Question 1

A nongovernmental,not-for-profit entity is subject to

Accepted Answer

A nongovernmental, not-for-profit entity is subject to GAAP (Generally Accepted Accounting Principles) just like any other business entity, in order to maintain transparency and accountability. GAAP lays down the standards and principles for financial reporting, ensuring uniformity across the industry. GAAS (Generally Accepted Auditing Standards) is applicable to auditors while auditing financial statements of entities for which GAAP has been followed. SEC (Securities and Exchange Commission) is the regulatory body that oversees financial reporting by publicly traded companies. AICPA (American Institute of Certified Public Accountants) is a professional organization of accountants in the United States that provides guidance and resources to its members.

Question 2

Which one of the following statements is not required for voluntary health and welfare organizations?

Accepted Answer

Voluntary health and welfare organizations are required to present a statement of financial position, a statement of activities, and a statement of functional expenses as part of their financial statements. However, the statement of changes in net assets is not a separate requirement because the information is typically included within the statement of activities.

Question 3

A donor gives a Voluntary Health and Welfare Organization (VHWO)$1,000 cash that is restricted for a research project.What account does the VHWO credit when the VHWO receives the money?

Accepted Answer

The VHWO should credit the Temporarily Restricted Support account because the funds are restricted for a specific research project. This account tracks any contributions that are restricted to be used for a particular purpose or time frame. Once the research project is completed, the funds will no longer be restricted, and the VHWO can release them to other accounts.

Question 4

For nonprofit,nongovernmental organizations,unconditional promises to give that include promises of payments due in future periods (next year or later)are reported as

Accepted Answer

Unconditional promises to give that are due in future periods are considered restricted support because they are not available for use until the specified time or condition is met.

Question 5

A gift-in-kind,for which the not-for-profit entity has no discretion on disposition,should be accounted for by the not-for-profit,nongovernmental entity as

Accepted Answer

A gift-in-kind for which the not-for-profit entity has no discretion on disposition means that the entity is acting as an agent for the donor and therefore the transaction should be recorded as an agency transaction. The not-for-profit entity only acts as a conduit, passing the gift-in-kind to the intended recipient. It does not have control over the gift and, therefore, cannot recognize it as a contribution or an exchange transaction. A conditional promise to give is a commitment made by a donor to give a gift, but it has not yet been received.

Question 6

Not-for-profit,private colleges classify student unions,dining halls,and residence halls as

Accepted Answer

Student unions, dining halls, and residence halls are all considered auxiliary enterprises because they provide services that are not directly related to education but support the educational mission of the institution. These services are typically self-supporting and generate revenue through fees or charges.

Question 7

Voluntary health and welfare organizations must report expenses classified by

Accepted Answer

Voluntary health and welfare organizations are required to report expenses by both function (such as program services, management and general, and fundraising) and natural classification (such as salaries, rent, utilities, etc.). This dual classification provides a clearer picture of how resources are used.

Question 8

Voluntary health and welfare organizations classify fund-raising costs as

Accepted Answer

Fund-raising costs are categorized as supporting services as they are essential for the organization's operation but do not directly contribute to the implementation of specific programs or services. This category includes costs related to management, finance, and administration of the organization.

Question 9

An alumnus of a nonprofit,nongovernmental university establishes an endowment of $50,000.When the university receives the endowment from the donor,what account will the university credit?

Accepted Answer

Endowments are typically meant to be kept permanently with only the income generated from them being used for the university's purposes, which classifies the funds as permanently restricted revenues.

Question 10

An alumnus made a donation of adjoining land to a not-for-profit,nongovernmental university.The donor made no specifications regarding the time period or use of the land.The university would record the gift as

Accepted Answer

Since the donor has made no specifications regarding the time period or use of the land, the university can use it for any purpose it chooses. Therefore, the gift would be classified as unrestricted revenue.

Question 11

Voluntary health and welfare organizations

Accepted Answer

Voluntary health and welfare organizations are supported by and provide voluntary services to the public. They may have paid executives and staff, and they follow the same accounting standards as other non-profit organizations, including the use of fund accounting. There is not a separate GASB statement specifically for these types of organizations.

Question 12

On January 1,2011,a Voluntary Health and Welfare Organization (VHWO)receives an unconditional promise to give $6,000.The money is not collectible until 2012.The VHWO estimates that 10% of pledges are uncollectible.On January 1,2011,the VHWO will credit

Accepted Answer

The answer of On January 1,2011,a Voluntary Health and Welfare...

Question 13

The gift shop of a nonprofit,private hospital has cash revenue of $24,000.What account will the hospital credit?

Accepted Answer

The correct account to credit for cash revenue from a nonprofit, private hospital's gift shop is "Other operating revenue - unrestricted." This is because the revenue is generated from the hospital's operations (the gift shop) and is not restricted by donors for specific purposes, thus it is considered unrestricted.

Question 14

In a nonprofit,nongovernmental hospital,courtesy allowances are

Accepted Answer

Courtesy allowances in a nonprofit, nongovernmental hospital setting are considered revenue deductions. This is because they represent a reduction in the total charges or fees that would normally be billed for services provided, often as a courtesy to employees, physicians, or other affiliated individuals. These are not treated as charity care, expenses, or revenues earned, but rather as adjustments to the revenue figures.

Question 15

Which of the following is not true?

Accepted Answer

A not-for-profit entity does not have ownership interests like a corporation. Instead, it may have members or stakeholders who do not have equity ownership in the organization but have a vested interest in its mission or purpose.

Question 16

Under GAAP,for nonprofit,nongovernmental entities,an unconditional transfer of cash or other assets to an entity,or a settlement or cancellation of its liabilities in a voluntary,non-reciprocal transfer,is called a(n)

Accepted Answer

An unconditional transfer of cash or other assets to a nonprofit, nongovernmental entity is called a contribution under GAAP. This transfer must be voluntary, non-reciprocal, and without any conditions attached to it. It could be in the form of cash, stocks, bonds, or any other asset. It may also involve the cancellation or settlement of the entity's liabilities. Therefore, option B is the correct answer. Option A and C refer to promises to give, which are different from an actual transfer of assets. Option D is not a relevant term in this context.

Question 17

For a Voluntary Health and Welfare Organization,what entry is prepared when the restriction on a cash donation is met?

Accepted Answer

When a Voluntary Health and Welfare Organization receives a cash donation with a restriction that is later met, the correct accounting entry is to debit Temporarily Restricted Net Assets - Reclassifications out and credit Unrestricted Net Assets - Reclassifications in. This reflects the movement of funds from a restricted status to an unrestricted status, indicating that the conditions of the donation have been satisfied.

Question 18

Voluntary health and welfare organizations (VHWO)measure contributions at fair value unless

Accepted Answer

Voluntary health and welfare organizations measure contributions at fair value unless the fair value cannot be reasonably determined. This is because accurately assessing the value of non-cash contributions can sometimes be challenging, and if a reliable fair value cannot be established, an alternative accounting treatment may be necessary.

Question 19

In a not-for-profit,private university,the federal grant funds given directly to students for financial aid are an example of

Accepted Answer

Federal grant funds given directly to students for financial aid in a not-for-profit, private university are considered an agency transaction because the university acts as an intermediary, passing the funds directly to the students without having discretion over their use.

Question 20

In a nongovernmental,nonprofit hospital,contractual adjustments are

Accepted Answer

Contractual adjustments in a nongovernmental, nonprofit hospital refer to the discounts arranged with third-party payors, such as insurance companies, which are deducted from the hospital's gross revenue to reflect the net revenue expected to be collected.

Quiz 22: Accounting for Not-For-Profit Organizations