Question 1

Under FASB standards,expenses of a not-for-profit organization can only be shown as reductions of unrestricted net assets.

Accepted Answer

FASB standards require that expenses be deducted from unrestricted net assets. When expenses have been incurred that fulfill the purpose of restricted net assets, those net assets are released from restriction and shown as an increase in unrestricted net assets.

Question 2

Describe the difference between fund accounting and the accounting methods required by FASB.

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Question 3

Explain the accounting for contributions received by a financial intermediary.

Accepted Answer

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Question 4

When a nongovernmental not-for-profit organization spends money for the purpose for which an external donor intended,then the expense is reported as a

Accepted Answer

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Question 5

Which of the following is not one of the criteria specified in the FASB Codification for determining whether joint costs with a fund-raising appeal can be reported with program expenses rather than as fund- raising expenses?

Accepted Answer

The FASB Codification specifies that joint costs can be reported with program expenses rather than as fund-raising expenses if the purpose of the appeal is to educate and the content is informational rather than motivational, if the audience for the solicitation is not targeted primarily to donors, and if the costs incurred for the solicitation are incurred for activities that include both educational and fund-raising purposes. The time period is not specified as a criterion.

Question 6

Distinguish not-for-profit organizations from entities in the governmental and commercial sectors of the U.S.economy.

Accepted Answer

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Question 7

The statement of financial position prepared by a nongovernmental NFP presents net assets in these categories: unrestricted,temporarily restricted,net investment in capital assets,and permanently restricted.

Accepted Answer

Nongovernmental NFPs must report only the three net asset categories required by FASB: unrestricted, temporarily restricted, and permanently restricted. The category of net investment in capital assets is found in governmental entities that follow GASB standards.

Question 8

If the program services expenses category includes both directly related costs and indirect costs allocated to it,why is it necessary to have a separate category of "supporting services expenses"?

Accepted Answer

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Question 9

In the current year,the not-for-profit organization (NFP)How to Read Government Financial Reports received both cash of $1,000 and pledges of $2,000 to be used for teaching citizens how to read government financial reports.During the year the organization spent $1,500 teaching citizens to read financial statements.Assuming the NFP has a policy of spending its restricted resources first,in the current year what amount of contributions can be reclassified as unrestricted?

Accepted Answer

The NFP has a policy of spending its restricted resources first. Therefore, the $1,000 in cash received specifically for teaching citizens how to read government financial reports would be considered restricted funds and would be spent first. Since the organization spent $1,500 teaching citizens to read financial statements, there would be $500 left of the restricted funds. Any pledges received would also be considered restricted until they are fulfilled. Therefore, none of the $2,000 in pledges can be reclassified as unrestricted. Therefore, the only amount that can be reclassified as unrestricted would be the remaining $1,000 in cash contributions.

Question 10

Distinguish between "support" and "revenues from exchange transactions".

Accepted Answer

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Question 11

Would a not-for-profit library that receives the majority of its resources from a specific tax levy on local citizens remitted to the city follow the same financial reporting principles as would a library that operates without a dedicated tax and instead relies on contributions from individuals and grants from foundations and governments? Explain.

Accepted Answer

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Question 12

The purpose of a statement of functional expenses is to

Accepted Answer

A statement of functional expenses provides detailed information on expenses by their nature (such as salaries, rent, etc.) and by their function (such as program services and supporting services).

Question 13

Explain when donated materials should be recognized as a contribution and as an expense by a nongovernmental not-for-profit organization.

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Question 14

Which of the following terms is used to indicate that a donor provided a gift with explicit instructions that the gift is to be used for a specific purpose by the not-for-profit but the entire amount may be spent right away?

Accepted Answer

Temporarily restricted net assets are gifts that are given with explicit instructions that limit the use of the funds to a specific time period or purpose. In this case, the donor has specified that the entire amount may be spent right away, indicating that the gift is temporarily restricted.

Question 15

In the current year,the not-for-profit organization Save the Butterflies Foundation received cash of $500 to be used as the Foundation wished and $1,000 to be used for butterfly research.Save the Butterflies also received pledges of $700 that it can use as it wishes and $600 for its building fund.All pledges are expected to be received next year.How much would Save the Butterflies report as temporarily restricted contributions in the current year?

Accepted Answer

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Question 16

For each of the following unrelated transactions,record the journal entry that would be made by a nongovernmental,not-for-profit organization involved in medical research.If no journal entry is recorded,explain why there is no journal entry.
a.The entity received $1,500 in cash contributions.Of that amount,$1,000 is to be used for medical research.
 b.The entity received pledges of $700,000 for its endowment fund.All pledges will be collected next year.
c.The entity received donated services of $1,200 from medical researchers who helped with the entity's on-going drug development research.It also received $300 in donated services from students,who helped clean the research facilities.
d.The entity paid medical research operating expenses of $5,000 that were related to restricted net assets it had received in prior years.

Accepted Answer

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Question 17

Explain the purpose of FASB ASC 958-720-45 on joint-cost accounting as it relates to reporting fund- raising expenses of a not-for-profit organization.How is this standard applied?

Accepted Answer

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Quiz 13: Accounting for Not-For-Profit Organizations