Question 1

The FASB requires the statement of financial position prepared by a not-for-profit organization to report net assets in these categories: unrestricted,temporarily restricted,net investment in capital assets,and permanently restricted.

Accepted Answer

The FASB requires not-for-profit organizations to report net assets in three categories: without donor restrictions, with donor restrictions, and net investment in capital assets is not a separate category.

Question 2

The FASB requires investments in equity securities that have a readily determinable market value and all debt securities of a not-for-profit organization are reported at:

Accepted Answer

According to FASB, investments in equity securities and all debt securities of not-for-profit organizations are reported at fair value if they have a readily determinable market value.

Question 3

To be considered a nongovernmental not-for-profit an organization must be tax-exempt.

Accepted Answer

Being tax-exempt is not a requirement to be considered a nongovernmental not-for-profit organization. However, many not-for-profit organizations do seek tax-exempt status as it can provide certain benefits such as exemption from some types of taxes and eligibility for certain grants and funding sources.

Question 4

Under the FASB Codification a $5 million endowment that cannot be spent for 50 years should be classified as permanently restricted net assets.

Accepted Answer

Under the FASB Codification, such an endowment would be classified as "temporarily restricted" because it is restricted for a specific period (50 years), not permanently.

Question 5

According to the information provided in the textbook,Beta Alpha Psi would be considered an other nonprofit organization (ONPO).

Accepted Answer

According to the information provided in the textbook, Beta Alpha Psi is a professional accounting organization and would fall under the category of "other nonprofit organization" (ONPO). This is because it is not a charity or foundation but rather serves the professional development needs of its members.

Question 6

A donor provides a large cash contribution that is to be used for acquisition of a new building.Under FASB standards,how would this contribution be reported by a not-for-profit organization on its statement of cash flows?

Accepted Answer

Cash contributions for acquisition of a new building are considered financing activities because they result in an increase in long-term liabilities or contributions restricted for long-term assets.

Question 7

Which of the following statements is regarding fund accounting for not-for-profit organizations (NFPs)?

Accepted Answer

Fund accounting is commonly used by NFPs to track the use of funds for specific purposes, such as donations, grants, or endowments. This type of accounting can help to facilitate reporting to donors, as well as ensure compliance with legal and regulatory requirements. While fund accounting may not be required for internal purposes, it can still be a useful tool for managing financial resources and tracking performance. FASB has not replaced fund accounting with the three classes of net assets, but rather requires NFPs to disclose information about their net assets and how they are restricted or designated for specific purposes.

Question 8

Which of the following characteristics of not-for-profit organizations (NFPs)can be used to distinguish a nongovernmental from a governmental NFP?

Accepted Answer

The ability to impose taxes on citizens is a characteristic unique to governmental entities and therefore distinguishes them from nongovernmental nonprofit organizations. A and C are characteristics that apply to all nonprofit organizations, regardless of whether they are governmental or nongovernmental.

Question 9

Under FASB standards how would a not-for-profit organization recognize a conditional pledge?

Accepted Answer

A conditional pledge is not recognized as revenue until the conditions are substantially met, as it is not considered a binding commitment until those conditions are fulfilled.

Question 10

Similar to the GASB,the FASB requires not-for-profit entities to prepare the statement of cash flows using the direct method.

Accepted Answer

The FASB allows not-for-profit entities to prepare the statement of cash flows using either the direct or indirect method, whereas GASB requires the direct method for governmental entities.

Question 11

The FASB requires that long-term unconditional pledges (those that will not be collected within a year)be reported at fair value.

Accepted Answer

The FASB does require that long-term unconditional pledges be reported at fair value.

Question 12

The FASB Codification requires the following financial statements for all not-for-profit organizations:

Accepted Answer

The FASB Codification requires not-for-profit organizations to prepare a statement of financial position, a statement of activities, and a statement of cash flows. The statement of functional expenses is not required for all not-for-profits, only for voluntary health and welfare organizations.

Question 13

An example of an increase in net assets for a not-for-profit organization that would be labeled revenue rather than support is:

Accepted Answer

Investment income is earned by the organization and is considered revenue. An unconditional promise to give, a restricted gift, and an allocation of funds from the local United Way organization are all considered support as they are contributions from external sources.

Question 14

One characteristic that separates a governmental not-for-profit from a nongovernmental not-for-profit is the ability to raise taxes.

Accepted Answer

A governmental not-for-profit has the authority to raise taxes to support its mission and programs, while a nongovernmental not-for-profit relies on donations, grants, and other sources of funding to sustain its operations.

Question 15

According to the FASB Codification,which of the following is a condition that must be met for contributed services to a not-for-profit organization (NFP)to be recorded as both a contribution and as an expense?

Accepted Answer

The answer of According to the FASB Codification,which of the...

Question 16

The FASB states that if a not-for-profit has a controlling interest in another not-for-profit it should consolidate the not-for-profit over which it has a controlling interest into its financial statements.

Accepted Answer

The answer of The FASB states that if a not-for-profit...

Question 17

Responsibility for establishing generally accepted accounting principles (GAAP)for nongovernmental,not-for-profit organizations rests with the FASB and was most clearly established:

Accepted Answer

The FASB Codification is the single, authoritative source for all U.S. GAAP, including for nongovernmental, not-for-profit organizations, clearly establishing the FASB's responsibility in this area.

Question 18

Term endowments and quasi-endowments are classified as temporarily restricted net assets according to the FASB.

Accepted Answer

Term endowments and quasi-endowments are classified as net assets with donor restrictions, not temporarily restricted net assets, according to FASB standards.

Question 19

The FASB requires that if a financial intermediary has variance power it recognize a donation as a contribution payable on its financial statements.

Accepted Answer

The Financial Accounting Standards Board (FASB) does not specifically require financial intermediaries to recognize a donation as a contribution payable based solely on having variance power. The recognition of contributions and liabilities is determined by the substance of the transaction and the entity's control over the donated assets, among other factors, according to FASB standards.

Question 20

Under the FASB Codification the costs incurred for a joint activity may be allocated between fund-raising expenses and program expenses if the criteria of purpose,audience,and content are met.

Accepted Answer

According to FASB Codification 958-720-55-38, costs incurred for a joint activity may be allocated between fund-raising expenses and program expenses if certain criteria are met, including purpose, audience, and content.

Quiz 13: Accounting for Not-For-Profit Organizations