Question 1

For not-for-profit entities,external financial reporting focuses on:

Accepted Answer

A) individual funds 
B) fund groups 
C) the organization as a whole 
D) major funds

Question 2

A not-for-profit entity conducts a special fund-raising campaign at the end of fiscal year 2012,intended to raise funds for general operations that take place during fiscal year 2013.It receives pledges totaling $200,000.Based on past experience,the entity expects to receive $150,000 in cash.How should the entity report these events?

Accepted Answer

A) recognize the entire amount pledged as unrestricted contribution revenue in 2012 
B) recognize the amount pledged (net of a $50,000 allowance for estimated uncollectibles)as unrestricted contribution revenue in 2012 
C) recognize the amount pledged (net of a $50,000 allowance for estimated uncollectibles)as temporarily restricted contribution revenue in 2012;and report the 2013 expenses as changes in temporarily restricted net assets in 2013 
D) recognize the amount pledged (net of a $50,000 allowance for estimated uncollectibles)as temporarily restricted contribution revenue in 2012;and reclassify the net assets as unrestricted at the beginning of 2013

Question 3

Under which of the following circumstances would a not-for-profit organization's net assets be classified as temporarily restricted?

Accepted Answer

A) donors impose stipulations on the use of resources that expire with the passage of time or that can be fulfilled by actions of the organization 
B) donors stipulate that resources must be held intact in perpetuity,but that the income from the gift may be used for any purpose desired by the organization's trustees 
C) the entity's board of directors requires that unrestricted resources be set aside for a specific purpose 
D) the bank lending money to the organization requires a percentage of maximum debt service to be set aside in a sinking fund

Question 4

A not-for-profit organization receives a pledge from a donor in fiscal 2013.The terms of the pledge are such that the organization will receive a large contribution in fiscal 2015.At what value should the pledge be reported in the organization's 2013 statement of financial position?

Accepted Answer

A) face or nominal value 
B) compound value 
C) marginal value 
D) present value

Question 5

The Bob Buckham Senior Center,a not-for-profit entity,serves a hot meal to senior citizens every Friday evening.All the food is donated by a local supermarket.All the food preparation and serving is done by local volunteers.If the Center had to pay for the food,it would need to spend $10,000 a year.If it had to pay for the food preparation and service,it would need to spend $12,000 a year.How should it report these contributions in its financial statements?  Food $\quad$Food preparation and service 
a.$\quad$$\quad$Disclose in the notes Disclose in the notes
b. $\quad$$\quad$Disclose in the notesReport $ \$ 12,000 $ revenue and expense
c. $\quad$$\quad$Report $ \$ 10,000 $ rev enue and expenseDisclose in the notes
d. $\quad$$\quad$Report $ \$ 10,000 $ rev enue and expenseReport $ \$ 12,000 $ rev enue and expense

Accepted Answer

The answer of The Bob Buckham Senior Center,a not-for-profit entity,serves...

Question 6

In which classification of net assets are expenses reported?

Accepted Answer

A) only in unrestricted net assets 
B) only in temporarily restricted net assets 
C) either in unrestricted or temporarily restricted net assets 
D) either in unrestricted,temporarily restricted,or permanently restricted net assets

Question 7

Which of the following is true regarding the Financial Accounting Standards Board requirements for a not-for-profit entity's accounting and financial reporting?

Accepted Answer

A) Both fund accounting and reporting by net asset classification are required. 
B) Neither fund accounting nor reporting by net asset classification are required. 
C) Fund accounting is required,but reporting by net asset classification is not required. 
D) Fund accounting is not required,but reporting by net asset classification is required.

Question 8

The Turtle Island Singers receive three gifts during the year 2012: (a)$3,000,which may be used for any purpose at any time; (b)$5,000,which must be used for a special concert in a nursing home;and (c)$1,000,which may be used for any purpose,but only in the year 2013.When it receives the gifts,how should the entity classify them:

Accepted Answer

A) $3,000 as unrestricted revenue and $6,000 as temporarily restricted revenue 
B) $4,000 as unrestricted revenue and $5,000 as temporarily restricted revenue 
C) $8,000 as unrestricted revenue and $1,000 as temporarily restricted revenue 
D) $9,000 as unrestricted revenue

Question 9

Which of the following characteristics of a brochure prepared by an NFPO is not relevant to whether the cost of the brochure can be allocated between program and fund-raising functions?

Accepted Answer

A) page count 
B) content 
C) purpose 
D) audience

Question 10

A not-for-profit university uses fund accounting.It maintains a Loan Fund to account for its extensive program of financial assistance to students.The Loan Funds are derived from many sources,including both donations and amounts set aside by the university's governing board.When it prepares its statement of financial position,how should the university classify the net assets of the Loan Fund?

Accepted Answer

A) All net assets should be classified as temporarily restricted. 
B) All net assets should be classified as permanently restricted. 
C) Net assets should be classified as either temporarily or permanently restricted,depending on the restrictions imposed by the governing board and the donors. 
D) Net assets set aside by the governing board should be classified as unrestricted,and net assets from donations should be classified as temporarily or permanently restricted,depending on the nature of the donor-imposed restrictions.

Question 11

Say No To Meth,a not-for-profit entity devoted to informing the public about the hazards of methamphetamine,sends out brochures to a large number of doctors,urging that the brochures be placed in the doctors' waiting rooms.The four-page brochure contains a description of the addictive and destructive nature of the drug,but half of the last page contains an appeal for funds,in relatively large type.How should the entity report the $30,000 expense of preparing,printing,and mailing the brochure in its statement of activities?

Accepted Answer

A) The entire $30,000 must be reported as a fund-raising expense. 
B) The entire $30,000 must be reported as a program expense. 
C) The $30,000 should be allocated between fund-raising and program expenses,using appropriate cost accounting techniques. 
D) The $30,000 should be reported under the caption "Program and fund-raising expenses."

Question 12

A group of citizens donate their time to construct a building to provide shelter for the homeless,to be run by a not-for-profit entity.In this situation,what is the applicable accounting rule for recognizing the fair value of the services on the face of the financial statements?

Accepted Answer

A) donations that take a form other than cash should not be recognized. 
B) the fair value of contributed services should not be recognized unless the services require specialized skills,are provided by individuals who have those skills,and which the entity would need to be purchased if not donated. 
C) contributed services should be recognized at the fair value of the assets they create. 
D) donations should be recognized on the face of financial statements only for cash,securities,and other tangible assets;all other donations should be described in the notes.

Question 13

When a not-for-profit entity's funds are classified as restricted,who has imposed the restrictions?

Accepted Answer

A) the entity's board of trustees 
B) donors 
C) the bondholders 
D) government regulators

Question 14

In response to a fund-raising campaign,an electric utility provides free electricity to a not-for-profit entity.How should the not-for-profit entity report this gift in its statement of activities?

Accepted Answer

A) It should not be reported in the statement. 
B) It should not be reported on the face of the statement,but should be disclosed in the notes. 
C) It should be reported at its fair value as a revenue and as an expense. 
D) The entity may choose either to not report it or to report it at fair value as a revenue and as an expense.

Question 15

The FASB requires not-for-profits to report net assets and resource inflows and outflows in which categories?

Accepted Answer

A) Current and noncurrent 
B) Unrestricted,temporarily restricted,or permanently restricted depending on the existence and nature of donor restrictions 
C) Unrestricted,temporarily restricted,or permanently restricted depending on the existence and nature of donor and creditor restrictions 
D) Unrestricted,temporarily restricted,or permanently restricted depending on the existence and nature of creditor,donor,and supplier restrictions

Question 16

Socialite Lisa King establishes a $4 million irrevocable charitable remainder trust providing a beneficial interest to the Clinton Metropolitan Opera.A percentage of the fair value of the trust's assets go to her husband during his lifetime.The Opera will receive the remaining assets at her husband's death.Mrs.King also specifies that the only the revenue from investing the assets may be used to support the Opera's programs.The Opera estimates that the present value of the estimated future benefits it will receive from the trust is $1.5 million.How should the Opera report this arrangement when it learns of the trust?

Accepted Answer

A) It should record nothing now.It should record the fair value of the assets only after Mr.King dies 
B) It should record a $4 million receivable,$1.5 million in permanently restricted support,and $2.5 million long-term payable to Mr.King. 
C) It should disclose the anticipated $1.5 million contribution in the notes to its financial statements. 
D) It should record $1.5 million as contributions receivable and as permanently restricted support

Question 17

Ruth Richter gives a not-for-profit entity $25,000 in cash.She tells the entity that it may use the gift for particular research project but only after it receives at least $20,000 cash from other donors to help complete the project.If the entity fails to raise the additional $20,000,it must return Ruth's gift.What account should the entity credit when it receives Ruth's gift?

Accepted Answer

A) Unrestricted support - contributions 
B) Temporarily restricted support - contributions 
C) Refundable advance (deferred revenue) 
D) Allowance for uncollectible contributions

Question 18

A not-for-profit entity that conducts numerous programs receives investments as a donation.The donor,in a letter accompanying the donation,states that the principal of the donation must be maintained intact permanently,and that the income from the investment must be used to finance research in kidney disease.If the entity receives income of $8,000 from these investments,how should be income be reported?

Accepted Answer

A) as an increase in unrestricted net assets 
B) as an increase in temporarily restricted net assets 
C) as an increase in permanently restricted net assets 
D) as an increase in any of the net asset classifications directed by the entity's trustees

Question 19

A not-for-profit entity receives equipment having a fair value of $50,000 as a gift.How should the gift be reported in the entity's financial statements?

Accepted Answer

A) as an asset and as an increase in permanently restricted net assets 
B) as an asset and as an increase in unrestricted net assets 
C) as a footnote only,because gifts of equipment are not be reported on the face of financial statements 
D) as an asset and as an increase in temporarily restricted net assets

Question 20

A not-for-profit university uses fund accounting.The university's governing board decides to set aside $500,000 in a separate fund called the Student Performance Quasi-Endowment Fund,the income of which will be used to finance a long-term study on the career paths of the university's graduates.In which net asset classification of the university's statement of financial position should this fund be reported?

Accepted Answer

A) Unrestricted 
B) Temporarily restricted 
C) Permanently restricted 
D) Endowment funds

Exam 12: Accounting for Not-For-Profit Organizations