Question 1

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 AICPA's Statement of Auditing Standards No. 69 (hierarchy of GAAP) in 1992 established the FASB as the body responsible for establishing GAAP for nongovernmental, not-for-profit organizations.

Question 2

A local philanthropist pledged to make a donation of $100,000 to an NPO to be paid in five equal installments of $20,000 beginning in the next fiscal year.Under FASB standards the pledge would be recognized as

Accepted Answer

Under FASB standards, a pledge is recognized as revenue in the year it is made, at its present value, discounted for future receipts.

Question 3

Which of the following contributions would not have to be reported as an asset on the statement of financial position of a not-for-profit organization?

Accepted Answer

The answer of Which of the following contributions would not...

Question 4

Which of the following is not a condition that must be met for contributed services to a not-for-profit organization (NPO)to be recorded as both a contribution and as an expense?

Accepted Answer

If the service provides a tangible benefit, it would only be recorded as an expense and not as a contribution. The other conditions would all qualify the contributed services to be recorded as both a contribution and an expense in the financial statements of the NPO.

Question 5

A good reason for an NPO to adopt fund accounting even though FASB standards do not require it is that

Accepted Answer

Fund accounting is useful for NPOs to track and report on funds that have donor-imposed restrictions, ensuring compliance with those restrictions.

Question 6

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 considered revenue for a not-for-profit organization because it is earned through an activity that generates income for the organization, rather than being a donation or support from a third party. The other options listed (an unconditional promise to give, a restricted gift, and an allocation of funds from the local United Way organization) are considered support because they are gifts or donations from external sources.

Question 7

Statement of Financial Accounting Standards (SFAS)No.116 on contributions received and contributions made describes measurement and reporting rules for

Accepted Answer

SFAS No. 116 specifically deals with contributions received and contributions made, which are nonexchange transactions. It provides guidance on how contributions should be measured and reported, including those that are restricted versus unrestricted. Therefore, choice B is the best answer.

Question 8

Depreciation expense in a not-for-profit organization should be

Accepted Answer

Depreciation expense should be assigned or allocated to the functions (program or support) that it relates to, in order to accurately reflect the expenses associated with those functions. This is in line with the principle of programmatic allocation, which requires expenses to be reported based on the function or program to which they are directly associated.

Question 9

Which of the following statements is not a true statement about reporting of financially related not-for-profit entities?

Accepted Answer

Consolidation is not required for joint arrangements, as each entity maintains control over its assets and obligations. Therefore, the financial information of the other NPO should not be consolidated with the first NPO's financial information.

Question 10

Temporarily restricted net assets are released from restrictions

Accepted Answer

Temporarily restricted net assets are released from restrictions as assets are spent for the purposes intended by the donor. This means that the restrictions are lifted when the organization uses the funds in the way that the donor intended. The release of restrictions does not happen at the end of each fiscal year, when funds are returned to the donor, or when they are converted to permanently restricted net assets.

Question 11

Which of the following statements is correct regarding reporting of special events and related direct costs under current FASB standards?

Accepted Answer

Under current FASB standards, special events and related direct costs must be reported separately at their gross amounts if they relate to the ongoing major operations of a nonprofit organization (NPO).

Question 12

An NPO incurred $10,000 in management and general expenses in the current fiscal year.In the organization's statement of activities prepared in conformity with FASB standards,the $10,000 would be reported as

Accepted Answer

Management and general expenses are considered supporting services expenses as they do not directly relate to program services.

Question 13

All of the following are characteristics of not-for-profit organizations (NPOs)that distinguish them from business organizations except

Accepted Answer

Not-for-profit organizations (NPOs) do not have the ability to impose taxes on citizens. They are funded by contributions from resource providers who do not expect a return on investment, have operating purposes other than to earn a profit, and have an absence of ownership interests. Their primary focus is on achieving their social or charitable mission rather than maximizing profits.

Question 14

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

Equity securities with a readily determinable market value and all debt securities are reported at fair value.

Question 15

Statement of Financial Accounting Standards (SFAS)No.117 requires the following financial statements for all nongovernmental,not-for-profit organizations

Accepted Answer

SFAS No. 117 requires nongovernmental, 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 such organizations, only for voluntary health and welfare organizations.

Question 16

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

Accepted Answer

Fund accounting is often used by NPOs to keep track of specific revenue sources and expenses related to those sources, such as restricted grants from donors. Fund accounting allows for separate reporting on each fund, which can facilitate reporting to donors and ensure compliance with any restrictions placed on the funds. It can also be used for internal purposes, such as tracking the financial activity of specific programs or departments within the organization. While SFAS Nos. 116 and 117 provide a method for reporting net assets, they do not replace the need for fund accounting in some cases.

Question 17

Securities donated to an NPO should be recorded at the

Accepted Answer

Securities donated to an NPO should be recorded at the fair market value at the date of the gift. This is in accordance with Generally Accepted Accounting Principles (GAAP) and ensures that the financial statements accurately reflect the value of the assets donated.

Question 18

Accounting standards for NPOs require

Accepted Answer

The answer of Accounting standards for NPOs require
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Question 19

Which of the following would be considered "contribution revenue or support" of an NPO?

Accepted Answer

Contributions received from a fundraising campaign are considered contribution revenue or support for an NPO, as they are donations made with the intention of supporting the organization's mission and activities. The other options listed (gain on disposal of capital assets, rent earned from surplus office space, and investment earnings) are all forms of non-contribution revenue for an NPO.

Question 20

Which of the following organizations would be covered by the AICPA Audit and Accounting Guide Not-for-Profit Organizations?

Accepted Answer

The AICPA Audit and Accounting Guide Not-for-Profit Organizations covers entities that are organized and operated for purposes other than generating profit, such as political parties.

Quiz 14: Not-For-Profit Organizations Regulatory, taxation, and Performance Issues

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