Question 1

FASB Statement 124,Accounting for Certain Investments of Not-for-Profit Organizations,requires investments by a not-for-profit in debt securities and equity securities to be carried at fair value.

Accepted Answer

FASB Statement 124 requires investments in debt securities and equity securities to be carried at fair value for not-for-profit organizations.

Question 2

A private not-for-profit reports expenses in either the unrestricted net asset class or restricted net asset class,depending which program the expense was supporting.

Accepted Answer

Expenses, including depreciation, are measured on the accrual basis and are reported in the unrestricted net asset class.

Question 3

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.

Accepted Answer

This statement is true. Fixed assets that are temporarily restricted are reclassified to unrestricted resources each accounting period in an amount equal to the depreciation or an allocation based on the time the asset is restricted, whichever is shorter. This is because the restriction on the asset's use will eventually expire, and it will become fully available for use in the organization's regular operations.

Question 4

A Statement of Functional Expenses presents a matrix of expenses classified by function and by object or natural classification.

Accepted Answer

A Statement of Functional Expenses presents expenses classified by function (e.g. program services, management and general, fundraising) and object or natural classification (e.g. salaries, rent, supplies).

Question 5

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

Accepted Answer

The current accounting standards require net assets to be presented in two classes: net assets with donor restrictions and net assets without donor restrictions.

Question 6

Fixed assets may be recorded by a private not-for-profit as temporarily restricted or unrestricted,depending on the policy of the organization.

Accepted Answer

Yes, fixed assets may be recorded as temporarily restricted or unrestricted depending on the policy of the private not-for-profit organization. Temporarily restricted fixed assets are those that are restricted by donors or grantors for a specific purpose or time period, while unrestricted fixed assets do not have any donor-imposed restrictions.

Question 7

A conditional pledge should be recognized as revenue when the pledge is made.

Accepted Answer

A conditional pledge is a pledge that is dependent on the occurrence of a certain event, such as the completion of a project or the attainment of a specific goal. Therefore, it cannot be recognized as revenue until the conditions are satisfied and the pledge becomes unconditional. Until then, it should be recorded as a liability.

Question 8

Expenditures,encumbrances,and budgetary accounts are used by private not-for-profit organizations.

Accepted Answer

Private not-for-profit organizations do not record expenditures, encumbrances or budgets.

Question 9

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.

Accepted Answer

To be restricted, resources must be restricted by donors or grantors. Internally Board) designated resources are considered unrestricted.

Question 10

FASB requires multiyear pledges to be recorded at the present value of the future collections.

Accepted Answer

FASB requires multiyear pledges to be recorded at the present value of the future collections in order to properly reflect the time value of money and provide accurate financial reporting.

Question 11

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

Accepted Answer

Expenses of private not-for-profit organizations are reported by function, program, or supporting services in the Statement of Activities. However, if the expenses cannot be reasonably allocated, they can be disclosed in the notes to the financial statements.

Question 12

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

Accepted Answer

The Statement of Cash Flows uses the standard FASB categories; operating, investing and financing. Restricted contributions or restricted investment proceeds that will be used for long-term purposes such as endowments or plant, are reported as financing activities.

Question 13

A not-for-profit organization receiving donated fixed assets must record those assets as temporarily restricted.

Accepted Answer

With the exception of collections, fixed assets may be recorded as either temporarily restricted or unrestricted, depending on the policy of the organization. This is true both when an asset is acquired with temporarily restricted resources and when it is acquired with restricted resources.

Question 14

The FASB requires private not-for-profit organizations to report net assets (the excess of assets over liabilities)separated by unrestricted,temporarily restricted and permanently restricted.

Accepted Answer

This statement is true. The FASB requires private not-for-profit organizations to report net assets separated by unrestricted, temporarily restricted, and permanently restricted categories on their financial statements. This allows stakeholders to understand the organization's financial position and how funds are being used.

Question 15

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.

Accepted Answer

According to accounting standards, donated services should be considered revenue if they meet certain criteria, one of which is that they create or enhance a nonfinancial asset and require a specialized skill that would have had to be purchased if not donated. Therefore, if these criteria are met, donated services are considered as revenue in the financial statements.

Question 16

Contributions to be paid in future periods should be recorded at present value.

Accepted Answer

This is in accordance with the accrual accounting principle, which requires that expenses and revenues should be recognized in the period in which they are incurred or earned. This means that contributions to be paid in future periods should be recorded at their present value, which takes into account the time value of money.

Question 17

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

Accepted Answer

In the Statement of Activities, separate revenues, expenses, gains, losses and reclassifications between classes of net assets are provided for each class of net assets. Organization-wide totals must be provided.

Question 18

Private not-for-profit organizations record depreciation expense.

Accepted Answer

Private not-for-profit organizations are required to record depreciation expense in their financial statements to reflect the wearing out or consumption of their long-term assets over time.

Question 19

All donated services are recognized as revenue.

Accepted Answer

Donated services do not qualify as revenue under the generally accepted accounting principles. These services are recorded as an expense or as an in-kind contribution in the financial statements.

Question 20

A private not-for-profit reports all expenses in unrestricted net asset class.

Accepted Answer

Private not-for-profits report all expenses in the unrestricted net asset class because they are not restricted by donors and are used for the general operations of the organization.

Quiz 10: Accounting for Private Not-For-Profit Organizations