Question 1

Which of the following is not true of a Statement of Activities prepared for a private not-for-profit organization?

Accepted Answer

Unrealized gains and losses and realized gains and losses on investments are reported together in the Statement of Activities as unrestricted, temporarily restricted or permanently restricted gains or losses.

Question 2

In 2017, a major drug company agreed to give a not-for-profit private college $420,000 to perform testing of a new drug. An advance payment of $335,000 was received in 2017. The college was to receive $1,500 per individual test. In 2017, the college completed 130 tests. How much revenue should the college report for 2017?

Accepted Answer

130 tests x $1,500 per test = $195,000

Question 3

A private not-for-profit organization received a gift of $640,000 with purpose restrictions in 2014. In 2017 funds were expended for the purpose outlined in the gift, however, it was not possible to determine whether the restricted funds or unrestricted funds were used. The presumption should be:

Accepted Answer

In the case of contributions restricted for purpose or plant acquisition, a presumption is made that disbursements are made first from restricted resources and then unrestricted resources.

Question 4

Under FASB Statement 116, reclassifications of net assets are not made:

Accepted Answer

If temporarily restricted resources are used, a reclassification is made from temporarily restricted net assets to unrestricted net assets. Reclassifications are made for satisfaction of program restrictions, fix asset restrictions, and time restrictions.

Question 5

The Statement of Functional Expenses:

Accepted Answer

Voluntary health and welfare organizations are required to report a Statement of Functional Expenses that shows expenses by both function and natural classification.

Question 6

FASB statement 116 requires contributions to be recorded as revenue when

Accepted Answer

FASB statement 116 requires contributions, including unconditional promises to give, to be recorded as revenue when the promise is made.

Question 7

What financial ratio is most commonly used to evaluate charitable organizations?

Accepted Answer

The program expense ratio is the ratio of program service expense to total expenses.

Question 8

The FASB has the authority to set accounting standards for all of the following organizations except:

Accepted Answer

The FASB has standard-setting authority over business organizations and private not-for-profit organizations. The GASB has standard-setting authority over state and local governments, including governmentally related not-for-profit organizations. A city owned hospital would follow GASB standards.

Question 9

A donor made a cash contribution of $90,000 to a private not-for-profit organization for the purpose of acquiring a building. The not-for-profit organization properly recorded the gift of cash as temporarily restricted revenue. When the building is acquired, the organization should:

Accepted Answer

With the exception of collections, fixed assets may be recorded as either temporarily restricted or unrestricted, depending on the policy of the organization.

Question 10

Which of the following is not an example of a voluntary health and welfare organization?

Accepted Answer

Trade associations are not voluntary health and welfare organizations. Meals on Wheels, Big Brothers/Big Sisters and Girl and Boy Scouts are all voluntary health and welfare organizations.

Question 11

Which of the following is not a condition for recording donated services?

Accepted Answer

Contributed services are recognized as revenue only under specific circumstances; if the service 1) creates or enhances nonfinancial assets or 2) requires specialized skills, is provided by someone possessing those skills, and typically would be purchased if not provided by donation.

Question 12

Which of the following would not be an example of a voluntary health and welfare organization?

Accepted Answer

Voluntary health and welfare organizations typically generate some revenues through user charges but receive most of their support from donors who do not receive direct benefits in return. Examples are community mental health center, American Heart Association, American Cancer Society, Meals on Wheels, senior citizens' centers, Girl and Boy Scouts and Big Brothers/Big Sisters and food banks. A state community college is not a voluntary health and welfare organization.

Question 13

Which of the following statements is false with respect to private not-for-profit organizations?

Accepted Answer

An intention to give is not the same an unconditional promise to give. No revenue would be recorded when the intention is made known.

Question 14

A donor made an unconditional pledge in 2016 of $ 50,000 to a private not-for-profit organization with the intent to pay the cash in 2017 for unrestricted use in 2017. The organization should:

Accepted Answer

FSB Statement 116 requires contributions, including unconditional promises to give, to be recorded as revenues when the promise is made. The entire amount would be recorded as temporarily restricted revenue in 2016 which is reclassified to unrestricted in 2017.

Question 15

Which of the following pledges of support would not be recognized in the year the pledge was made?

Accepted Answer

Conditional promises to give are not recognized as revenues until the conditions are met. No revenue would be recorded on a pledge with no restrictions until the matching pledges were received.

Question 16

Which of the following is true of a Statement of Cash Flows for a private sector, private not-for-profit organization?

Accepted Answer

The Statement of Cash Flows uses the standard FASB categories; operating, investing and financing. The direct or indirect method may be used. The indirect method or the reconciliation schedule for the direct method) reconciles the change in total net assets to the net cash used or provided by operating activities.

Question 17

Which of the following is not a characteristic that distinguishes a private not-for-profit organization from a business?

Accepted Answer

Both not-for-profit and for profit businesses record revenues and expenses.

Question 18

Under which of the following conditions is it appropriate for a private not-for-profit to allocate the cost of mass mailings from fund raising to a program related activity, such as Public Education?

Accepted Answer

The AICPAs issued a statement establishing guidance for allocation of costs that involve fund-raising. The statement indicates that it is appropriate to allocate costs from fund-raising to a program function when the activity meets three conditions: Purpose: The purpose of the joint activity includes accomplishing program functions. Audience: The audience is selected based on characteristics other than ability to make contributions. Content: The activity calls for specific action by the recipient that is will help accomplish the organization's mission.

Question 19

A donor gave equipment valued at $60,000 at the beginning of 2017 to a private not-for-profit organization. The equipment had a 10-year life and depreciation of $6,000 was charged during 2017. At the end of the year, the net assets to be reported in unrestricted net assets related to this equipment would be:

Accepted Answer

With the exception of collections, fixed assets may be recorded as either temporarily restricted or unrestricted, depending on the policy of the organization. This is true both when an asset is acquired with temporarily restricted resources and when it is acquired with restricted resources.

Question 20

Which of the following is a legitimate reason for a private not-for-profit organization to have a surplus increase in net assets)?

Accepted Answer

Establishing working capital, retiring debt and expanding or replacing physical facilities and continuing a program beyond the period that the initial funding provided are all reasons why a private not-for-profit would want a surplus increase in net assets).

Quiz 10: Accounting for Private Not-For-Profit Organizations