum received the...

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)   FASB requires that the change in net assets be reported for each of the net asset classes and in total.
B)   Expenses are reported as unrestricted, temporarily restricted or permanently restricted.
C)   Both A & B above.
D)   Neither A nor B above. .

Question 19

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?

Accepted Answer

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

Question 20

If a private not-for-profit fails to comply with donor restriction on contributions received,the organization must accrue and disclose a contingent liability.

Accepted Answer

A) True 
 B)False

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

When might it be appropriate for a not-for-profit organization to report a surplus (increase in net assets)?

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

In 2014,Susan tells The Art Museum,a private not-for-profit organization,that she has named the museum in her will.When should the organization recognize the contribution revenue?

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

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

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.

A private not-for-profit organization received a gift of $460,000 with purpose restrictions in 2013.In 2014 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 Statement of Functional Expenses presents a matrix of expenses classified by function and by object or natural classification.

What are the revenue recognition requirements for: (1)unconditional promises to give (i.e.pledges), (2)conditional promises to give, (3)multi-year pledges, (4)donated services,and (5)Donated materials or fixed assets.

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

The entry to record the expiration of program restrictions includes which of the following?

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

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

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

An intention to give (such as being named in a will)is the same as an unconditional promise to give and can be recorded as revenue when the intention is made known.

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

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

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?

If a private not-for-profit fails to comply with donor restriction on contributions received,the organization must accrue and disclose a contingent liability.