Question 1

_____ Under FAS 116, contributions are reported in the statement of activities using all of the following categories except
A) Board-restricted.
B) Permanently restricted.
C) Temporarily restricted.
D) Unrestricted.
E) None of the above.

Accepted Answer

Under FAS 116, contributions are reported as permanently restricted, temporarily restricted, or unrestricted. Board-restricted contributions are not a separate category under FAS 116; instead, they are typically classified under one of the other three categories based on the nature of the restriction.

Question 2

_____ Under FAS 116, which of the following donated services would not be recognized as contributions in the statement of activities?
A)Services contributed by lay volunteers manning a phone bank.
B)Services provided by a lawyer (giving free legal advice).
C)Services provided by a certified public accountant (performing an audit for free).
D)Services provided by a carpenter (repairing facilities for free).
E)None of the above.

Accepted Answer

Under FAS 116, services that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recognized as contributions. Services by lay volunteers, such as manning a phone bank, do not meet these criteria and thus are not recognized as contributions in the statement of activities.

Question 3

_____	Volunteers constructed an addition to an existing building owned by a nonprofit organization. The cost of materials was $60,000 (donated by local firms). The value of the labor hours (based on prevailing hourly rates for carpenters and electricians) was $40,000. An outside contractor offered to do the work for $115,000. At the completion of the job, the county property tax assessor assigned a value of $120,000 to the addition. Under FAS 116, how much should be reported in the financial statements for donated services?
A) $100,000
B) $115,000
C) $120,000
D) $100,000 or $120,000 at the option of the nonprofit organization.
E) $115,000 or $120,000 at the option of the nonprofit organization.

Accepted Answer

The value of donated services is the fair value of the services received. In this case, the fair value is the lower of the outside contractor's bid ($115,000) or the value assigned by the county property tax assessor ($120,000). Therefore, the nonprofit organization should report $120,000 in the financial statements for donated services.

Question 4

_____	A nonprofit organization has been receiving free electricity from a local utility. How should the nonprofit organization account for this?
A) As contributed assets, with a credit to be made to revenues.
B) As contributed services, with a credit to be made to revenues.
C) As contributed assets, with a credit to be made to revenues and a debit to be made to expenses.
D) As contributed services, with a credit to be made to revenues and a debit to be made to expenses.
E) None of the above.

Accepted Answer

The nonprofit should account for the free electricity as contributed assets, recognizing it as revenue and simultaneously recording it as an expense, reflecting the consumption of the electricity.

Question 5

_____	Under FAS 116, which of the following is not a condition to be satisfied for the nonrecognition of contributed collection items?
A) The collection must be held for public exhibition, education, or research in furtherance of public service rather than for financial gain.
B) The collection must be protected, cared for, and preserved.
C) The collection must be kept unencumbered.
D) The nonprofit organization must have an organizational policy requiring the proceeds from sales of collection items to be used to acquire other items for collections.
E) None of the above.

Accepted Answer

Under FAS 116, all the listed conditions (A, B, C, D) are actually requirements for the nonrecognition of contributed collection items. Therefore, none of the options listed is an incorrect condition, making E the correct choice.

Question 6

_____ Under FAS 116, which of the following is a condition that, if satisfied, requires the recognition of contributed collection items?
A) The collection must be held for public exhibition, education, or research in furtherance of public service rather than for financial gain.
B) The collection must be protected, kept unencumbered, cared for, and preserved.
C) The nonprofit organization must have an organizational policy requiring the proceeds from sales of collection items to be used to acquire other items for collections.
D) All of the above.
E) None of the above.

Accepted Answer

The answer of _____ Under FAS 116, which of the...

Question 7

_____	Under FAS 116, contributed collection items
A) Must be recognized in the financial statements.
B) Cannot be recognized in the financial statements.
C) Must be recognized in the financial statements if certain conditions are satisfied.
D) Need not be recognized in the financial statements if certain conditions are satisfied.
E) None of the above.

Accepted Answer

Under FAS 116 (Accounting for Contributions Received and Contributions Made), contributed collection items need not be recognized in the financial statements if they are added to collections and meet certain conditions such as being preserved, protected, and cared for, and used for public exhibition, education, or research in furtherance of public service rather than financial gain.

Question 8

_____	Under FAS 116, when are conditional promises to give cash recognized in the financial statements?
A) When the promise is received.
B) When the cash is collected.
C) When the promise becomes unconditional in status.
D) When the possibility of occurrence of the condition set forth in the promise becomes remote.
E) None of the above

Accepted Answer

Conditional promises to give are recognized when the conditions on which they depend are substantially met or when the promise becomes unconditional.

Question 9

_____	A religious organization received a building and land as a gift from a local company with the understanding that the building would be used as a training center for organization members or for any other purpose consistent with the organization's mission. How would the nonprofit organization report the contribution?
A) As temporarily restricted support.
B) As unrestricted support.
C) As permanently restricted support.
D) As temporarily restricted support or unrestricted support at the discretion of the board.
E) None of the above.

Accepted Answer

The answer of _____	A religious organization received a building and...

Question 10

_____ A religious organization received a building and land as a gift from a local company with the understanding that the building would be used as a training center for organization members or for any other purpose consistent with the organization's mission. How would the nonprofit organization report the contribution under each of the following assumed board policies regarding a time restriction?
 $\begin{array}{lll} 
& {\mathbf { Imply ~a ~Time }} & {\mathbf { Imply ~No ~Time }} \
&{\mathbf { Restriction }} & {\mathbf { Restriction }} \
\text { a. } & \text { Temporarily Restricted } & \text { Temporarily Restricted } \
\text { b. } & \text { Temporarily Restricted } & \text { Unrestricted } \
\text { c. } & \text { Unrestricted } & \text { Temporarily Restricted } \
\text { d. } & \text { Unrestricted } & \text { Unrestricted }
\end{array}$

Accepted Answer

The answer of _____ A religious organization received a building...

Question 11

_____	A historical society received several old pictures as a gift from the family whose ancestors settled the town. The pictures are of the downtown area 80 years ago. The staff of the society has determined that the pictures have potential historical and educational use to those who may be interested in studying the area. The pictures are suitable for display, and no alternative use exists. Under FAS 116, the historical society
A) Could capitalize the pictures as assets as long as it capitalizes its collections.
B) Could capitalize the pictures as assets at its discretion if it has a selective capitalization policy.
C) Could not capitalize the pictures as assets.
D) Could not capitalize the pictures as assets because of the uncertainty about the existence of value and because no alternative use exists.
E) None of the above.

Accepted Answer

The answer of _____	A historical society received several old pictures...

Question 12

_____	Under FAS 117, which of the following categories of net assets is not required to be shown in the statement of financial position?
A) Permanently restricted.
B) Temporarily restricted.
C) Board-restricted.
D) Unrestricted.
E) None of the above.

Accepted Answer

Under FAS 117 (now known as ASC 958 due to the codification of accounting standards), nonprofit organizations are required to report net assets in three categories: unrestricted, temporarily restricted, and permanently restricted. Board-restricted net assets, while they may be internally designated for specific purposes by the organization's board, do not constitute a separate category under these reporting standards.

Question 13

_____	Under FAS 117, which of the following statements is false concerning the statement of financial position?
A) Assets and liabilities may be presented in a "layered" format.
B) Assets and liabilities may be presented using a classified format.
C) Assets and liabilities may be presented using an unclassified format, sequenced by liquidity.
D) The difference between total assets and liabilities can be described as equity instead of net assets.
E) None of the above.

Accepted Answer

The answer of _____	Under FAS 117, which of the following...

Question 14

_____ Under FAS 117, voluntary health and welfare organizations must present
A) A separate statement showing expenses by both function and natural classification.
B) A separate statement showing expenses by function.
C) A separate statement showing expenses by natural classification.
D) Expenses by natural classification in the statement of activities.
E) None of the above.

Accepted Answer

Under FAS 117 (now known as ASC 958 due to the codification of accounting standards), voluntary health and welfare organizations are required to present a separate statement of functional expenses. This statement must show expenses by both their function (such as program services, management and general, and fundraising) and their natural classification (such as salaries, rent, utilities, etc.). This requirement is unique to these types of organizations and is intended to provide greater transparency into how they allocate their resources.

Question 15

_____	Under FAS 117, income earned from endowments (permanent) that can be spent on only certain programs but that has not yet been spent would be reported in the statement of activities in the
A) Permanently restricted category.
B) Temporarily restricted category.
C) Unrestricted category.
D) Temporarily restricted category or unrestricted category.
E) None of the above.

Accepted Answer

Under FAS 117, income earned from permanent endowments that is designated to be spent on certain programs but has not yet been spent is reported in the temporarily restricted category. This is because the funds are restricted by donors for specific purposes and can only be used once those conditions are met, making them temporarily restricted until those conditions are fulfilled.

Question 16

_____	Under FAS 117, income earned from temporary endowments that can be spent on only certain programs but that has not yet been spent would be reported in the statement of activities in the
A) Permanently restricted category.
B) Temporarily restricted category.
C) Unrestricted category.
D) Temporarily restricted category or unrestricted category.
E) None of the above.

Accepted Answer

Under FAS 117 (now updated to FASB ASC 958), income earned from temporary endowments that has not yet been spent but is intended for certain programs is reported in the temporarily restricted category. This is because the funds are restricted by the donor for a specific purpose and remain so until they are used for that purpose.

Question 17

_____	Under FAS 117, income earned from temporary endowments that can be spent on only certain programs and that was spent in the year earned would be reported in the statement of activities in the
A) Permanently restricted category.
B) Temporarily restricted category.
C) Unrestricted category.
D) Temporarily restricted category or unrestricted category.
E) None of the above.

Accepted Answer

The answer of _____	Under FAS 117, income earned from temporary...

Question 18

_____	Under FAS 117, income earned from endowments (permanent) that can be spent on only certain programs and that was spent in the year earned would be reported in the statement of activities in the
A) Permanently restricted category.
B) Temporarily restricted category.
C) Unrestricted category.
D) Temporarily restricted category or unrestricted category.
E) Permanently restricted category or unrestricted category.

Accepted Answer

Income from endowments that is restricted for certain programs is initially classified as temporarily restricted. Once the funds are spent according to the restrictions, they are reclassified to the unrestricted category.

Question 19

_____	Under FAS 117, how would the expiration of a prior-year donor restriction as to purpose be reflected in the current-year statement of activities?
A) Recognition of an expense.
B) Recognition of a revenue.
C) Recognition of both an expense and an offsetting revenue amount.
D) A separate line item reclassification between the temporarily restricted category and the unrestricted category.
E) None of the above.

Accepted Answer

Under FAS 117 (now known as ASC 958 due to the codification of FASB standards), the expiration of a prior-year donor restriction is reflected as a reclassification from temporarily restricted net assets to unrestricted net assets. This is shown as a separate line item in the statement of activities, indicating the funds are now available for general use.

Question 20

_____	Under FAS 117, how would the spending of money set aside in the prior year by the board of directors of a nonprofit organization to be used for a community service education project be reported in the current-year statement of activities?
A) Recognition of an expense.
B) Recognition of a revenue.
C) Recognition of both an expense and an offsetting revenue amount.
D) A separate line item reclassification between the temporarily restricted category and the unrestricted category.
E) None of the above.

Accepted Answer

The spending of money set aside by the board for a specific purpose would be recognized as an expense in the current-year statement of activities when the funds are actually spent on the project.

Quiz 26: Not-For-Profit Organizations: Introduction and Private Npos

_____ Under FAS 116, contributions are reported in the statement of activities using all of the following categories except

_____ Under FAS 116, which of the following donated services would not be recognized as contributions in the statement of activities?

_____ A nonprofit organization has been receiving free electricity from a local utility. How should the nonprofit organization account for this?

_____ Under FAS 116, which of the following is not a condition to be satisfied for the nonrecognition of contributed collection items?

_____ Under FAS 116, which of the following is a condition that, if satisfied, requires the recognition of contributed collection items?

_____ Under FAS 116, contributed collection items

_____ Under FAS 116, when are conditional promises to give cash recognized in the financial statements?

_____ Under FAS 117, which of the following categories of net assets is not required to be shown in the statement of financial position?

_____ Under FAS 117, which of the following statements is false concerning the statement of financial position?

_____ Under FAS 117, voluntary health and welfare organizations must present

_____ Under FAS 117, income earned from endowments (permanent) that can be spent on only certain programs but that has not yet been spent would be reported in the statement of activities in the

_____ Under FAS 117, income earned from temporary endowments that can be spent on only certain programs but that has not yet been spent would be reported in the statement of activities in the

_____ Under FAS 117, income earned from temporary endowments that can be spent on only certain programs and that was spent in the year earned would be reported in the statement of activities in the

_____ Under FAS 117, income earned from endowments (permanent) that can be spent on only certain programs and that was spent in the year earned would be reported in the statement of activities in the

_____ Under FAS 117, how would the expiration of a prior-year donor restriction as to purpose be reflected in the current-year statement of activities?

_____ Under FAS 117, how would the spending of money set aside in the prior year by the board of directors of a nonprofit organization to be used for a community service education project be reported in the current-year statement of activities?