Question 1

How does a for-profit organization record contributions made to a private not-for-profit organization?

Accepted Answer

For-profit organizations use accrual accounting and would record an expense and a liability when the pledge is made.

Question 2

Supporting activities as classified in the Statement of Activities, normally include

Accepted Answer

Supporting activities as classified in the Statement of Activities normally include management and general, fund-raising, and membership development. Therefore, all of the above options (A, B, and C) are correct.

Question 3

The institution's governing board governing board decided to create an endowment from contributed funds, this is called a(n) ________ and the funds are unrestricted.

Accepted Answer

A quasi-endowment is created when an institution's governing board decides to designate funds for an endowment, but the funds are unrestricted and can be used at the board's discretion.

Question 4

Which of the following is not a reason for a private not-for-profit to generate a surplus?

Accepted Answer

All of the options listed are legitimate reasons for a private not-for-profit to generate a surplus. Retiring debt helps to improve the organization's financial health, establishing working capital provides a cushion for unexpected expenses or periods of low revenue, and expanding facilities can create new revenue streams and improve services.

Question 5

When should unconditional pledges be recorded as revenue?

Accepted Answer

Unconditional pledges should be recorded as revenue when the pledge is made, typically in the period in which the pledge is promised. This is because an unconditional pledge represents a promise to make a gift, and therefore it meets the criteria for revenue recognition. The actual receipt of the cash may occur in a different period, but the recognition of the revenue is based on the unconditional promise.

Question 6

The equity section of Statement of Financial Position for private not-for-profits includes which accounts?

Accepted Answer

Private not-for-profits typically have three types of net assets: unrestricted, temporarily restricted, and permanently restricted. These are reflected in the equity section of the Statement of Financial Position. Option B describes the equity section for government entities. Option C is not a correct description of the equity section for any organization. Option D is incorrect as well since not-for-profit organizations are required to present a Statement of Financial Position in accordance with GAAP.

Question 7

A membership pass to Dukes Sports & Fitness (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 Dukes account for membership dues?

Accepted Answer

The membership pass to Dukes Sports & Fitness represents an exchange transaction because it provides the member with access to facilities and a subscription to a health magazine in exchange for payment of membership dues. As such, Dukes should recognize membership dues as revenue on a pro-rated basis that corresponds to the length of the membership. This approach recognizes revenue over the period during which Dukes is actually providing services to the member, which is consistent with the matching principle of accounting. Therefore, Choice D is the best option.

Question 8

A Statement of Functional Expenses is required for

Accepted Answer

A Statement of Functional Expenses is required for Voluntary health and welfare organizations. This statement shows the details of expenses by function and can be helpful for donors and stakeholders to understand how the organization is utilizing its resources. State governments, tax agencies, and colleges and universities have different reporting requirements and may not need to prepare this statement.

Question 9

Who is the standard setting body for private not-for-profit organizations and what type of accounting method do they use?

Accepted Answer

The Financial Accounting Standards Board (FASB) is the standard-setting body for private not-for-profit organizations, and they use the accrual accounting method.

Question 10

Which of the following is not an example of a donor imposed restriction?

Accepted Answer

Donor imposed restrictions can be temporary purpose or time) or permanent.

Question 11

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

Accepted Answer

The answer of How is an unconditional pledge to contribute...

Question 12

Investments in equity and debt securities should be carried at

Accepted Answer

Equity and debt securities should be carried at fair market value, which is the current market price of the security. This ensures that the financial statements reflect the accurate value of the investments, which is important for decision-making purposes. The historical cost (A) may not reflect the current value of the investment, while the lower of cost or market (B) may result in understating the value of the investment. Therefore, C is the best choice.

Question 13

In 2010, 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?

Accepted Answer

The Art Museum should recognize the contribution revenue when Susan dies and the will is declared valid, as this is when the contribution becomes unconditional and realizable.

Question 14

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

Accepted Answer

GASB (Governmental Accounting Standards Board) has standard setting authority over state and local governments, including governmentally related not-for-profit organizations such as hospitals colleges and universities. FASB (Financial Accounting Standards Board) has standard setting authority over for-profit entities. AICPA (American Institute of Certified Public Accountants) provides guidance and support to members but does not have standard setting authority. SEC (Securities and Exchange Commission) has regulatory authority over publicly traded companies and securities markets, but not state and local governments.

Question 15

The following statement is true of not-for-profits

Accepted Answer

The answer of The following statement is true of not-for-profits
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Question 16

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.

Accepted Answer

The Financial Accounting Standards Board (FASB) sets accounting standards for private not-for-profit organizations. The American Institute of Certified Public Accountants (AICPA) sets accounting standards for the accounting profession, while the Securities and Exchange Commission (SEC) sets accounting standards for publicly traded companies. The Governmental Accounting Standards Board (GASB) sets standards for state and local governments and governmentally related not-for-profit organizations.

Question 17

Which of the following financial statements are required for voluntary health and welfare organizations?

Accepted Answer

The answer of Which of the following financial statements are...

Question 18

The three classes of net assets reported for a private not-for-profit organization include all of the following except:

Accepted Answer

The three classes of net assets reported for a private not-for-profit organization are unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Capital restricted net assets is not a valid class of net assets.

Question 19

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

Accepted Answer

The journal entries would be a debit to Reclassification from temporarily restricted net assets - Satisfaction of Program Restriction and a credit to Reclassification to Unrestricted Net Assets- Satisfaction of Program Restrictions.

Question 20

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:

Accepted Answer

The FASB requires expenses of voluntary health and welfare organizations to be reported according to function, and the function categories are program and supporting. Therefore, the correct choice is D, which includes both function categories. Operating is not one of the required function categories for voluntary health and welfare organizations.

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