Question 1

Which of the following statements is correct?

Accepted Answer

Unrestricted resources can be used for any purposes that are consistent with the goals and objectives of the not-for-profit organization. However, restricted resources have specific restrictions placed on them by the donor and can only be used for the intended purpose. Restricted resources should not be used for other purposes, even in the case of financial deficit. Both restricted and unrestricted funds should be used in accordance with the wishes of the contributor, but only if those wishes are consistent with the goals and objectives of the organization.

Question 2

In which fund would the purchase of the asset be recorded?

Accepted Answer

The purchase of a capital asset would be recorded in the Capital Fund, which is used for long-term investments and acquisitions of major assets. The General Fund and Operating Fund are typically used for day-to-day expenditures and routine operating expenses, while the Encumbrance Fund is used to set aside funds for anticipated future purchases.

Question 3

How may a not-for-profit organization account for a portfolio investment it has made in profit-oriented entity?

Accepted Answer

Not-for-profit organizations should account for their investments in profit-oriented entities using either the fair value or the cost method, depending on the characteristics of the specific investment. The equity method is used when the organization has significant influence over the investee's accounting and operating policies, which is atypical for a not-for-profit organization. Proportionate consolidation is used for joint ventures, which is also not common for not-for-profit organizations. Consolidating the results of the profit-seeking entity with its own is not applicable as it is not the same as accounting for a portfolio investment.

Question 4

What would be the balance in the Capital Fund on December 31, 2018?

Accepted Answer

The answer of What would be the balance in the...

Question 5

Section 4431 of the CPA Canada Handbook contains a provision applicable to not-for-profit organizations which grants an exemption from capitalizing and amortizing all their fixed assets. The exemption is applicable to:

Accepted Answer

The exemption is applicable to not-for-profit organizations whose two-year average annual revenues in their statement of operations are less than $500,000. This means that not-for-profit organizations that meet this criteria do not have to capitalize and amortize their fixed assets.

Question 6

The maximum amortization period specified by Section 4431 with respect to capital assets is:

Accepted Answer

Section 4431 does not specify a maximum amortization period for capital assets, allowing flexibility based on the asset's useful life.

Question 7

Which of the following is NOT an acceptable way of reporting for a not-for-profit entity over which an organization has control?

Accepted Answer

The equity method is not an acceptable way of reporting for a not-for-profit entity over which an organization has control. The equity method is used for investments in equity securities, which are not applicable to not-for-profit entities. The other options, including consolidating the controlled organization, providing disclosure, or adhering to disclosure requirements, are acceptable ways of reporting for not-for-profit entities.

Question 8

Which of the following financial statements are NOT required by not-for-profit organizations for external reporting purposes?

Accepted Answer

Not-for-profit organizations do not have members' equity, which is a term used for for-profit organizations. Therefore, a Statement of Changes in Members' Equity is not required by not-for-profit organizations for external reporting purposes. However, they are required to prepare a Statement of Financial Position, a Statement of Cash Flows, and a Statement of Operations.

Question 9

In which fund would the purchase and amortization of the asset be recorded?

Accepted Answer

The purchase and amortization of an asset would be recorded in the Capital Fund, as this fund is used to account for long-term and capital assets. The General Fund is used for operating expenses, the Operating Fund is used for revenue-generating activities, and the Encumbrance Fund is used for reserving funds for anticipated expenses.

Question 10

Collections are works of art that have been excluded from the definition of capital assets. Which of the following statements is NOT a criterion which must be met before works of art qualify as collections under Canadian accounting standards?

Accepted Answer

The criterion that is NOT required for a work of art to qualify as a collection is that it must be possible to establish a useful life for the works and an appropriate amortization period. The other three criteria - public exhibition, protection/care/preservation, and organizational policies for proceeds - are all necessary for a work of art to qualify as a collection under Canadian accounting standards.

Question 11

Which of the following statements is NOT correct?

Accepted Answer

The statement "A contribution receivable should be recognized as an asset when the amount can be reasonable estimated or the ultimate collection is reasonably assured" incorrectly presents the recognition criteria for a contribution receivable. According to accounting standards, both of these conditions must be met in order for a contribution receivable to be recognized as an asset. Therefore, statement B is incorrect. Statements A, C, and D are all correct.

Question 12

What would be the balance in the Capital Fund on December 31, 2018?

Accepted Answer

The answer of What would be the balance in the...

Question 13

How would the not-for-profit organization report each controlled profit-oriented enterprise?

Accepted Answer

A not-for-profit organization must report its interest in controlled profit-oriented enterprises by consolidating the controlled enterprise into its own financial statements or by using the equity method and disclosing additional financial information. This is because the profit-oriented enterprise is considered a subsidiary of the not-for-profit organization, and therefore, its financial results must be included in the not-for-profit organization's financial statements. Using the cost method together with appropriate note disclosure would not provide sufficient information about the financial results and operations of the controlled enterprise.

Question 14

Which of the following was NOT a common argument against the Accounting Standards Board's proposal that all capital acquisitions be capitalized and amortized?

Accepted Answer

This argument was not commonly used against the proposal. The other three options were commonly cited as reasons to oppose the proposal.

Question 15

Section 4431 contains a compromise applicable to not-for-profit organizations whose two-year average annual revenues are less than $500,000. These organizations must disclose all of the following EXCEPT:

Accepted Answer

Section 4431 requires not-for-profit organizations to disclose their accounting policy for capital assets, information about capital assets not shown on the balance sheet, and the amount expensed in the current period if they have a policy to expense capital assets when acquired. However, they are not required to provide an appraised listing of their capital assets showing book values and appraised market values.

Question 16

In which fund would the receipt of the unrestricted contribution be recorded?

Accepted Answer

Unrestricted contributions are donations that have no strings attached and are not designated for any specific purpose. Therefore, they are recorded in the General Fund, which is used to account for the government's ongoing operations and all general revenue and expenditure transactions that are not required to be accounted for in another fund.

Question 17

Which of the following statements is correct?

Accepted Answer

The answer of Which of the following statements is correct?
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Question 18

Bequests are normally not recorded until:

Accepted Answer

The answer of Bequests are normally not recorded until:
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Question 19

What would be the balance in the General Fund on December 31, 2018?

Accepted Answer

The General Fund balance is typically zero at the end of the fiscal year as all revenues and expenditures are closed out.

Question 20

What would be the carrying value of the equipment on December 31, 2018?

Accepted Answer

The carrying value of the equipment is calculated by subtracting accumulated depreciation from the cost of the equipment. Without specific details on the cost and accumulated depreciation, the answer is based on typical depreciation calculations.

Quiz 12: Accounting for Not-For-Profit and Public Sector Organizations

Which of the following statements is correct?

In which fund would the purchase of the asset be recorded?

How may a not-for-profit organization account for a portfolio investment it has made in profit-oriented entity?

What would be the balance in the Capital Fund on December 31, 2018?

Section 4431 of the CPA Canada Handbook contains a provision applicable to not-for-profit organizations which grants an exemption from capitalizing and amortizing all their fixed assets. The exemption is applicable to:

The maximum amortization period specified by Section 4431 with respect to capital assets is:

Which of the following is NOT an acceptable way of reporting for a not-for-profit entity over which an organization has control?

Which of the following financial statements are NOT required by not-for-profit organizations for external reporting purposes?

In which fund would the purchase and amortization of the asset be recorded?

Collections are works of art that have been excluded from the definition of capital assets. Which of the following statements is NOT a criterion which must be met before works of art qualify as collections under Canadian accounting standards?

Which of the following statements is NOT correct?

What would be the balance in the Capital Fund on December 31, 2018?

How would the not-for-profit organization report each controlled profit-oriented enterprise?

Which of the following was NOT a common argument against the Accounting Standards Board's proposal that all capital acquisitions be capitalized and amortized?

Section 4431 contains a compromise applicable to not-for-profit organizations whose two-year average annual revenues are less than $500,000. These organizations must disclose all of the following EXCEPT:

In which fund would the receipt of the unrestricted contribution be recorded?

Which of the following statements is correct?

Bequests are normally not recorded until:

What would be the balance in the General Fund on December 31, 2018?

What would be the carrying value of the equipment on December 31, 2018?