Question 1

Which of the following is the incorporating document of a not-for-profit organization that describes the purpose or mission of the organization?

Accepted Answer

The Articles of incorporation is the incorporating document of a not-for-profit organization that describes the purpose or mission of the organization.

Question 2

Your client is a nongovernmental not-for-profit museum that operates a gift shop. Explain the unrelated business income tax to your client and suggest ways to avoid this tax.

Accepted Answer

The answer of Your client is a nongovernmental not-for-profit museum...

Question 3

Describe the difficulty in comparing the financial performance of a not-for-profit organization to other similar organizations. What benchmarks are available to assist in this task?

Accepted Answer

The answer of Describe the difficulty in comparing the financial...

Question 4

For each of the following performance indicators, select the type of ratio from the list that best matches by placing the appropriate ratios.
A. Liquidity
B. Going concern
C. Capital structure
D. Program effectiveness
E. Efficiency
F. Leverage and debt coverage
G. Fund-raising ratio
H. Fund-raising efficiency
I. Investment performance
. Are earnings on investments on target?
________ 2. What percentage of contributions remains after deducting the cost of raising the contributions?
________ 3. Does the organization rely more on debt or net assets to finance its operations?
________ 4. Is an appropriate amount spent on accomplishing the organization's program goals?
________ 5. Are revenues sufficient to cover expenses?

Accepted Answer

The answer of For each of the following performance indicators,...

Question 5

The local Kennel Club is a not-for-profit organization with gross receipts of $23,500 for the current tax year. Under the Internal Revenue Service Code, the Kennel Club would be required to file which of the following forms for the tax year?

Accepted Answer

According to the IRS, non-profit organizations with gross receipts under $50,000 are required to file Form 990-N, also known as the e-Postcard. Since the Kennel Club's gross receipts are under $50,000, it would be required to file Form 990-N.

Question 6

A not-for-profit organization is granted its legal status by which of the following?

Accepted Answer

A not-for-profit organization is granted its legal status by the state government where it is incorporated or registered. The federal government has requirements and regulations for tax-exempt status and may oversee certain types of not-for-profit organizations, but it does not grant the initial legal status. The city or county in which the organization resides may have specific regulations and requirements for operating within their jurisdiction, but they do not grant legal status. The courts may become involved in legal disputes related to the organization, but they do not grant the initial legal status.

Question 7

The Form 990 consists of 12 parts (core form) and several schedules. Which of the following would not be included as one of the parts of the core form of the Form 990?

Accepted Answer

The management analysis of the financial condition of the organization is not included as one of the parts of the core form of the Form 990. The other options listed are included in the core form.

Question 8

A good measure of whether a not-for-profit organization is efficient in its fund-raising efforts is:

Accepted Answer

Fund-raising expenses as a percentage of public support is a good measure of efficiency because it shows how much money is being spent on fund-raising in relation to the amount of money being raised. If the percentage is high, it could indicate inefficient fund-raising techniques or excessive fund-raising costs. A lower percentage indicates that more of the organization's resources are being directed towards the actual programs and services being provided.

Question 9

Explain the purpose of "intermediate sanctions."

Accepted Answer

The answer of Explain the purpose of "intermediate sanctions."...

Question 10

For each of the following definitions, select the key term from the list that best matches by placing the appropriate terms.
A. Unrelated business income
B. Public charity
C. Charitable solicitation
D. Lobbying
E. Debt financed income
F. Private foundation
G. Propaganda
. A not-for-profit exempt under IRC Sec. 501(c)(3) that receives most of its support from a small number of donors or investment income than it does from the public at large.
________ 2. A direct request for credit or financial assistance that will be used for the 501(c)(3)'s mission.
________ 3. Information that is skewed toward a particular belief with little basis in fact.
________ 4. Gross income from a trade or business regularly carried on by a tax-exempt organization.
________ 5. Contacting elected officials to encourage specific legislative action.

Accepted Answer

The answer of For each of the following definitions, select...

Question 11

Which of the following would not be required under not-for-profit incorporation laws?

Accepted Answer

Application for 501(c)(3) status is not a requirement under not-for-profit incorporation laws. It is an optional step to become eligible for tax exemption under US federal tax law.

Question 12

An individual can generally receive a tax deduction for contributions to which type of not-for-profit organization?

Accepted Answer

A 501(c)(3) organization is a charitable organization that is granted tax-exempt status by the IRS. Contributions made to these organizations are generally tax-deductible for individuals.

Question 13

Which of the following defines an appeal to the public to take action on a legislative matter?

Accepted Answer

Grass-roots lobbying is a form of lobbying where an organization or individual appeals to the public to take action on a legislative matter. This can include calling, emailing, writing letters, or protesting to lawmakers as a way to influence legislation. Propaganda is a type of communication aimed at influencing public opinion, while lobbying is the act of attempting to influence decisions made by government officials. Political influence refers to the ability of individuals or groups to shape political decisions.

Question 14

Describe the process for becoming a tax-exempt organization. Why do you believe it is important for an accountant to understand this process?

Accepted Answer

The answer of Describe the process for becoming a tax-exempt...

Question 15

Why do states and the federal government exercise oversight responsibility over not-for-profit, tax-exempt corporations? How do states and the federal government differ in the way they exercise this responsibility?

Accepted Answer

The answer of Why do states and the federal government...

Question 16

All of the following organizations may be not-for-profit except:

Accepted Answer

Privately held partnerships are typically for-profit entities.

Question 17

Not-for-profit organizations can take which of the following organizational forms?

Accepted Answer

Not-for-profit organizations can be either governmental or nongovernmental. Governmental organizations are operated by the government, while nongovernmental organizations are independent and operate separately from the government. Both types of organizations can be not-for-profit, depending on their goals and objectives. Additionally, not-for-profit organizations cannot take the form of a business, as their primary purpose is not to generate profits for their owners or shareholders.

Question 18

A good measure of whether a not-for-profit organization is "liquid" and can meet its short-term obligations is:

Accepted Answer

The ratio of current assets to current liabilities is known as the current ratio, and it is a measure of the organization's liquidity. A current ratio of 1.0 or higher is generally considered good, indicating that the organization can meet its short-term obligations. Choices A, B, and D do not provide information on an organization's liquidity.

Question 19

A good measure of whether a not-for-profit organization is operating its programs efficiently is:

Accepted Answer

The ratio of program expenses to number of clients served is a good measure of whether a not-for-profit organization is operating efficiently because it shows how much money is being spent per client served. This ratio can help identify whether the organization is delivering services as efficiently as possible or if there are opportunities to improve operations. Fund-raising expenses as a percentage of public support and percentage of program expenses to total expenses are also important measures, but they do not directly provide insight into program efficiency. Total revenues divided by total expenses is a measure of financial viability but does not necessarily reflect program efficiency.

Quiz 13: Not-for-Profit Organizations—Regulatory, Taxation, and Performance Issues