FAR Unit 6

Pharm, a nongovernmental not-for-profit organization, is preparing its year-end financial statements. Which of the following statements is required?

a. statement of cash flows

b. statement of changes in financial position

c. statement of revenue, expenses and changes in fund balance

d. statement of changes in fund balance

a. statement of cash flows

Stanton College, a not-for-profit organization, received a building with no donor stipulations as to its use. What type of net assets should be increased when the building was received?

I. net assets without donor restriction

II. net assets with donor restrictions

III. board-designated net assets

a. III only

b. I only

c. II nonly

d. II nor III

b. I only

At the beginning of the year, the Baker Fund, a nongovernmental not-for-profit corporation, received a $125,000 contribution restricted to youth activity programs. During the year, youth activities generated revenue of $89,000 and had program expenses of $95,000. What amount should Baker report as net assets released from restrictions for the current year?

a. $0

b. $6,000

c. $95,000

d. $125,000

c. $95,000

The following expenditures were made by Green Services, a society for the protection of the environment:

Printing of the annual report	$12,000
Unsolicited merchandise sent to encourage contributions	25,000
Cost of an audit performed by a CPA firm	3,000

What amount should be classified as fundraising costs in the society's statement of activities?

a. $0

b. $25,000

c. $37,000

d. $28,000

b. $25,000

Guidance included in the FASB accounting standards codification for Financial Statements of Not-for-Profit Organizations, focuses on:

a. inherent differences of not-for-profit organizations that impact reporting presentations

b. basic information for the organization as a whole

c. standardization of funds nomenclature

d. distinctions between current fund and non-current fund presentations

b. basic information for the organization as a whole

What is a primary purpose and focus of the statement of activities for a nongovernmental, not-for-profit organization?

a. to provide relevant information information about the cash receipts and cash payments of the organization during a period

b. to demonstrate how the organization’s resources are used in providing various programs and services

c. to provide a cost-benefit analysis of the use of the organization’s resources

d. to demonstrate the ability of the organization to meet donor-imposed restrictions on resources

b. to demonstrate how the organization’s resources are used in providing various programs and services

Which of the following classifications is required for reporting of expenses by all not-for-profit organizations?

a. functional classification in the statement of activities or notes to the financial statements

b. functional classification in the statement of activities and natural classification in a matrix format in a separate statement

c. functional classification in the statement of activities and natural classification analyzed by function in the notes to the financial statements

d. natural classification in the statement of activities or notes to the financial statements

c. functional classification in the statement of activities and natural classification analyzed by function in the notes to the financial statements

Nongovernmental not-for-profit organizations are required to provide which of the following external financial statements?

a. statement of cash flows, statement of comprehensive income, statement of unrelated business income

b. statement of comprehensive income, statement of cash flows, statement of gains and losses

c. statement of financial position, statement of comprehensive income, statement of cash flows

d. statement of financial position, statement of activities, statement of cash flows

d. statement of financial position, statement of activities, statement of cash flows

A nongovernmental, not-for-profit day care center pays its executive director a salary of $80,000. The director's time is spent as follows:

Activity	Time spent
Providing direct educational services	40%
Conducting membership development activities	30%
Fundraising activities	20%
Recordkeeping and budgeting	10%

In the statement of functional expense, what amount of the executive director's salary should be reported as supporting activities?

a. $8,000

b. $80,000

c. $48,000

d. $24,000

c. $48,000

A non-governmental, not-for-profit entity started a direct mail campaign to generate contributions. The costs of the direct mailing include the printing of the materials, staff time to assemble the mailing, and market research relating to the distribution of the entity's brochures. The entity should account for these fundraising costs by:

a. recording the deferred costs of the brochures, recognizing the expense over the period in which related contributions are expected to be received, and recording as expense the market research and staff costs as incurred

b. recording the costs of the brochures, market research, and staff time as expenses in the period in which the costs are incurred

c. recording a prepaid expense for the costs of the brochures, staff, and market research expenses, and recognizing the expense when the materials are mailed

d. recording a prepaid expense for the cost of the brochures only and recognizing the expense when the materials are mailed

b. recording the costs of the brochures, market research, and staff time as expenses in the period in which the costs are incurred

The purpose of a statement of financial position for a nongovernmental not-for-profit entity is to provide relevant information about:

a. the changes in net assets with and without donor restrictions

b. the assets, liabilities, and net assets, and about their relationships to one another at a moment in time

c. the effects of transactions and other events and circumstances that change the amount and nature of net assets

d. the cash receipts and cash payments during a period in time

b. the assets, liabilities, and net assets, and about their relationships to one another at a moment in time

Which of the following financial categories are used in a nongovernmental not-for-profit organization's statement of financial position?

a. income, expenses, and net assets without donor restrictions

b. changes in net assets without donor restrictions and with donor restrictions

c. net assets, income, and expense

d. assets, liabilities, and net assets

d. assets, liabilities, and net assets

Which of the following types of information would be included in total net assets in the statement of financial position for a nongovernmental not-for-profit organization?

a. net assets without donor restriction and net assets with donor restrictions

b. total current assets and restricted assets

c. net assets without donor restrictions, net assets with donor restrictions, and total current assets

d. total current net assets and total other assets

a. net assets without donor restriction and net assets with donor restrictions

A nongovernmental, not-for-profit entity recorded the following transactions during its first year of operation:

• Donor A contributed $1,000,000 to acquire the necessary assets to expand the entity's services to a nearby city. The project was completed during Year 1 at a total cost of $1.25 million.

• The entity's board of directors designated $250,000 of net assets to complete the expansion project.

• Donor B contributed $500,000 to establish a perpetual endowment fund whose investment returns must be used for the maintenance of a building owned by the entity.

What amount should be reported as the balance in net assets with donor restrictions in the year-end statement of financial position?

a. $1,500,000

b. $750,000

c. $1,750,000

d. $500,000

d. $500,000

A nongovernmental, not-for-profit health care entity reported the following items in its trial balance:

Account	Amount	Notes
Cash and cash equivalents	$98,000	Includes $22,000 restricted for building improvements
Grants receivable	20,000	Owed by the state for specified capital expenditures incurred during the year
Land, buildings, and equipment	250,000
Long-term investments	130,000
Marketable securities	90,000	The donor allowed this temporary investment in high-quality debt investments until the cash is needed for building construction; construction is scheduled to begin late in the next fiscal year
Prepaid insurance	15,000	Remaining term of policy is two years from fiscal year-end

What amount should the entity report as total noncurrent assets in its year-end statement of financial position?

a. $477,500

b. $507,000

c. $499,500

d. $519,500

c. $499,500

When preparing the statement of financial position for a nongovernmental not-for-profit organization, in which of the following locations are net assets reported?

a. after long-term liabilities

b. in the long-term asset section

c. after current assets

d. in the current asset section

a. after long-term liabilities

What is the primary purpose of the statement of activities of a nongovernmental not-for-profit organization?

a. to report the cash flow position of the entity for the period

b. to report the change in net assets for the period

c. to report the liquidity of the entity as of a specific date

d. to report assets, liabilities, and net assets as of a specific date

b. to report the change in net assets for the period

A statement of activities prepared by a nongovernmental not-for-profit organization is most similar to which of the following financial statements prepared by a for-profit entity?

a. income statement

b. balance sheet

c. statement of changes in stockholders’ equity

d. statement of cash flows

a. income statement

How should operating expenses for a nongovernmental not-for-profit organization be reported?

a. change in board designated net assets (for future expenditures)

b. change in net assets with donor restrictions

c. contra-account to associated revenues

d. change in net assets without donor restrictions

d. change in net assets without donor restrictions

A nongovernmental, not-for-profit entity should report a reclassification of net assets in its statement of activities if a donor:

a. withdraws previously imposed restrictions on a gift of cash

b. pledges equity stock for the purchase of equipment in two years

c. makes payment on an outstanding pledge

d. contributes cash for a perpetual endowment

a. withdraws previously imposed restrictions on a gift of cash

Which of the following statements about a nongovernmental not-for-profit organization's financial reporting is correct?

a. organizations are required to report expense information by functional and natural classification in a separate financial statement using a matrix format

b. organizations are required to report expenses by functional classification in the notes to financial statements

c. supporting services are activities other than program services

d. program service expenses include only direct costs relating to providing program services

c. supporting services are activities other than program services

The Jupiter Children's Center, a not-for-profit organization, receives State grants to fund its ongoing programming. Grants are annual contracts that are structured as cost reimbursement agreements requiring expenditure of grant funding before revenues are deemed to be earned. Assuming the Jupiter Children's Center expended all grant funds in accordance with program requirements, the center would likely record grant revenues as:

a. conditional revenue with donor restrictions

b. a refundable advance and a reclassification to support without donor restrictions

c. support (contribution revenue) without donor restrictions, provided that the center discloses and consistently applies this accounting policy

d. revenue with donor restrictions and a reclassification that decreases net assets with donor restrictions and increases net assets without donor restrictions

c. support (contribution revenue) without donor restrictions, provided that the center discloses and consistently applies this accounting policy

In the preparation of the statement of activities for a nongovernmental not-for-profit organization, all expenses are reported as decreases in which of the following net asset classes?

a. net assets without donor restrictions

b. board-designated net assets (for future expenditures)

c. net assets with donor restrictions

d. board-designated endowment funds

a. net assets without donor restrictions

Pann, a nongovernmental not-for-profit organization, provides food and shelter to the homeless. Pann received a $15,000 gift with the stipulation that the funds be used to buy beds. In which net asset class should Pann report the contribution?

a. endowment

b. with donor restrictions

c. board-designated net assets (for future expenditures)

d. without donor restrictions

b. with donor restrictions

Which of the following resources increases the net assets with donor restrictions of a nongovernmental, not-for-profit voluntary health and welfare organization?

a. membership fees to fund general operations

b. participants’ deposits for an entity-sponsored trip

c. donor contributions to fund a resident camp program

d. refundable advances for purchasing playground equipment

c. donor contributions to fund a resident camp program

A nongovernmental, not-for-profit organization provided the following data in regard to $500,000 of donations received during the year:

Purchase of investments to be held in perpetuity at the donor’s request	$100,000
Future repairs to the organization’s building and equipment at the donor’s request	250,000
General operations at the discretion of the board of directors	100,000
Specific program services as indicated by the donor	50,000

In order to properly reflect receipt of the donations, net assets should increase in the amount of:

a. $100,000 without donor restrictions and $400,000 with donor restrictions

b. $400,000 without donor restrictions and $100,000 with donor restrictions

c. $100,000 without donor restrictions, $300,000 board-designated net assets (for future expenditures), and $100,000 with donor restrictions

d. $150,000 without donor restrictions, $250,000 board-designated net assets (for future expenditures), and $100,000 with donor restrictions

a. $100,000 without donor restrictions and $400,000 with donor restrictions

A nongovernmental, not-for-profit entity calculated a $4,000 increase in net assets with donor restrictions for the current fiscal year before consideration of the following:

A cash donation designated by the donor as an endowment in perpetuity	$28,000
Net assets released from restrictions	12,000
A donation received that was designated as a quasi-endowment	21,000

Which of the following should be reported as the increase in net assets with donor restrictions in the current year statement of activities?

a. $37,000

b. $20,000

c. $41,000

d. $16,000

b. $20,000

Kind Nurses Assoc. is a voluntary health and welfare organization. Nurses are paid to visit homes of elderly people and are reimbursed for mileage and supplies. Which of the following items should Kind record as a support activity in its disclosure of functional expenses?

a. payment for nurses’ supplies

b. nurses’ mileage expense

c. payment for nurses’ employee benefits

d. fundraising costs

d. fundraising costs

Which of the following costs should a nongovernmental not-for-profit organization report as a supporting service expense?

a. printing cost incurred to create educational flyers on the prevention of illness

b. cost incurred to advertise the programs of the organization

c. cost for the annual fund-raising dinner

d. salary paid to a program director

c. cost for the annual fund-raising dinner

Cancer Educators, a not-for-profit organization, incurred costs of $10,000 when it combined program functions with fundraising functions. Which of the following cost allocations might Cancer report in its statement of activities?

		Program services	Fund raising	General services
	A.	$10,000	$0	$0
	B.	$6,000	$4,000	$0
	C.	$0	$6,000	$4,000
	D.	$0	$0	$10,000

b. $6,000, $4,000, $0

Arkin Corp. is a nongovernmental, not-for-profit organization involved in research. Arkin's expenses classification in the notes to the financial statements should classify which of the following as support services?

a. costs of laboratory supplies used in research

b. costs of equipment involved in research

c. salaries of fundraisers for funds used in research

d. salaries of staff researchers involved in research

c. salaries of fundraisers for funds used in research

Which of the following would a nongovernmental not-for-profit educational institution report as program services?

a. fundraising expenses

b. publicity costs

c. management salaries

d. teacher salaries

d. teacher salaries

Which of the following comprise functional expense categories for a nongovernmental not-for-profit organization?

a. membership development, professional fees, and program services

b. grant expenses, program services, and membership development

c. membership dues, fund-raising, and management and general

d. program services and support services

d. program services and support services

In a statement of activity of a voluntary health and welfare organization, depreciation expense should:

a. not be included

b. be included as an element of support

c. be included as an element of other changes in a statement of activity

d. be included as an element of expense

d. be included as an element of expense

In a not-for-profit organization, which of the following should be included in total expenses?

		Grants to other organizations	Depreciation
	A.	Yes	Yes
	B.	No	No
	C.	No	Yes
	D.	Yes	No

a. yes, yes

The Jackson Foundation, a not-for-profit organization, received contributions in Year 1 as follows:

• Cash contributions of $500,000 without donor restrictions.

• Cash contributions of $200,000 with donor restrictions with specific requirements relative to the acquisition of property.

Jackson's statement of cash flows in Year 1 should include which of the following amounts?

		Operating activities	Investing activities	Financing activities
	A.	$0	$500,000	$200,000
	B.	$500,000	$200,000	$0
	C.	$500,000	$0	$200,000
	D.	$700,000	$0	$0

c. $500,000, $0, $200,000

How should a nongovernmental, not-for-profit organization report amounts paid for interest in a statement of cash flows prepared using the indirect method?

a. as a cash flow from investing activities

b. as a cash flow from operating activities

c. as a supplemental disclosure of cash flow information

d. as a disclosure in the required supplemental information section of the financial statements

c. as a supplemental disclosure of cash flow information

Which of the following statements is correct regarding the statement of cash flows for a nongovernmental not-for-profit organization?

a. cash collected on contributions receivable is an investing activity

b. grants paid are operating activities

c. cash received from service recipients is a financing activity

d. cash paid to employees and suppliers is an investing activity

b. grants paid are operating activities

What is the primary purpose of the statement of cash flows for not-for-profit organizations?

a. to display cash flows from operating activities

b. to highlight the sources and uses of donor-restricted contributions

c. to reconcile the change in a not-for-profit’s net assets to its cash flows from operations

d. to provide relevant information about cash receipts and cash payments during a period

d. to provide relevant information about cash receipts and cash payments during a period

How many classifications may be used in a not-for-profit organization's statement of cash flows?

a. four

b. five

c. three

d. two

c. three

In preparing its statement of cash flows, a not-for-profit organization has the option of using which of the following methods/formats?

a. a not-for-profit organization has no options; it may only use the indirect method

b. a not-for-profit organization has no options; it may only use the direct method

c. a not-for-profit organization has the option of using either the direct or indirect method

d. not-for-profit organizations do not need to prepare a statement of cash flows

c. a not-for-profit organization has the option of using either the direct or indirect method

Although the statement of cash flows prepared for a not-for-profit organization is very similar to the statement of cash flows presented for a commercial entity, there are several significant differences. Which of the following statements describes an important difference between commercial and not-for-profit statements of cash flows?

a. the statement of cash flows for a not-for-profit organization does not comprehensively report the change in all cash and cash equivalents, only those without donor restrictions

b. the statement of cash flows for a not-for-profit organization will strictly define cash as cash on deposit and excludes cash equivalents

c. not-for-profit organizations electing to prepare their statement of cash flows using the direct method are not required to provide a supplementary reconciliation of change in net assets to cash flows from operations

d. not-for-profit organizations must use the direct method for the preparation of their statement of cash flows

c. not-for-profit organizations electing to prepare their statement of cash flows using the direct method are not required to provide a supplementary reconciliation of change in net assets to cash flows from operations

A cash contribution without donor restrictions should be reported in a nongovernmental not-for-profit organization's statement of cash flows as an inflow from:

a. financing activities

b. operating activities

c. investing activities

d. capital and related financing activities

b. operating activities

During the current year, as part of its fundraising efforts, a non-governmental, not-for-profit entity collected $10,000 on behalf of other third-party entities and distributed $3,000 to those entities. If the non-governmental, not-for-profit entity uses the indirect method to calculate its statement of cash flows, how would these agency transactions appropriately be presented?

a. as a $7,000 decrease to net cash provided by operating activities

b. as a $7,000 increase to net cash provided by operating activities

c. as a $7,000 increase to net cash provided by investing activities

d. as a $7,000 decrease to net cash provided by investing activities

b. as a $7,000 increase to net cash provided by operating activities

The Sunriss Foundation, Inc., a not-for-profit organization, received a contribution without donor restrictions in January, Year 1. At their February Year 1 meeting, the board of directors restricted the proceeds of the contribution to the purchase of equipment. How should the contribution be classified on the Sunriss Foundation’s statement of cash flows?

a. a non-cash transaction

b. investing activity

c. financing activity

d. operating activity

d. operating activity

Feelwell Hospital, Inc., a not-for-profit organization, received a refund from its pharmaceutical supplier. How would this refund activity be classified in Feelwell’s statement of cash flows?

a. operating activity

b. extraordinary activity

c. financing activity

d. investing activity

a. operating activity

Famous, a nongovernmental not-for-profit art museum, has elected not to capitalize its donated permanent collections. In Year 1, a bronze statue was stolen. The statue was not recovered and insurance proceeds of $35,000 were paid to Famous in Year 2. This transaction would be reported in:

I. the statement of activities as revenues without donor restrictions

II. the statement of cash flows as cash flows from investing activities

a. both I and II

b. I only

c. neither I nor II

d. II only

d. II only

A not-for-profit voluntary health and welfare organization should report a contribution for the construction of a new building as cash flows from which of the following in the statement of cash flows?

a. investing activities

b. operating activities

c. financing activities

d. capital financing activities

c. financing activities

The Appleton Museum, a not-for-profit organization, sells a painting donated to its collection to a private investor. The museum plans to use the proceeds associated with the sale to purchase additional works of art for display. In its statement of cash flows, the museum typically would display proceeds from the sale as cash flows from:

a. investing activities

b. financing activities

c. operating activities

d. donor-restricted resources, which are not displayed on the face of the statement of cash flows

a. investing activities

A nongovernmental not-for-profit organization borrowed $5,000, which it used to purchase a truck. In which section of the organization's statement of cash flows should the transaction be reported?

a. in cash inflow from operating activities and cash outflow from investing activities

b. in cash inflow from financing activities and cash outflow from investing activities

c. in cash inflow and cash outflow from financing activities

d. in cash inflow and cash outflow from investing activities

b. in cash inflow from financing activities and cash outflow from investing activities

Box, a nongovernmental not-for-profit organization, had the following transactions during the year:

Proceeds from sale of investments	$  80,000
Purchase of property, plant, and equipment	$  10,000
Proceeds from long-term debt	$100,000
Loss on sale of investment	$    5,000

What amount should be reported as net cash provided by financing activities in Box's statement of cash flows?

a. $70,000

b. $100,000

c. $80,000

d. $75,000

b. $100,000

Biscuitworks Charities, a not-for-profit organization, received a contribution of crypto assets with donor restrictions that stipulated those assets be used for the construction of a new research facility. Biscuitworks Charities converted them to cash within two days. How would Biscuitworks Charities classify this receipt on its statement of cash flows?

a. financing activity

b. investing activity

c. noncash activity

d. operating activity

a. financing activity

The Gauldie Museum, a not-for-profit organization, sold artwork that was received as a donation in the previous year. How would the museum classify the cash received from this transaction in its statement of cash flows?

a. investing activity

b. special activity

c. operating activity

d. financing activity

a. investing activity

The Limerack not-for-profit corporation routinely invests idle cash without donor restriction in short-term treasury bills with an original maturity of less than three months. How would proceeds from the sale of these short-term treasury bills be classified?

a. not required to be reported

b. operating activity

c. investing activity

d. financing activity

a. not required to be reported

The Mariguild Corporation, a not-for-profit organization, received a donor-restricted donation for the construction of a research facility and issued bonds for the construction of a general administration building in Year 1. How would the Mariguild Corporation most likely treat these transactions as it prepares its Year 1 statement of cash flow?

a. exclusively show only debt proceeds within the financing activities classification

b. combine both donor-restricted funds and debt proceeds in the financing activities classification

c. separate donor-restricted contributions and debt proceeds within the financing activities classification

d. exclusively show only donor-restricted contributions for capital projects within the financing activities classification

c. separate donor-restricted contributions and debt proceeds within the financing activities classification

Which of the following noncash transactions must be disclosed in the statement of cash flows of a not-for-profit organization?

a. accrued interest expense

b. contributed securities

c. annual amortization of bond premium

d. monthly depreciation expense

b. contributed securities

What treatment is required for transfers among cash, cash equivalents, and restricted amounts on the statement of cash flows of a not-for-profit organization?

a. classification as a financing activity

b. excluded form the activity reported on the statement of cash flows

c. classification as an investing activity

d. classification as an operating activity

b. excluded form the activity reported on the statement of cash flows

The Dexter Soup Kitchen, Inc., a not-for-profit organization, elects to use the direct method to prepare its statement of cash flows. As a result of their election to use the direct method, Dexter will:

a. present both direct and indirect methods

b. include a supplemental disclosure of noncash transactions

c. show gross receipts by major class

d. provide a reconciliation of change in net assets to net cash flows form operating activities

c. show gross receipts by major class

Zokro, a nongovernmental not-for-profit organization, uses the indirect method to prepare its statement of cash flows. In determining its net cash provided (used) by operating activities, Zokro must add back which of the following to the change in net assets?

a. depreciation

b. payment on long-term debt

c. decrease in accounts payable

d. purchase of equipment

a. depreciation

Pica, a nongovernmental not-for-profit organization, received unconditional promises of $100,000 expected to be collected within one year. Pica received $10,000 prior to year-end. Pica anticipates collecting 90 percent of the contributions and has a June 30 fiscal year-end. What amount should Pica record as contribution revenue as of June 30?

a. $10,000

b. $80,000

c. $90,000

d. $100,000

c. $90,000

During Year 7, Jones Foundation received the following support:

• A cash contribution of $875,000 to be used at the board of directors' discretion

• A promise to contribute $500,000 in Year 8 from a supporter who has made similar contributions in prior periods

• Contributed legal services with a value of $100,000, which Jones would have otherwise purchased

At what amounts would Jones classify and record these transactions?

		Revenues and Gains Without Donor Restrictions	Revenues and Gains With Donor Restrictions
	A.	$975,000	$500,000
	B.	$975,000	$0
	C.	$875,000	$500,000
	D.	$1,375,000	$0

a. $975,000, $500,000

Hospital Inc., a not-for-profit organization with no governmental affiliation, reported the following in its accounts for the current year ended December 31:

Gross patient service revenue from all services provided at the established billing rates of the hospital (note that this figure includes charity care of $25,000)	$775,000
Provision for credit losses	15,000
Difference between established billing rates and fees negotiated with third-party payors (contractual adjustments)	70,000

What amount would the hospital report as net patient service revenue in its statement of activities for the current year ended December 31?

a. $690,000

b. $735,000

c. $680,000

d. $705,000

c. $680,000

In its fiscal year ended June 30, Year 1, Barr College, a large, private institution, received $100,000 designated by the donor for scholarships for superior students. On July 26, Year 1, Barr selected the students and awarded the scholarships. How should the July 26 transaction be reported in Barr's statement of activities for the year ended June 30, Year 2?

a. as a decrease only in net assets without donor restrictions

b. by footnote disclosure only

c. as both an increase and a decrease of $100,000 in net assets without donor restrictions

d. not reported

c. as both an increase and a decrease of $100,000 in net assets without donor restrictions

A not-for-profit organization receives $150 from a donor. The donor receives two tickets to a theater show and an acknowledgment in the theater program. The tickets have a fair value of $100. What amount is recorded as contribution revenue?

a. $50

b. $100

c. $0

d. $150

a. $50

In April of Year 1, Delta Hospital purchased medicines from Field Pharmaceutical Co. at a cost of $5,000. However, Field notified Delta that the invoice was being canceled and that the medicines were being donated to Delta. Delta should record this donation of medicines as:

a. a memorandum entry only

b. other operating revenue

c. a $5,000 credit to operating expenses

d. a $5,000 credit to nonoperating expenses

b. other operating revenue

Measurable performance-related barriers that are typically indicative of conditions attached to promises (pledges) or resources received by a not-for-profit organization would include which of the following?

a. administratie reporting requirements

b. entitlement to assets contingent upon the achievement of producing specific outputs or measurable outcomes

c. donor restrictions relative to uses of transferred assets

d. a right of return of contributed resources or release of the promisor from any obligation

b. entitlement to assets contingent upon the achievement of producing specific outputs or measurable outcomes

Contribution revenue recognition for not-for-profit organizations is based on the concept of:

a. meeting performance obligations

b. qualifying under time requirements

c. satisfying restrictions

d. satisfying conditions

d. satisfying conditions

Oz, a non-governmental not-for-profit organization, received $50,000 from Ame Company to sponsor a play given by Oz at the local theater. Oz gave Ame 25 tickets, which generally cost $100 each. Ame received no other benefits. What amount of ticket sales revenue should Oz record?

a. $50,000

b. $0

c. $47,500

d. $2,500

d. $2,500

State University received two contributions during the year that must be used to provide scholarships. Contribution A for $10,000 was collected during the year, and $8,000 was spent on scholarships. Contribution B is a pledge for $30,000 to be received next fiscal year. What amount of contribution revenue should the university report in its statement of activities?

a. $10,000

b. $38,000

c. $40,000

d. $8,000

c. $40,000

Altruistic University, a not-for-profit research university, conducts cancer research as part of its normal ongoing activities and regularly receives contributions to support these efforts. Experimental Pharmaceuticals Corporation, a large for profit corporation that markets drugs for cancer treatment, provides resources to Altruistic University to perform clinical trial research on an experimental drug to treat cancer. Resources are provided on the condition that Altruistic University comply with strict specifications governing the manner in which the research is conducted and the frequency and the character of outcome reports. Altruistic University should account for the resources provided by Experimental Pharmaceuticals as:

a. a contribution that increases net assets without donor restrictions provided the restrictions are met in the current year and the university uniformly applies this method of recognition to all similar transactions

b. a contribution that increases net assets with donor restrictions and reclassified as an increase to net assets without donor restrictions upon satisfaction of research and reporting restrictions

c. a contribution that increases board-designated restricted net assets (for future research expenditures)

d. an exchange transaction that increases net assets without donor restrictions

d. an exchange transaction that increases net assets without donor restrictions

Child Care Centers, Inc., a not-for-profit organization, receives revenue from various sources during the year to support its day care centers. The following cash amounts were received during Year 1.

• $2,000 restricted by the donor to be used for meals for the children.

• $1,500 received for subscriptions to a monthly child care magazine with a fair market value to subscribers of $1,000.

• $10,000 to be used only upon completion of a new playroom that was 75 percent complete at December 31, Year 1.

What amount should Child Care Centers record as contribution revenue in its Year 1 statement of activities?

a. $11,000

b. $10,000

c. $2,000

d. $2,500

d. $2,500

A storm damaged the roof of a new building owned by K-9 Shelters, a not-for-profit organization. A supporter of K-9, a professional roofer, made required minor repairs to the roof at no charge. In K-9's statement of activities, the damage and repair of the roof should:

a. be reported by note disclosure only

b. not be reported

c. be reported as an increase in both expenses and contributions

d. be reported as an increase in both net assets and contributions

c. be reported as an increase in both expenses and contributions

Whitestone, a nongovernmental not-for-profit organization, received a contribution in December, Year 1. The donor restricted use of the contribution until March, Year 2. How should Whitestone record the contribution?

a. report as income in Year 1

b. report as deferred income in Year 1

c. footnote the contribution in Year 1 and record as income when it becomes available in Year 2

d. no entry required in Year 1 and record as income in Year 2 when it becomes available

a. report as income in Year 1

Pahn, a nongovernmental not-for-profit organization, received an unconditional pledge of $50,000. The donor stipulated that the pledge must be used in the next fiscal year. Pahn received and spent the $50,000 in the next year. For the current fiscal year, what element of Pahn's statement of financial position will increase as a result of the unconditional pledge?

a. support without donor restrictions

b cash and cash equivalents

c. pledge receivables

d. deferred contributions

c. pledge receivables

The Community Services corporation is a private nongovernmental, not-for-profit organization that received a $1,000,000 federal grant for the improvement of after-school programming in blighted neighborhoods. The grant is structured as a cost reimbursement agreement that compensates Community Services in amounts equal to eligible expenses defined by federal cost principles. By the end of Year 1, Community Services had incurred $400,000 in eligible expenses. As a result of this activity, what classifications of revenues and expenses will Community Services report?

 

		Revenues		Expenses
		Without Donor Restrictions	With Donor Restrictions	Without Donor Restrictions	With Donor Restrictions
	A.	$0	$1,000,000	$400,000	$0
	B.	$0	$1,000,000	$0	$400,000
	C.	$400,000	$600,000	$0	$400,000
	D.	$0	$400,000	$400,000	$0

d $0, $400,000, $400,000, $0

The Community Services corporation is a private nongovernmental, not-for-profit organization that received a $1,000,000 private donation for the improvement of after-school programming in blighted neighborhoods. The donor requires an administrative report of program accomplishments once funds are fully expended. By the end of Year 1, Community Services had incurred $400,000 in program expenses. As a result of this activity, what classifications of revenues and expenses will Community Services report?

 

		Revenues		Expenses
		Without Donor Restrictions	With Donor Restrictions	Without Donor Restrictions	With Donor Restrictions
	A.	$0	$1,000,000	$0	$400,000
	B.	$0	$400,000	$400,000	$0
	C.	$400,000	$600,000	$0	$400,000
	D.	$0	$1,000,000	$400,000	$0

d. $0, $1,000,000, $400,000, $0

The Flamingo Animal Shelter, a nongovernmental not-for-profit organization, received a $500,000 challenge grant from a donor who promised to pay $5.00 for every $1.00 raised by the animal shelter during its spring fundraising appeal. Unmatched challenge grant funds promised by the donor would be forfeited at the end of the appeal. The animal shelter has successfully raised more than $100,000 in most years and is confident that it will meet the fundraising challenge. As a result of the donorʹs promise, how much revenue should the animal shelter record?

a. $500,000 in revenue with donor restriction and $100,000 in revenue without donor restriction

b. $0 revenue

c. $500,000 in revenue without donor restriction

d. $600,000 in revenue without donor restriction

b. $0 revenue

The Community Foundation, a nongovernmental not-for-profit organization, provides community grants restricted for use on a variety of community projects to benefit not-for-profit organizations. Grants presume that recipient not-for-profit organizations have the expertise to carry out the purpose of the funding. The Foundation includes a right of return and right of release from obligation in its agreements as a matter of policy and standard wording, but no other stipulation beyond the restriction of the grant itself. Not-for-profit organizations receiving Foundation grants would record the grants as which of the following?

a. conditional revenue

b. no revenue recognition subject to resolution of conditions

c. contribution with donor restriction

d. contribution revenue without donor restriction

c. contribution with donor restriction

Terry, an auditor, is performing test work for a not-for-profit hospital. Listed below are components of the statement of activities:

Revenue relating to charity care	$100,000
Credit loss expense associated with accounts assessed for collectibility	70,000
Net assets released from restrictions used for operations	50,000
Other revenue	80,000
Patient service revenue (includes revenue related to charity care)	500,000

What amount would be reported as revenues, gains, and other support without donor restrictions on the statement of activities?

a. $580,000

b. $630,000

c. $530,000

d. $460,000

c. $530,000

Gridiron University is a private university. A successful alumnus has recently donated $1,000,000 to Gridiron for the purpose of funding a "center for the study of sports ethics." This donation is conditional upon the university raising matching funds within the next 12 months. The university administrators estimate that they have a 50 percent chance of raising the additional money. How should this donation be accounted for?

a. as a memorandum entry reported in the footnotes

b. as support with donor restrictions

c. as support without donor restrictions

d. as a refundable advance

d. as a refundable advance

How should unconditional pledges received by a nongovernmental not-for-profit organization that will be collected over more than one year be reported?

a. long-term pledges receivable, valued at the expected collection amount

b. pledges receivable, valued at the amount pledged

c. pledges receivable, valued at their present values

d. deferred revenue, valued at present value

c. pledges receivable, valued at their present values

Community Enhancers, a nongovernmental not-for-profit organization, received the following pledges:

Without donor restrictions	$400,000
With donor restrictions for capital additions	300,000

All pledges are legally enforceable. However, Community's experience indicates that 5% of all pledges prove to be uncollectible. What amount should Community report as pledges receivable, net of any required allowance account?

a. $380,000

b. $700,000

c. $665,000

d. $285,000

c. $665,000

The Turtle Society, a nongovernmental not-for-profit organization, receives numerous contributed hours from volunteers during its busy season. Chris, a clerk at the local tax collector's office, volunteered ten hours per week for 24 weeks transferring turtle food from the port to the turtle shelter. This task typically is handled in the normal course of business at no charge to the Society and, consequently, no resources have been budgeted for service, but Chris' help has been accepted. His rate of pay at the tax office is $10 per hour, and the prevailing wage rate for laborers is $6.50 per hour. What amount of contribution revenue should Turtle Society record for this service?

a. $2,400

b. 840

c. $0

d. $1,560

c. $0

Lea Meditators, a not-for-profit religious organization, suffered damages when a storm broke glass windows in Lea's building. A member of Lea's congregation, a professional glazier, replaced the windows at no charge. In Lea's statement of activities, the breakage and replacement of the windows should:

a. not be reported

b. be reported by note disclosure only

c. be reported as an increase in both net assets and contributions

d. be reported as an increase in both expenses and contributions

d. be reported as an increase in both expenses and contributions

Super Seniors is a not-for-profit organization that provides services to senior citizens. Super employs a full-time staff of 10 people at an annual cost of $150,000. In addition, two volunteers work as part-time secretaries replacing last year's full-time secretary who earned $10,000. Services performed by other volunteers for special events had an estimated value of $15,000. These volunteers were employees of local businesses and they received small-value items for their participation. What amount should Super report for salary and wage expenses related to the above items?

a. $175,000

b. $150,000

c. $160,000

d. $165,000

c. $160,000

A nongovernmental not-for-profit animal shelter receives contributed services from the following individuals valued at their normal billing rate:

Veterinarian provides volunteer animal care	$8,000
Board member (a CPA) volunteers to prepare books for audit	4,500
Registered nurse volunteers as an extra receptionist	3,000
Teacher provides volunteer dog walking	2,000

What amount should the shelter record as contribution revenue?

a. $14,500

b. $11,000

c. $8,000

d. $12,500

d. $12,500

A storm damaged the roof of a nongovernmental, not-for-profit organization’s building. A professional roofer repaired the roof at no charge. How should the roof repairs be recognized in the statement of activities?

a. as an increase in fixed assets and an increase in contributions from donated services

b. no recognition is required in the financial statements, but a note disclosure is required

c. as an increase in the building account and an increase in net assets without donor restrictions

d. as an increase in expenses and an increase in contributions from donated services

d. as an increase in expenses and an increase in contributions from donated services

A not-for-profit organization is exempt from reporting which of the following contributed services as revenue?

a. a carpenter builds shelves for the office

b. a special education teacher tutors children with learning disabilities

c. an attorney solicits contributions on behalf of the organization

d. a CPA prepares the organization’s tax return

c. an attorney solicits contributions on behalf of the organization

In the current year a nongovernmental, not-for-profit entity incurred $630,000 in expenditures exclusive of in-kind and other nonmonetary activity during the year. It also received donated legal services, which otherwise would have cost $40,000, and consumed donated supplies with a value of $15,000. What should the entity report as total expenses in its statement of activities for the current year?

a. $630,000

b. $685,000

c. $645,000

d. $670,000

b. $685,000

On December 31, Year 1, the trial balance for a nongovernmental, not-for-profit entity includes $2,200,000 of assets before considering the following:

• On May 1, Year 1, a donor contributed to the entity a painting with a fair value of $350,000. The entity determined that the painting qualifies for held-for-sale accounting treatment.

• On July 15, Year 1, a donor transferred to the entity historical artifacts with a fair value of $225,000. The artifacts were placed in the entity's library as a named collection for use by students in its archeology lab.

If the entity's policy is not to capitalize collections in its financial statements, what amount should be reported as total assets in the December 31, Year 1, statement of financial position?

a. $2,200,000

b. $2,550,000

c. $2,424,000

d. $2,775,000

b. $2,550,000

The Jasper Foundation, Inc., a not-for-profit organization, operates from a building it owns in Knoble Knob Hamlet. The holding company of the Knoble Knob Electric Authority contributes power service to the Jasper Foundation. Jasper Foundation would display or disclose the contributed utilities as:

a. revenue and expense in the period received and used at fair value

b. revenue and expense in the period received and used at cost

c. disclosure only relative to donated service with no valuation

d. disclosure only relative to donated service valued at donor cost

a. revenue and expense in the period received and used at fair value

A not-for-profit organization received a donation of an acre of land on June 12, Year 1. The donor’s basis in the land was $10,000. The fair value of the land at the date of donation was $15,000. The land is monetized by the organization on December 15, Year 2, for $20,000. What amount of contribution is recognized in the Statement of Activities in Year 1?

a. $20,000

b. $0

c. $15,000

d. $10,000

c. $15,000

A not-for-profit organization received a donation of an acre of land on June 12, Year 1. The donor’s basis in the land was $10,000. The fair value of the land at the date of donation was $15,000. The land is monetized by the organization on December 15, Year 2, for $20,000. What amount of contribution is recognized in the Statement of Activities in Year 2?

a. $15,000

b. $20,000

c. $5,000

d. $10,000

c. $5,000

On a nongovernmental, not-for-profit entity's statements of activities, which of the following amounts should not be netted together under any circumstances?

a. revenues and expenditures from the sale of used equipment

b. revenues and expenditures from an annual fundraising event representing a major source of revenue

c. gains and losses from exchange rates or other foreign currency translations

d. investment income, custodial fees, and other advirosry expenditures

b. revenues and expenditures from an annual fundraising event representing a major source of revenue

Azim Services, a nongovernmental, not-for-profit organization, received dues of $100 from its members. Azim provided its members with a newsletter that had a $25 value. All other services were valued at $10 per member. What is the amount of contribution made to Azim by each member?

a. $25

b. $100

c. $65

d. $10

c. $65

For the fall semester of Year 1, Ames University assessed its students $3,000,000 for tuition and fees. The net amount realized was only $2,500,000 because scholarships of $400,000 were granted to students, and tuition remissions of $100,000 were allowed to faculty members' children attending Ames. What amount should Ames report for the period as gross revenues from tuition and fees?

a. $2,600,000

b. $2,500,000

c. $3,000,000

d. $2,900,000

c. $3,000,000

State University assessed its students' tuition and fees totaling $50,000,000 for the year ended June 30. However, its net cash collections were only $42,000,000 as a result of the following reductions:

Scholarship, tuition remission, and fellowship	6,500,000
Tuition refunds	1,500,000

In this situation, revenue without donor restrictions from tuition and fees for the year ended June 30 for State University will be reported at:

a. $48,500,000

b. $50,000,000

c. $43,500,000

d. $42,000,000

a. $48,500,000

Which of the following should normally be considered ongoing or central transactions for a not-for-profit hospital?

I. room and board fees from patients

II. recovery room fees

a. II only

b. I only

c. both I and II

d. neither I nor II

c. both I and II

Which of the following normally would be included in other operating revenues of a hospital?

		Revenue from educational programs	Gifts without donor restrictions
	A.	Yes	No
	B.	Yes	Yes
	C.	No	Yes
	D.	No	No

a. yes, no

Valley's community hospital normally includes proceeds from sale of cafeteria meals in:

a. ancillary service revenues

b. patient service revenues

c. deductions from dietary service expenses

d. other revenues

d. other revenues