Deck 13: Private Not-For-Profit Organizations

Question 1

The operating statement for a private NFP organization is called a:

A) Statement of revenues and expenses
B) Statement of activities
C) Statement of changes in net assets
D) Statement of changes in fund balances

Answer 1

Statement of activities

Question 2

A private NFP organization files standardized financial information on Form 990 with what government entity?

A) Department of Justice
B) Federal Bureau of Investigation
C) Internal Revenue Service
D) Department of Commerce

Answer 2

Internal Revenue Service

Question 3

Which one of the following is least likely to be an objective of NFP reporting?

A) Information should be useful in assessing management performance.
B) Information should useful in evaluating services provided.
C) Information should be useful for making resource allocation decisions.
D) Information should be useful in assessing whether the organization is in compliance with relevant laws.

Answer 3

Information should be useful in assessing whether the organization is in compliance with relevant laws.

Question 4

Additional disclosures required by the 2016 ASU focus on the private NFP organization's

A) Liquidity.
B) Profitability.
C) Assets.
D) Liabilities.

Question 5

In a private NFP organization's statement of financial position, what categories of net assets are displayed?

A) Unrestricted, temporarily restricted, and permanently restricted net assets
B) Net assets with board restrictions and net assets without board restrictions
C) Net assets with donor restrictions and net assets without donor restrictions
D) Operating net assets and nonoperating net assets

Question 6

In a private NFP organization's statement of financial position, how is cash received from a capital campaign, to be used to build facilities, reported?

A) Combined with the unrestricted cash balance
B) Restricted cash, separately from unrestricted cash
C) Investments
D) Capital assets

Question 7

The board of directors of a private NFP organization sets aside net assets for future payment of debt. How can this be displayed on the organization's statement of financial position?

A) A category of net assets with board restrictions
B) A category of net assets without donor restrictions
C) A category of net assets with donor restrictions
D) Reporting standards prohibit display of this information.

Question 8

Reporting standards for private NFP organizations are promulgated by the:

A) SEC
B) GASB
C) American Institute of Philanthropy
D) FASB

Question 9

Private NFP organizations report their financial results using what basis of accounting?

A) full accrual basis
B) modified accrual basis
C) fund basis
D) cash basis

Question 10

How does a private NFP organization value its investments in debt and equity securities on its statement of financial position?

A) Market value at year-end
B) Original cost
C) Original cost for debt securities and market value at year-end for equity securities
D) Original cost for equity securities and market value at year-end for debt securities

Question 11

On the operating statement of a private NFP organization, expenses reduce

A) Net assets with donor restrictions only.
B) Net assets without donor restrictions only.
C) Net assets with donor restrictions if the resources used were donor-restricted for that use and net assets without donor restrictions if the resources used were not donor-restricted.
D) Total net assets, without specifying a category.

Question 12

Charity watchdog groups regularly rate charitable organizations on:

A) Change in net assets as a percent of total assets
B) Fund-raising expenses as a percent of total expenses
C) Inventory and receivables turnover
D) Intangible assets as a percent of total assets

Question 13

On a private NFP organization's statement of financial position, the asset "restricted cash" may represent:

A) The balance in net assets with donor restrictions.
B) Cash set aside by its board of directors for construction activities.
C) Investments in short-term securities.
D) Cash donated as a permanent endowment.

Question 14

Functional categories of expenses for a private NFP organization are:

A) Cost of goods sold, general and administrative, and financial
B) Operating and nonoperating
C) Programs and support
D) Expenses with donor restrictions and expenses without donor restrictions

Question 15

A natural category of expenses for a private NFP organization may be:

A) Administrative expenses
B) Nonoperating expenses
C) Cost of goods sold
D) Salaries

Question 16

A private NFP organization is required to report its expenses

A) In both functional and natural classifications.
B) Only in functional classifications.
C) Only in natural classifications.
D) In both functional and natural classifications if it is a voluntary health and welfare organization; otherwise only in functional classifications.

Question 17

Which statement is true concerning intermediate performance measures (subtotals measuring operating performance, for example) displayed in a private NFP organization's operating statement?

A) Intermediate performance measures are not allowed; only the total change in each category of net assets is displayed.
B) Intermediate performance measures, standardized by the FASB, are allowed but not required for all NFP organizations.
C) Intermediate performance measures are allowed and may take any format that best communicates the organization's financial performance.
D) Intermediate performance measures, standardized by the FASB, are required for all NFP organizations.

Question 18

The line labeled "net assets released from use restrictions," reported on a private NFP organization's operating statement, represents

A) Donor-restricted resources used according to the donor's wishes during the year.
B) Donor-restricted resources used to finance the organization's programs during the year, but not used for administrative expenses.
C) Donor-restricted resources used to acquire capital assets, but not for program or administrative expenses.
D) Resources used to pay the principal of loans.

Question 19

The National Red Cross receives dividend and interest income on its investments, in cash. In which section is this cash receipt reported in its statement of cash flows?

A) Cash from operating activities
B) Cash from investing activities
C) Cash from financing activities
D) Not reported

Question 20

A donor makes a contribution of $1 million in cash to a private NFP organization and requires that this amount be invested. The organization may use investment income for any purpose. On the organization's statement of cash flows, the $1 million donation appears in which section?

A) Cash from operating activities
B) Cash from investing activities
C) Cash from financing activities
D) Not reported

Question 21

A private NFP organization makes a cash payment for interest on its long-term loans. On the organization's statement of cash flows, the payment appears in which section?

A) Cash from operating activities
B) Cash from investing activities
C) Cash from financing activities
D) Not reported

Question 22

A private NFP organization accepts a donation of securities, with no donor restrictions, and immediately sells the securities. The proceeds appear in which section of the organization's statement of cash flows?

A) Cash from operating activities
B) Cash from investing activities
C) Cash from financing activities
D) Not reported

Question 23

If a private NFP organization uses the direct method to report the operating section of its statement of cash flows,

A) A reconciliation of the change in net assets to cash from operating activities, in any format, is not required.
B) A reconciliation of the change in net assets to cash from operating activities is required.
C) A reconciliation of the change in net assets without donor restrictions to cash from operating activities is required.
D) A reconciliation of the change in net assets with donor restrictions to cash from operating activities is required.

Question 24

A private NFP's statement of cash flows presents cash from operating activities using the indirect method. In the reconciliation of the change in net assets to cash from operating activities, which item is added?

A) Donations of endowment cash
B) Increase in loans payable
C) Reduction in contributions receivable
D) Unrealized gains on investments

Question 25

A private NFP's statement of cash flows presents cash from operating activities using the indirect method. In the reconciliation of the change in net assets to cash from operating activities, which item is subtracted?

A) Increase in accounts payable
B) Depreciation expense
C) Contributions of administrative services
D) Contributions of nonfinancial services

Question 26

Private NFP organizations are required to provide liquidity disclosures on

A) The amount of financial assets available to pay existing liabilities as of year-end.
B) Expected contributions available in the next three months to pay current obligations.
C) The availability of financial assets to pay for general expenditures during the next year.
D) The realizable value of financial assets on hand at year-end.

Question 27

Donations are received by an NFP organization. The organization's Board of Directors decides to set aside the money to pay for new computers and software. The donations are reported as:

A) Liabilities
B) Contributions, increasing net assets without donor restrictions
C) Contributions, increasing net assets with donor restrictions
D) Reductions in contributions receivable

Question 28

A contractor contributes services valued at $40,000 to build a new building for a private NFP organization. The net effect of this contribution in the organization's statement of activities is:

A) Increase in expenses and increase in contributions of $40,000; no net effect on net assets.
B) $40,000 increase in net assets with donor restrictions.
C) $40,000 increase in net assets without donor restrictions.
D) Not reported in the statement of activities.

Question 29

A CPA contributes services valued at $3,000 to provide financial services to a private NFP organization. The net effect of this contribution in the organization's statement of activities is:

A) Increase in expenses and increase in contributions of $3,000; no net effect on net assets.
B) $3,000 increase in net assets with donor restrictions.
C) $3,000 increase in net assets without donor restrictions.
D) Not reported in the statement of activities.

Question 30

Students and faculty volunteer their time to the activities of Beta Alpha Psi. The fair value of their services is $25,000. How is this information reported Beta Alpha Psi's statement of activities?

A) Increase in expenses and increase in contributions of $25,000; no net effect on net assets.
B) $25,000 increase in net assets with donor restrictions.
C) $25,000 increase in net assets without donor restrictions.
D) Not reported in the statement of activities.

Question 31

College students provide services during their winter and spring breaks, building houses for Habitat for Humanity. Their services are valued at $50,000. How is this information reported in Habitat for Humanity's statement of activities?

A) Increase in expenses and increase in contributions of $50,000; no net effect on net assets.
B) $50,000 increase in net assets with donor restrictions.
C) $50,000 increase in net assets without donor restrictions.
D) Not reported in the statement of activities.

Question 32

The American Museum of Natural History makes the following statement in the footnotes to its annual report: "Hundreds of volunteers, including members of the Museum's Board of Trustees, have made significant contributions of time in furtherance of the Museum's mission." How does the Museum most likely report these contributions in its financial statements?

A) Reported as expenses and revenues in the statement of activities
B) Not reported
C) Reported as revenues only in the statement of activities
D) Reported as deferred inflows in the statement of financial position

Question 33

An NFP organization receives supplies from a donor. At what amount is the donation reported in contribution revenue?

A) Fair value at the date of donation
B) Fair value at year-end
C) The donor's cost
D) Zero

Question 34

The National Red Cross reports a balance of $100 million in net assets with donor restrictions on its statement of financial position, labeled "Disaster Services." What is the interpretation of this amount?

A) Donors contributed $100 million for disaster services in the current fiscal year.
B) The Red Cross spent $100 million for disaster services in the current fiscal year.
C) Of total contributions collected for disaster services, $100 million has not yet been spent as of the fiscal year-end.
D) The Board of Directors has $100 million in resources set aside for disaster services as of the fiscal year-end.

Question 35

Make-A-Wish Foundation accepts $40,000 in donations that are donor designated to specific wish granting activities. When the resources are spent for this purpose, the statement of activities will report:

A) Expenses of $40,000, as a decrease in net assets without donor restrictions.
B) Expenses of $40,000, as a decrease in net assets with donor restrictions.
C) Net assets released, as a $40,000 decrease in net assets with donor restrictions and a $40,000 increase in net assets without donor restrictions, and expenses of $40,000, as a decrease in net assets without donor restrictions.
D) Net assets released, as a $40,000 increase in net assets with donor restrictions and a $40,000 decrease in net assets without donor restrictions, and expenses of $40,000, as a decrease in net assets with donor restrictions.

Question 36

During the year, a not-for-profit organization receives cash contributions of $1,000,000 that are donor-restricted for constructing a new office building. As of year-end, $800,000 of these contributions have been used for building construction, and the organization holds the remaining balance in cash. The reporting of this information includes all of the following except:

A) $200,000 included in the cash balance on the statement of financial position
B) $1,000,000 in contribution revenue, increasing net assets with donor restrictions on the statement of activities
C) $800,000 in construction in progress on the statement of financial position
D) $800,000 reduction in net assets with donor restrictions for net assets released from use restrictions on the statement of activities

Question 37

On its statement of financial position, the Red Cross reports over $118 million of net assets with donor restrictions, labeled "international relief and development services." Which statement below best describes this $118 million balance?

A) Total amounts contributed for the current year that are donor-designated for international relief and development services.
B) Total unspent amounts contributed for the current year that are donor-designated for international relief and development services.
C) Total amounts spent as of year-end that were funded by contributions donor-designated for international relief and development services.
D) Total unspent amounts contributed as of year-end that are donor-designated for international relief and development services.

Question 38

A corporate donor promises to contribute $1 million to an NFP organization, payable in installments over the next 10 years. If the NFP records the promise at its present value, what is the most appropriate discount rate?

A) Treasury bond rate
B) Current borrowing rate for low-risk individuals
C) Market rate on the NFP's investments
D) Rate at which the NFP can obtain loans

Question 39

Make-A-Wish Foundation reports contributions receivable on its balance sheet, expected to be collected within the next year. How is this receivable valued in the Foundation's statement of financial position?

A) Gross contributions, adjusted for expected uncollectibles
B) Present value of future contributions, adjusted for expected uncollectibles
C) Present value of future contributions
D) Gross contributions, without any adjustments

Question 40

An increase in the present value of reported promises of contributions:

A) Increases net assets without donor restrictions
B) Increases net assets with donor restrictions
C) Increases nonoperating gains
D) Is not reported

Question 41

At the start of the year, Habitat for Humanity reports gross contributions receivable of $8,000 and a related allowance for bad debts of $1,200. During the year, $7,000 of these receivables are collected and the rest are written off. Habitat for Humanity records current year contributions of $200,000, of which $190,000 are collected in cash. Its ending allowance for bad debts balance should be 15% of uncollected receivables. These promises are expected to be collected within one year. What is bad debt expense for the current year?

A) $1,500
B) $1,700
C) $1,800
D) $1,300

Question 42

Make-A-Wish Foundation reports contributions receivable on its balance sheet, expected to be collected in three years. How is this receivable measured?

A) Gross contributions, adjusted for expected uncollectibles
B) Present value of future contributions, adjusted for expected uncollectibles
C) Present value of future contributions
D) Gross contributions, without any adjustments

Question 43

When promises are made, and before any cash is collected, documented promises of future contributions are:

A) Not reported
B) Reported as deferred revenues.
C) Reported as contribution revenue, increasing net assets without donor restrictions.
D) Reported as contribution revenue, increasing net assets with donor restrictions.

Question 44

Use the following information to answer Questions bellow.
At the beginning of 2020, a donor makes a documented promise to contribute $100,000 to a private NFP organization at the end of 2021. The donor says the contribution may be used for any purpose and follows through on his promise at the end of 2021. The appropriate interest rate is 4%. The promise is considered fully collectible.

-By how much does this donation increase the organization's net assets with donor restrictions in 2020?

A) $100,000
B) $ 92,456
C) $ 96,154
D) $ 0

Question 45

Use the following information to answer Questions bellow.
At the beginning of 2020, a donor makes a documented promise to contribute $100,000 to a private NFP organization at the end of 2021. The donor says the contribution may be used for any purpose and follows through on his promise at the end of 2021. The appropriate interest rate is 4%. The promise is considered fully collectible.

-By how much does this donation increase the organization's net assets without donor restrictions in 2021?

A) $ 3,846
B) $100,000
C) $ 92,456
D) $ 0

Question 46

Use the following information to answer Questions bellow.
At the beginning of 2020, a donor makes a documented promise to contribute $100,000 to a private NFP organization at the end of 2021. The donor says the contribution may be used for any purpose and follows through on his promise at the end of 2021. The appropriate interest rate is 4%. The promise is considered fully collectible.

-By how much does this donation increase the organization's total net assets in 2021?

A) $ 3,846
B) $100,000
C) $ 92,456
D) $ 0

Question 47

Use the following information to answer Questions bellow.
At the beginning of 2020, a donor makes a documented promise to contribute $100,000 to a private NFP organization at the end of 2021. The donor says the contribution may be used for any purpose and follows through on his promise at the end of 2021. The appropriate interest rate is 4%. The promise is considered fully collectible.

-Now assume the donor requires that the contribution be used for a specific program. The $100,000 collected at the end of 2021 is used for program activities in 2022. How does this change the reporting for this contribution in 2020 and 2021?

A) Promises of contributions that are donor-restricted to specific uses are not recorded until the contribution is received. The entry at the end of 2021 increases net assets with donor restrictions.
B) The contribution is now a use restriction, and contribution revenue at the beginning of 2020 therefore is reported at its gross amount instead of at present value, as an increase in net assets with donor restrictions. Collection of the promise in 2021 reduces the receivable already on the books, but net assets are not released until 2022.
C) No difference in 2020, but an entry to record net assets released from restrictions is not made when the donation is made at the end of 2021.
D) The reporting is the same; time and use restrictions are reported the same way.

Question 48

Use the following information to answer Questions bellow.
At the beginning of 2020, a donor makes a documented promise to contribute $10,000 per year to a private NFP organization at the end of each of the years 2020, 2021, and 2022. The donor says the contribution may be used for any purpose, and the appropriate discount rate is 4%. The organization estimates that collections will be $9,000 per year for each of the three years.

-When the promise is recorded at the beginning of 2020, contributions receivable is debited for:

A) $30,000
B) $27,000
C) $24,976
D) $27,751

Question 49

Use the following information to answer Questions bellow.
At the beginning of 2020, a donor makes a documented promise to contribute $10,000 per year to a private NFP organization at the end of each of the years 2020, 2021, and 2022. The donor says the contribution may be used for any purpose, and the appropriate discount rate is 4%. The organization estimates that collections will be $9,000 per year for each of the three years.

-When the promise is recorded at the beginning of 2020, contributions revenue increases net assets with donor restrictions by:

A) $30,000
B) $27,000
C) $24,976
D) $27,026

Question 50

Use the following information to answer Questions bellow.
At the beginning of 2020, a donor makes a documented promise to contribute $10,000 per year to a private NFP organization at the end of each of the years 2020, 2021, and 2022. The donor says the contribution may be used for any purpose, and the appropriate discount rate is 4%. The organization estimates that collections will be $9,000 per year for each of the three years.

-When the promise is recorded at the beginning of 2020, the allowance for uncollectible contributions is credited for:

A) $2,776
B) $5,024
C) $2,974
D) $3,000

Question 51

Lassen Medical Center, a private NFP organization, receives donations as part of a capital campaign to raise money to build new facilities. They need to raise $10 million to start construction, and they haven't reached that goal yet. The donations received are reported as increases in:

A) Contributions receivable
B) Liabilities
C) Net assets with donor restrictions
D) Net assets without donor restrictions

Question 52

Use the following information to answer Questions bellow.
At the beginning of 2020, a private NFP organization receives a donation of equipment with a fair value of $1,000,000 and an estimated useful life of 5 years, no residual value.

-The donor puts no restrictions on the donation. What items appear in the 2020 statement of activities related to this donation?

A) Contributions revenue (increases net assets with donor restrictions) $1,000,000; expense (reduces net assets without donor restrictions) $200,000.
B) Contributions revenue (increases net assets without donor restrictions) $1,000,000; expense (reduces net assets without donor restrictions) $200,000.
C) Contributions revenue (increases net assets with donor restrictions) $1,000,000; net assets released from use restrictions (increases net assets without donor restrictions and reduces net assets with donor restrictions) $200,000; expense (reduces net assets without donor restrictions) $200,000.
D) Contributions revenue (increases net assets without donor restrictions) $1,000,000; expense (reduces net assets with donor restrictions) $200,000.

Question 53

Use the following information to answer Questions bellow.
At the beginning of 2020, a private NFP organization receives a donation of equipment with a fair value of $1,000,000 and an estimated useful life of 5 years, no residual value.

-The donor requires the equipment to be used for a specific project. What items appear in the 2020 statement of activities related to this donation?

A) Contributions revenue (increases net assets with donor restrictions) $1,000,000; expense (reduces net assets without donor restrictions) $200,000.
B) Contributions revenue (increases net assets without donor restrictions) $1,000,000; expense (reduces net assets without donor restrictions) $200,000.
C) Contributions revenue (increases net assets with donor restrictions) $1,000,000; net assets released from use restrictions (increases net assets without donor restrictions and reduces net assets with donor restrictions) $200,000; expense (reduces net assets without donor restrictions) $200,000.
D) Contributions revenue (increases net assets without donor restrictions) $1,000,000; expense (reduces net assets with donor restrictions) $200,000.

Question 54

Use the following information to answer Questions bellow.
At the beginning of 2020, a private NFP organization receives a donation of equipment with a fair value of $1,000,000 and an estimated useful life of 5 years, no residual value.

-The donor requires the organization to use the equipment for two years. What items appear in the 2020 statement of activities related to this donation?

A) Contributions revenue (increases net assets with donor restrictions) $1,000,000; expense (reduces net assets without donor restrictions) $500,000.
B) Contributions revenue (increases net assets without donor restrictions) $1,000,000; expense (reduces net assets without donor restrictions) $200,000.
C) Contributions revenue (increases net assets with donor restrictions) $1,000,000; net assets released from use restrictions (increases net assets without donor restrictions and reduces net assets with donor restrictions) $200,000; expense (reduces net assets without donor restrictions) $200,000.
D) Contributions revenue (increases net assets with donor restrictions) $1,000,000; net assets released from use restrictions (increases net assets without donor restrictions and reduces net assets with donor restrictions) $500,000; expense (reduces net assets without donor restrictions) $200,000.

Question 55

Use the following information to answer Questions bellow:
At the beginning of the current year, a donor gave the Fresno Rehabilitation Center, a private NFP organization, $100,000 in cash, with the provision that the cash be invested in income-producing securities. The center is to pay the donor $3,000 at the end of each year for his remaining life. Upon his death, remaining resources become available to the center with no restrictions as to use. The center invested the $100,000 in securities earning cash dividend and interest income of $3,500 in the current year. The securities have a fair value of $102,000 at the end of the year. The donor's life expectancy is 10 years, and the annual discount rate is 5%. The present value of $1/year for 10 years, discounted at 5%, is 7.7217.

-Contribution revenue increases net assets with donor restrictions on the current year's statement of activities by

A) $ 76,835
B) $ 23,165
C) $ 73,835
D) $100,000

Question 56

Use the following information to answer Questions bellow:
At the beginning of the current year, a donor gave the Fresno Rehabilitation Center, a private NFP organization, $100,000 in cash, with the provision that the cash be invested in income-producing securities. The center is to pay the donor $3,000 at the end of each year for his remaining life. Upon his death, remaining resources become available to the center with no restrictions as to use. The center invested the $100,000 in securities earning cash dividend and interest income of $3,500 in the current year. The securities have a fair value of $102,000 at the end of the year. The donor's life expectancy is 10 years, and the annual discount rate is 5%. The present value of $1/year for 10 years, discounted at 5%, is 7.7217.

-The annuity payable, reported on the statement of net position for the current year-end, is

A) $76,835
B) $97,000
C) $20,165
D) $25,665

Question 57

Use the following information to answer Questions bellow:
At the beginning of the current year, a donor gave the Fresno Rehabilitation Center, a private NFP organization, $100,000 in cash, with the provision that the cash be invested in income-producing securities. The center is to pay the donor all income generated on the investments for his remaining life. Income is defined as cash income and unrealized investment gains or losses. Upon his death, remaining resources become available to the center with no restrictions as to use. The center invested the $100,000 in securities earning cash dividend and interest income of $3,500 in the current year. The securities have a fair value of $102,000 at the end of the year. The donor's life expectancy is 10 years, and the annual discount rate is 5%. The present value of $1/year for 10 years, discounted at 5%, is 7.7217.

-Contribution revenue increases net assets with donor restrictions on the current year's statement of activities by

A) $ 72,974
B) $ 27,026
C) $100,000
D) $ 0

Question 58

Use the following information to answer Questions bellow:
At the beginning of the current year, a donor gave the Fresno Rehabilitation Center, a private NFP organization, $100,000 in cash, with the provision that the cash be invested in income-producing securities. The center is to pay the donor all income generated on the investments for his remaining life. Income is defined as cash income and unrealized investment gains or losses. Upon his death, remaining resources become available to the center with no restrictions as to use. The center invested the $100,000 in securities earning cash dividend and interest income of $3,500 in the current year. The securities have a fair value of $102,000 at the end of the year. The donor's life expectancy is 10 years, and the annual discount rate is 5%. The present value of $1/year for 10 years, discounted at 5%, is 7.7217.

-The annuity payable, reported on the statement of net position for the current year-end, is

A) $ 72,974
B) $ 27,026
C) $100,000
D) $ 0

Question 59

During the year, the United Way receives $100,000 in cash contributions that are donor-designated for the Salvation Army. The United Way distributes $80,000 of these contributions to the Salvation Army by year-end. This information is reported in the United Way's financial statements for the year as:

A) Contributions revenue of $100,000, increasing net assets with donor restrictions, and expenses of $80,000, reducing net assets with donor restrictions, both on the statement of activities.
B) Liability to the Salvation Army of $20,000 on the statement of financial position.
C) Receivable from the Salvation Army of $20,000 on the statement of financial position.
D) Contributions revenue of $100,000, increasing net assets with donor restrictions, net assets released from restrictions of $80,000, increasing net assets without donor restrictions and reducing net assets with donor restrictions, and expenses of $80,000, reducing net assets without donor restrictions, all on the statement of activities.

Question 60

Make-A-Wish Foundation invests in derivatives hedging the price risk of forecasted transactions. Unrealized gains on these derivatives are:

A) Reported on the Foundation's statement of activities as part of its change in net assets
B) Reported on the Foundation's statement of financial position in a separate category between liabilities and net assets
C) Reported on the Foundation's statement of activities as an offset to losses on the forecasted transactions
D) Not reported

Question 61

What is an accurate statement regarding required NFP reporting of derivatives used to hedge forecasted transactions?

A) Similar to governments, NFPs can report changes in the value of derivatives used for hedging as deferred inflows/outflows on the balance sheet rather than reporting gains and losses on the operating statement.
B) Similar to businesses, NFPs can report changes in the value of derivatives used for hedging as adjustments to OCI rather than reporting gains and losses on the operating statement.
C) NFP organizations do not report unrealized gains and losses on hedge investments.
D) NFP reporting standards do not allow any special hedge accounting for hedges of forecasted transactions.

Question 62

A private NFP organization reports interest rate swaps in the asset section of its balance sheet, at about $2 million. The organization has variable rate debt and uses the swaps to change the interest payments to fixed payments. Which statement most accurately describes the required reporting for these swaps?

A) Interest rates have fallen and unrealized losses on the swaps are reported in the statement of activities.
B) Interest rates have fallen and unrealized losses on the swaps are reported as deferred outflows in the statement of financial position.
C) Interest rates have increased and unrealized gains on the swaps are reported in the statement of activities.
D) Interest rates have increased and unrealized gains on the swaps are reported as deferred inflows on the statement of financial position.

Question 63

A private NFP organization reports gains on interest rate swaps of approximately $60,000. The organization has variable rate debt and uses the swaps to change the interest payments to fixed payments. Which statement best reflects the organization's reporting for these swaps?

A) The gains appear in the statement of financial position as a component of other comprehensive net assets.
B) The gains appear on the statement of financial position as deferred inflows.
C) The gains appear in the statement of activities as an increase in net assets with donor restrictions.
D) The gains are reported in the statement of activities as an increase in net assets without donor restrictions.

Question 64

A donor contributed $100,000 in cash to Goodwill Industries in 2020. The donor specified that the contribution be held as a permanent endowment, and income from investment of the contribution be used for job training programs. Goodwill Industries invested the $100,000 in securities in 2020. During 2021, investment income of $3,000 was received in cash, and $2,500 was used for job training programs. How does Goodwill Industries report this on its 2021 statement of activities?

A) $3,000 investment income increases net assets without donor restrictions; $2,500 expense decreases net assets without donor restrictions.
B) $3,000 investment income increases net assets with donor restrictions; $2,500 net assets released from use restrictions decreases net assets with donor restrictions and increases net assets without donor restrictions; $2,500 expense reduces net assets without donor restrictions.
C) $3,000 investment income increases net assets without donor restrictions; $2,500 expense reduces net assets with donor restrictions.
D) $3,000 investment income increases net assets with donor restrictions; $3,000 net assets released from use restrictions decreases net assets with donor restrictions and increases net assets without donor restrictions; $2,500 expense reduces net assets without donor restrictions.

Question 65

At the beginning of 2020, a donor gives a private NFP organization a cash endowment of $500,000. The donor states that the organization must retain the endowment, and cash income on its investment must be used for specific program activities. The endowment is invested in securities. During 2020, cash investment income from the securities is $15,000. The securities have a fair value of $504,000 at year-end. The organization has not spent any of the investment income by year-end. How is this information reported in the organization's statement of activities for 2020?
$\begin{array} { l c c } & \begin{array} { c } \text { Increase in netassets } \\\text { with donor restrictions }\end{array} & \begin{array} { c } \text { Increase in net assets } \\\text { without donor restrictions }\end{array} \\\end{array}$

A) $\begin{array} { l c c } &&&& \$ 519,000 &&&&&&&&& \$0 \\\end{array}$
B) $\begin{array} { l c c } &&&& 504,000 &&&&&&&&& 15,000 \\\end{array}$
C) $\begin{array} { l c c } & &&&500,000 &&&&&&&&& 19,000 \\\end{array}$
D) $\begin{array} { l c c } &&&& 515,000 &&&&&&&&& 4,000\end{array}$

Question 66

At the beginning of 2020, a donor gives a private NFP organization equity securities with a fair value of $500,000. The donor states that the organization must retain the securities, and cash income from the securities must be used for specific program activities. During 2020, investment income from the securities is $15,000. The securities have a fair value of $504,000 at year-end. The organization has not spent any of the investment income by year-end. How is this information reported in the organization's statement of activities for 2020?
$\begin{array} { l c c } & \begin{array} { c } \text { Increase in net assets with } \\\text { donor restrictions }\end{array} & \begin{array} { c } \text { Increase in net assets } \\\text { without donor restrictions }\end{array} \\\end{array}$

A) $\begin{array} { l c c } &&&&& \$ 519,000 &&&&&&&&&& \$ 0 \\\end{array}$
B) $\begin{array} { l c c } &&&&& 504,000 &&&&&&&&&& 15,000 \\\end{array}$
C) $\begin{array} { l c c } &&&&& 500,000 &&&&&&&&&& 19,000 \\\end{array}$
D) $\begin{array} { l c c } &&&&& 515,000 &&&&&&&&&& 4,000\end{array}$

Question 67

At the end of 2020, a donor contributed equity securities worth $600,000 to Habitat for Humanity, with the stipulation that the shares be retained intact, and any investment income be used to support building projects in inner city neighborhoods in Chicago, IL. The shares declined in value by $10,000 during 2021. How is this unrealized loss reported in Habitat for Humanity's 2021 statement of activities?

A) Decrease in net assets without donor restrictions
B) Decrease in net assets with donor restrictions
C) Direct reduction in the beginning balance of net assets
D) Not reported

Question 68

How are investments in debt and equity securities valued in a private NFP organization's financial statements?

A) Shown at cost; gains and losses appear on the statement of activities when the investment is sold.
B) Shown at market; unrealized gains and losses are reported on the statement of financial position and reclassified to the statement of activities when the investment is sold.
C) Shown at market; unrealized gains and losses are reported on the statement of activities as market value changes.
D) Shown at cost; gains and losses are reported on the statement of financial position as direct adjustments of net assets without donor restrictions when the investment is sold.

Question 69

NFP organizations like the Red Cross invest in derivatives to hedge their financial risks. How do the accounting standards for NFP hedge investments differ from the accounting standards for other NFP investments?

A) There is no difference.
B) Unrealized gains and losses on hedge investments are reported as changes in net assets with donor restrictions on the statement of activities, while unrealized gains and losses on other investments are not reported.
C) Unrealized gains and losses on hedge investments are not reported, while unrealized gains and losses on other investments are reported as changes in net assets without donor restrictions on the statement of activities.
D) Unrealized gains and losses on hedge investments are deferred on the statement of financial position until the hedged item is reported on the statement of activities, while unrealized gains and losses on other investments are reported as a change in net assets without donor restrictions on the statement of activities.

Question 70

Two NFP organizations form a new entity, which takes control of the activities of both organizations. How are the assets of the new entity valued?

A) One organization is identified as the acquiring organization, and its assets are revalued to fair value at the date of acquisition; the acquired organization's assets remain at book value.
B) One organization is identified as the acquired organization, and its assets are revalued to fair value at the date of acquisition; the acquiring organization's assets remain at book value.
C) The assets of both organizations are revalued to fair value at the date of acquisition.
D) Assets are reported at the values carried on the books of each of the two organizations.

Question 71

NFP organization A takes control of NFP organization B in a transaction categorized as an acquisition. A pays $50 million in cash to acquire B. B relies primarily on donations to fund its operations. The fair value of B's identifiable net assets is $35 million, and the book value of B's identifiable net assets is $20 million. A's entry to record its acquisition of B will include a debit of:

A) $20 million to identifiable net assets.
B) $15 million as a charge against net assets.
C) $30 million to goodwill.
D) $15 million to goodwill.

Question 72

NFP organization A takes control of NFP organization B in a transaction categorized as an acquisition. A pays $50 million in cash to acquire B. B operates like a business, charging fees to cover costs. The fair value of B's identifiable net assets is $35 million, and the book value of B's identifiable net assets is $20 million. A's entry to record its acquisition of B will include a debit of:

A) $20 million to identifiable net assets.
B) $15 million as a charge against net assets.
C) $30 million to goodwill.
D) $15 million to goodwill.

Question 73

A university reports the following information:
$$\begin{array} { | l | r | } \hline \text { Gross tuition billing s to students } & \$ 60,000,000 \\\hline \text { Tuition scholarshipsgranted to students } & 20,000,000 \\\hline \text { Tuition waivers for teaching assistants } & 5,000,000 \\\hline \text { Estimated uncollectible tuition revenue } & 800,000 \\\hline\end{array}$$ On the university's statement of activities, net tuition revenue is:

A) $35,000,000
B) $40,000,000
C) $59,200,000
D) $55,000,000

Question 74

A university reports the following information:
$$\begin{array} { | l | r | } \hline \text { Gross tuition billing sto students } & \$ 35,000,000 \\\hline \text { Tuition scholarships based on high school academic performance } & 2,000,000 \\\hline \text { Need-based tuition scho larships } & 8,000,000 \\\hline \text { Tuition waivers for teaching assistants } & 3,000,000 \\\hline \text { Tuition waivers for students employed in the student union } & 900,000 \\\hline \text { Estimated uncollectible tuition revenue } & 500,000 \\\hline\end{array}$$ On the university's statement of activities, net tuition revenue is:

A) $34,500,000
B) $20,600,000
C) $25,000,000
D) $21,100,000

Question 75

Use the following information to answer bellow Questions:
A hospital reports the following information:
$$\begin{array} { | l | r | } \hline \text { Estimated bad debts-non-charity patients } & \$ 500,000 \\\hline \text { Contractual adjustments-third party payors } & 1,000,000 \\\hline \text { Direct gross billings to non-charity patients } & 5,000,000 \\\hline \text { Gross billings to insurance companies and M edicare/Medicaid } & 17,000,000 \\\hline \text { Charity care, estimated billing value } & 2,000,000 \\\hline \text { Charity care, cott } & 1,200,000 \\\hline\end{array}$$

-Net patient service revenue, as reported on the hospital's statement of activities, is:

A) $23,000,000
B) $22,500,000
C) $21,000,000
D) $16,500,000

Question 76

Use the following information to answer bellow Questions:
A hospital reports the following information:
$$\begin{array} { | l | r | } \hline \text { Estimated bad debts-non-charity patients } & \$ 500,000 \\\hline \text { Contractual adjustments-third party payors } & 1,000,000 \\\hline \text { Direct gross billings to non-charity patients } & 5,000,000 \\\hline \text { Gross billings to insurance companies and M edicare/Medicaid } & 17,000,000 \\\hline \text { Charity care, estimated billing value } & 2,000,000 \\\hline \text { Charity care, cott } & 1,200,000 \\\hline\end{array}$$

-Charity care is reported on the hospital's statement of activities as:

A) Expense of $1,200,000
B) Revenue of $2,000,000 and bad debt expense of $800,000
C) Revenue of $2,000,000 and expense of $1,200,000
D) Revenue of $1,200,000 and expense of $1,200,000

Question 77

A private college or university reports tuition waivers for teaching assistants as:

A) An expense
B) A reduction in tuition revenue
C) A reduction in net assets with donor restrictions
D) A reduction in net assets without donor restrictions

Question 78

For which type of private NFP organization does ASC Topic 954 require a standardized performance measure on its statement of activities?

A) Voluntary health and welfare organizations
B) Colleges and universities
C) Health care organizations
D) Professional organizations

Question 79

The intermediate performance indicator reported on the statement of activities of health care organizations, as specified by ASC Topic 954, excludes

A) Unrealized gains and losses on investments in equity securities.
B) Defined pension benefits earned by current employees.
C) Impairment losses on intangible assets.
D) Contributions of long-lived assets.

Question 80

The intermediate performance indicator reported on the statement of activities for health care organizations, as specified by ASC Topic 954, excludes

A) Bad debt expense related to receivables on services provided.
B) Depreciation expense on buildings and equipment.
C) Unrealized gains and losses on non-trading debt securities.
D) Interest expense on long-term debt.