Ashford University

ACC 380 380

Chapter 10 Accounting for Private Not-for-Profit Organizations

True/False Questions

1)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.

2. 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.

3. Contributions to a private not-for-profit are recorded at fair market value at the date of receipt.
4. Contributions of assets other than cash to a private not-for-profit are recorded at the donor’s basis
5. Contributions to a private not-for-profit may be restricted as to purpose or for plant acquisition, but not as to time.

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

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

9. Fixed assets may be recorded by a private not-for-profit as temporarily restricted or 1
10. 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.

11. 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.

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

13. 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.

14. 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.

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

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

17. 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.

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

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

20. 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.

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

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

23. Expenditures, encumbrances, and budgetary accounts are not used by private not-forprofit organizations.

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

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

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

27. Private not-for-profit organizations are not required to record depreciation expense.
28. Contributions to be paid in future periods should be recorded at present value.
29. Conditional pledges should not be recognized as revenue until the conditions have been met.
30. The financial statements of private not-for-profits are intended primarily for use by present and potential donors.

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

32. Performing arts organizations are an example of other private not-for-profit organizations.
33. A Statement of Functional Expenses is required for voluntary health and welfare organizations.
34. 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.

36. 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.

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

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

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

40. Present and potential donors are the primary users of private not-for-profit  financial statements.
41. Private not-for-profit organizations should have little to no profit.
42. 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.

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

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

45. 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.

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

47. A Statement of Functional Expenses is required for state governments.
48. A Statement of Functional Expenses is required for tax agencies.
49. A Statement of Functional Expenses is required for public colleges and universities.
50. A Statement of Functional Expenses is required for Voluntary health and welfare organizations.
51. 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.).

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

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

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

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.

56. State governments are required to prepare a Statement of Functional Expenses.
57. FASB statement 124 requires that investments in equity securities with readily determinable values be reported at fair market value.

58. 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.

59. 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.

60. 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.

 61.Which of the following is not a distinguishing characteristic of a private not-for-profit 8

Chapter 10 Accounting for Private Not-for-Profit Organizations

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.

62. 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 donorimposed restrictions apply.

63. 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.

64. Which of the following is not correct with respect collections held by private not-forprofit 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.

65. 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

66. 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.

67. 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

68. 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.

69. 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.

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.

71. Which of the following are the net asset classes required by the FASB for private not-forprofit 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.

72. A civic ballet company sells 10 “Benefactor” status memberships for $1,000 each. The Benefactors each receive a season ticket valued at $300, and a listing in the company’s program. How would the ballet company record the sale of these 100 memberships? A) Cash $100,000 Deferred Revenue

$100,000 B) Cash – Restricted $ 70,000 Cash – Unrestricted 30,000 Contributions – Restricted $ 70,000 Revenue 30,000 C) Cash $100,000 Revenue $ 30,000 Contributions – Restricted 70,000 D) Cash $100,000 Deferred Revenue $ 30,000 Contributions – Unrestricted 70,000

73. 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.

74. 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.

75. 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.

76. 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.

77. 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.

78. 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.

79. 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.

80. 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.

81. 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.

82.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 notfor-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.

83.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.

84. 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.

85. 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. 14

Chapter 10 Accounting for Private Not-for-Profit Organizations

86.A skilled carpenter repaired the roof for a private not-for-profit free of charge. The notfor-profit would have had to pay $2,000 for this service if not donated. What entry should the not-for-profit make?

A) No entries are required for this event. B) Improvements $2,000 Contribution revenue $2,000 C) Building $2,000 Contribution revenue $2,000 D) Service expense $2,000 Contribution revenue $2,000

87. 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.

88. 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.

89. 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.

90. 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.

91. 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.

92. 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.

93. 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.

94. Which of the following would not be recognized as contribution revenue by a private notfor-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.

95.A donor made a gift of cash to a private not-for-profit organization in 2012 with an expressed purpose restriction. All the funds were expended in 2012. 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).

96. Which of the following is a legitimate reason for a private 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.

97. 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.

98.A donor gave equipment valued at $50,000 at the beginning of 2012 to a private not-forprofit organization. The equipment had a 10-year life and depreciation of $5,000 was charged during 2012. 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

99.A private not-for-profit organization received a gift of $460,000 with purpose restrictions in 2011. In 2012 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.

100. 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.

101. 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.

102. Which of the following is true of a Statement of Cash Flows for a private sector, private 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.

103. Which of the following is not true of a Statement of Activities prepared for a private notfor-profit organization? A) Expenses are shown only as decreases in unrestricted net assets. B) Reclassifications for expiration of time restrictions are shown in the revenues and support section. C) Unrealized gains or losses on investments are shown only as increases in unrestricted net assets. D) Expenses are classified by function within the categories of Program Services and Supporting Services either in the Statement or the notes.

104. The Statement of Functional Expenses: A) Is required of voluntary health and welfare organizations only. B) Is required of all private not-for-profit organizations. C) Is required of all private colleges but not public colleges. D) Is no longer a required financial statement of any organization.

105. Under FASB standards, donated services are: A) Recorded whenever a service is provided. B) Recorded if the service requires a specialized skill and the donor possesses those skills. C) Recorded if the service would have been paid for if not donated. D) Recorded if (b) and (c) have been met.

106.A donor made a cash contribution of $90,000 to a private not-for-profit organization for the purpose of acquiring a building. The not-for-profit organization properly recorded the gift of cash as temporarily restricted revenue. When the building is acquired, the organization should: A) Record the building as permanently restricted. B) Record the building as temporarily restricted. C) Record the plant as either unrestricted or temporarily restricted, as long as a consistent policy is followed. D) Show an expense equivalent to the amount paid for the building in unrestricted net assets and reclassify the same amount from temporarily restricted to unrestricted net assets.

107.In 2012, a major drug company agreed to give a not-for-profit private college $300,000 to perform testing of a new drug. An advance payment of $200,000 was received in 2012. The college was to

receive $1,500 per individual test. In 2012, the college completed 100 tests. How much revenue should the college report for 2012? A) $ 300,000 B) $ 100,000 C) $ 150,000 D) $ 200,000

108.A donor made a pledge in 2011 of $ 50,000 to a private not-for-profit organization with the intent to pay the cash in 2012 for unrestricted use in 2012. The organization should: A) Record the pledge receivable and deferred revenue in 2011. B) Record the pledge as unrestricted revenue in 2011. C) Record the pledge as temporarily restricted revenue in 2011 and reclassify it to unrestricted in 2012. D) Record the pledge as temporarily restricted revenue in 2011 and reclassify it to unrestricted in 2012, but only in an amount equivalent to the amount that is spent in 2012.

109.A donor gave $ 500,000 to a private not-for-profit organization to be held in endowment. In addition, the governing board permanently designated $ 1,000,000 to the endowment. In the Statement of Financial Position, how should these amounts be classified? A) Permanently Restricted: $1,500,000; Unrestricted: $          - 0 - B) Permanently Restricted: $1,000,000; Unrestricted: $ 500,000 C) Permanently Restricted: $ 500,000; Unrestricted: $1,000,000 D) Permanently Restricted: $                                                                                 - 0 - ; Unrestricted:

$1,500,000

110. The FASB has the authority to set accounting standards for all of the following organizations except:

A) Political parties.. B) For profit hospitals. C) Trade associations. D) State colleges

111. Which of the following would not be an example of a voluntary health and welfare organization? A) A city owned hospital. B) A private mental health facility. C) A family planning agency. D) A food bank.

112. Under which of the following conditions is it appropriate for a private not-for-profit to allocate the cost of mass mailings from fund raising to a program related activity, such as Public Education? A) The purpose of the mailing includes accomplishing program functions. B) The audience is selected based on characteristics other than ability to make contributions. C) The mailing calls for specific action by the recipient that is consistent with the goals of the not-for-profit's mission. D) All of the above.

113. Which of the following is not a characteristic that distinguishes a private not-for-profit organization from a business? A. Contributions are from resource providers who expect nothing in return. B. Financial

statements are intended primarily for use by creditors. C. Operating purposes are other than to provide goods or services at a profit. D. Absence of ownership interests.

114. Which of the following is not an example of a voluntary health and welfare organization? A. Meals on Wheels. B. Big Brothers/Big Sisters. C. Performing arts organizations. D. Girl and Boy Scouts.

115. Reclassifications from permanently restricted net assets to temporarily restricted net assets would occur only under which of the following circumstances? A) Time restrictions placed on the permanently restricted net assets have been                 met. B). Purpose restriction placed on the permanently restricted net assets have been met. C). Either of the above criteria have been met. D). Permanently restricted net assets would not be reclassified to temporarily               restricted net assets.

. 116. Contributed service to private not-for-profit’s is recognized as revenue/support if: A) It creates or enhances nonfinancial assets. B) It requires a specialized skill. C) It would have had to be purchased if it wasn’t provided. D) All of the above.

117. FASB statement 116 requires contributions to be recorded as revenue when A) The contributed money is actually received. B) The contribution is likely to be received. C) The contribution is promised.

D) The contribution is probable and measurable.

118. Which of the following statements is false with respect to private not-for-profit organizations? A) Exchange transactions should be recorded on the accrual basis of accounting where the revenues are recognized when earned. B) An intention to give is the same as an unconditional promise to give and thus should be recorded as revenue in the same manner. C) In certain situations contributed services should be recognized as revenue. D) FASB statement 124 requires that investments in equity securities with readily determinable values be reported at fair market value.

119. The primary users of the financial statements of private not-for-profit organizations are: A) Owners of the organization. B) Present and potential donors. C) Investors. D) Government agencies.

120. Private not-for-profit entities are usually primarily concerned with which of the following performance measures? A) Their Program Expense Ratio. B) Return on Investment. C) Change in Net Assets. D) Ending Unrestricted Net Assets.

121. According to FASB, which of the following is not something that distinguishes a private not-for-profit organization from a business? A. Absence of ownership interests. B) Operating purposes other than to provide goods or services at a profit. C) Lack of ability to earn a profit.

Chapter 10 Accounting for Private Not-for-Profit Organizations

D) Contributions of significant amounts of resources from resource providers who  do not expect commensurate or proportionate pecuniary return.

122. A Statement of Functional Expenses is required for A) State governments. B) Tax agencies. C) Voluntary health and welfare organizations. D) Colleges and universities.

123. Supporting activities as classified in the Statement of Activities, normally include A) Management and general. B) Fund-raising. C) Membership development. D) All of the above.

.

124. In 2012, 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? A) When Susan dies and the will is declared valid. B) Ratably over a five year period beginning in 2013. C) All in 2012. D) When the Museum receives the contribution.

125. Which organization has standard setting authority over state and local governments, including governmentally related not-for-profit organizations such as hospitals colleges and universities. A) GASB.

B) FASB. C) AICPA. D) SEC.

126. The GASB has standards-setting authority over state and local governments, including governmentally related not-for-profit organizations such as hospitals colleges and universities. Private not-for-profits must follow all applicable               standards in recording transactions.

A) AICPA. B) FASB. C) GASB. D) SEC.

127. When should unconditional pledges be recorded as revenue? A) Never. B) When money is received. C) When the pledge is made. D) None of the above.

128. A membership pass to the YMCA (a private not-for-profit organization) includes unlimited rights to all facilities and a health magazine subscription. Non-members do not possess these rights. How must the YMCA account for membership dues? A) The dues are a non-exchange transaction, so it should report all dues in the year received. B) The dues are a non-exchange transaction, so it should report dues on a pro-rata basis determined by the length of the individual memberships. C) The dues are an exchange transaction, so it should report all dues in the year received. D) The dues are an exchange transaction, so it should report dues on a pro-rata basis determined by the length of the individual memberships.

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

130. The following statement is true of private not-for-profits A) Financial statements are standardized across industries. B) Different types of not-for-profit organizations follow very different accountings practices.

3. The AICPA is only the governing body for not-for-profits. D) All of the above are false.

131. Which of the following is not an example of a donor imposed restriction? A) Funds are not to be used until the following year. B) Funds must be used on certain programs. C) Funds are to be endowed.

4. All of the above are examples of donor imposed restrictions.

132. Which of the following is not a reason for a private not-for-profit to generate a surplus? A) Retiring debt. B) Establishing working capital. C) Expanding facilities. D) All of the above are legitimate reasons.

133. The equity section of Statement of Financial Position for private not-for-profits includes which accounts? A) Unrestricted, Temporarily Restricted, Permanently Restricted. B) Invested in Capital Assets net of related debt, unrestricted net assets. C) Unreserved Fund Balance, Reserved Fund Balance. D) None of the above describes the proper accounting treatment.

134. Identify the standard setting body for private not-for-profit organizations and the basis of accounting that should be used. A) GASB & Accrual. B) GASB & Modified Accrual. C) FASB & Accrual. D) FASB & Modified Accrual.

135. The institution’s governing board decided to create an endowment from contributed funds, this is called a(n) and the funds are unrestricted. A) Endowment. B) Term endowment.

3. Quasi-endowment. D) None of the above.

136. Which of the following financial statements are required for voluntary health and welfare organizations? A) Income Statement. B) Statement of Net Assets. C) Statement of Functional Expenses.

4. Budgetary Comparison Schedule.

137. The FASB requires that expenses of voluntary health and welfare organizations to be reported according to function. Which of the following is one of the FASB required function categories: A) Operating. B) Program. C) Supporting. D) Both B and C.

138. Investments by private not-for-profit organizations in equity and debt securities should be carried at

A) Historical cost. B) Lower of cost or Market. C) Fair Market Value. D) None of the above.

139. The three classes of net assets reported for a private not-for-profit organization include all of the following except: A) Unrestricted net assets. B) Temporarily restricted net assets. C) Capital restricted net assets. D) Permanently restricted net assets.

140. How is an unconditional pledge to contribute to a private not-for-profit organization recorded? 27

Chapter 10 Accounting for Private Not-for-Profit Organizations

A) As revenue when pledged. B) Not recorded until received. C) As unearned revenue. D) None of the above.

141. How does a for-profit organization record contributions made to a private not-forprofit organization? A) As an expense when originally pledged. B) As a reduction in revenue when pledged. C) As an expense when contributed. D) As a reduction in revenue when contributed.

142. If a person names a private not-for-profit organization in his or her will, this is considered a(n)

                    and is                         . A) Conditional promise to give; not recorded. B) Unconditional promise to give; recorded. C) Intention to give; recorded. D) Intention to give; not recorded.

143. The following treatment is correct with regards to payments that are partially exchange transactions and partially contributions: A) Reported only as a exchange transaction. B) Reported only as a contributions. C) Reported as either an exchange transaction or contribution, depending on management’s judgment. D) The two parts should be separately accounted for.

144. Contrast the reporting of mergers and acquisitions under the rules established by FASB Statement No. 164, Not-for-Profit Entities: Mergers and Acquisitions?
145. What is the treatment of multi-year pledges as required by FASB Statement No. 116?
146. According to FASB Statement No. 16, Appendix D, how are not-for-profit organizations distinguished from a business?

147. Answer the following questions regarding financial reporting by private not-for-profit organizations.

(1) What are the required financial statements? (2) What organizations are required to present a Statement of Functional Expenses? (3) What are the three classes of Net Assets?

148. When might it be appropriate for a not-for-profit organization to report a surplus (increase in net assets)?
149. What are the criteria established by Statement of Position 98-02 for allocation of costs that involve fund raising?

150. FASB Statement 136 Transfer of Assets to a Not-for-Profit Organization or Charitable Trust that Raises or Holds Contributions for Others provides guidance on how intermediary recipient organizations should record receipt of resources held for others. Briefly describe the issue and how such transfers should be recorded.

151. Distinguish between an exchange transaction and a contribution. How is the accounting different for these two events?

152. What are the revenue recognition requirements for: (1) unconditional promises to give (i.e. pledges),

1. conditional promises to give, (3) multi-year pledges, (4) donated services, and (5) Donated materials or fixed assets.

153. Identify three types of restrictions placed on temporarily restricted net assets and outline the accounting requirements for each type.

154. As of December 31, 2011, The Halifax Fishing Museum had unrestricted cash of $46,000, building and land with a net book value of $190,000, and permanently restricted collections totaling $ 99,000. There were no liabilities. The Museum has two programs: Operation of a Fishing Museum and Educational Programs. During the year ended December 31, 2012 the Museum incurred the following transactions:

1. Cash contributions to the Museum included (a) unrestricted $ 520,000, (b) restricted for educational programs $ 45,000 and (c) restricted by the donor for endowment purposes $150,000.
2. Additional unrestricted cash receipts included $ 19,900 in fees from individuals and organizations using the Museum building as a meeting facility. Included in this is $ 4,000 for a meeting to be held in January 2011.
3. Incurred cash expenses:

Item Total Amount

Portion for Museum Operations Portion for Education Programs Admin.

Utilities – programs 30,000 20,000 10,000 Utilities – administration 15,000 15,000 Salaries - programs

170,500 150,000 20,500 Salaries – administration 45,000 45,000 Supplies – programs 96,000 90,000

6,000 Supplies – administration 7,000 7,000 363,500 260,000 36,500 67,000

4. Purchased land for future expansion to the adjoining lot in the amount of $ 50,000.