ch 12 – Flashcards

1. The basis of accounting used by not-for-profit organizations in their external financial reports is a) Industry-specific basis of accounting. b) Cash basis of accounting. c) Modified accrual basis of accounting. d) Accrual basis of accounting

2. FASB require the balance sheets of not-for-profits to display a) Net assets in four separate categories—unrestricted, temporarily restricted, permanently restricted, and restricted by creditors. b) Three separate funds—unrestricted, temporarily restricted, and permanently restricted net assets. c) Six totals—total assets, total liabilities, total net assets, total unrestricted net assets, total temporarily restricted net assets, and total permanently restricted net assets. d) Unrestricted, temporarily restricted, and permanently restricted retained earnings.

3. FASB requires external financial reports to provide information about a) Donor-imposed restrictions on resources. b) All restrictions on resources. c) Donor and creditor restrictions on resources. d) None of the above

4. Expenses incurred by not-for-profit organizations should be reported as a) Decreases in one of the three categories of net assets. b) Decreases in unrestricted net assets. c) Decreases in temporarily restricted net assets. d) Decreases in permanently restricted net assets

5. Revenues of a not-for-profit organization should be reported as a) Increases in one of the three categories of net assets. b) Increases in unrestricted net assets. c) Increases in temporarily restricted net assets. d) Increases in permanently restricted net assets

6. Restricted gifts to not-for-profit organizations a) Must always be shown as an increase in restricted net assets. b) Must always be shown as an increase in unrestricted net assets. c) May be shown as an increase in unrestricted net assets if the restriction is met in the same period. d) May be shown as an increase in unrestricted net assets at the discretion of management

7. The account title "Resources Released from Restriction" is reported by a 'restricted fund' as a a) Revenue account. b) Contra-revenue account. c) Expense account. d) Contra-expense account

8. The account title "Resources Released from Restriction" is reported by an unrestricted "fund" as a a) Revenue account. b) Contra-revenue account. c) Expense account. d) Contra-expense account

9. FASB requires that all not-for-profit organizations report expenses a) By object. b) By function. c) By natural classification. d) By budget code

10. The National Association for the Preservation of Wildlife received $10,000 from a benefactor to support the overall objective of the organization. This amount will be recognized as revenue a) In the period received. b) In the period spent. c) Never, because it is not earned. d) In the period it becomes susceptible to accrual

11. Not-for-profit organizations report their cash flows in which of the following categories? a) Operating, noncapital financing, capital financing, investing. b) Operating, noncapital financing, investing. c) Operating, capital financing, investing. d) Operating, financing, investing

12. Not-for-profit organizations should report contributions restricted for long-term purposes in which of the following cash flows categories? a) Operating b) Financing. c) Capital financing. d) Investing

13. Not-for-profit organizations should report interest and dividends earned and restricted for long-term purposes in which of the following cash flows categories? a) Operating b) Financing. c) Capital financing. d) Investing

14. The characteristic that most clearly distinguishes a contribution from an exchange transaction is which of the following? a) Cash is always received. b) An exchange transaction is a reciprocal transfer of resources. c) An exchange transaction is a nonreciprocal transfer of assets. d) There are always restrictions attached to use of the assets received as a result of a contribution

15. Revenue from an exchange transaction may be classified as an increase in which class of net assets? a) Unrestricted net assets. b) Temporarily restricted net assets. c) Permanently restricted net assets. d) Any of the above

16. During the annual fundraising drive, the Cancer Society raised $900,000 in pledges of financial support for their general operations. By the fiscal year-end, the Society had collected $600,000 of the pledges. The Society estimates that 10% of the remaining pledges will be uncollectible. The NET amount of revenue the Society should recognize during the current year from this pledge drive is a) $900,000. b) $870,000. c) $810,000. d) $600,000

17. The increase in unrestricted net assets in 2010 as a result of the fund raising drive is a) $1,200,000. b) $1,050,000. c) $800,000. d) $250,000

18. The increase in temporarily restricted net assets in 2010 as a result of the fundraising drive is a) $1,200,000. b) $1,050,000. c) $800,000. d) $250,000

19. In 2011, the change in temporarily restricted net assets is a) $0 b) $200,000 decrease. c) $200,000 increase. d) $1,000,000 decrease

20. In 2011, the change in unrestricted net assets is a) $0 b) $200,000 increase. c) $200,000 decrease. d) $1,000,000 increase

21. In a prior year, United Charities received a $125,000 gift to be used to acquire vans to provide transportation for physically challenged adults. During the current year, United acquired two vans at a cost of $75,000 each. The appropriate entry(ies) to record the acquisition should be a) UNRESTRICTED FUND Resources released from restriction $125,00 Cash $125,000 RESTRICTED FUND Fixed assets $150,000 Cash $ 25,000 Resources released from restriction $125,000 b) RESTRICTED FUND Resources released from restriction $ 125,000 Cash $125,000 UNRESTRICTED FUND Fixed assets $150,000 Resources released from restriction $125,000 Cash $ 25,000 c) UNRESTRICTED FUND Fixed assets $150,000 Cash $150,000 d) RESTRICTED FUND Fixed assets $150,000 Cash $150,000

22. In the current year National Pet Charities, which uses fund-type accounting to maintain its books and records, received a $30,000 contribution to help educate people on responsible pet ownership. During the current year, the entry to record this donation is a) UNRESTRICTED FUND. No entry. RESTRICTED FUND. Debit Cash $30,000; Credit Revenues $30,000. b) UNRESTRICTED FUND. No entry. RESTRICTED FUND. Debit Cash $30,000; Credit Net assets $30,000. c) UNRESTICTED FUND. Debit Cash $30,000; Credit Revenues $30,000. RESTRICTED FUND. No entry. d) UNRESTRICTED FUND. Debit Cash $30,000; Credit Net assets $30,000. RESTRICTED FUND. No entry

23. During the current year a not-for-profit entity received a contribution of $100,000 to use for scholarships. In the current year the entity had already budgeted $400,000 for scholarships. During the current year, the entity disbursed $350,000 for scholarships. The amount the entity can consider as 'released from restriction' in the current year is a) $0. b) $100,000. c) $350,000. d) $400,000

24. Grace Church, a not-for-profit entity, operates a school in connection with the Church. This year members of the Church decided to construct a new wing on the school with six classrooms. The Church hired an architect and a construction supervisor. The bulk of the labor for construction was donated by Church members who were willing workers but not necessarily skilled carpenters. Materials for the construction cost $600,000 and the paid labor was $200,000. The fair value of the completed building is $2 million. When the building is completed what should be the balance in the asset account "Building" and the account "Contributed Revenue"? a) Building $800,000; Contributed Revenue $0. b) Building $800,000; Contributed Revenue $1,200,000. c) Building $2 million; Contributed Revenue $1,200,000. d) Building $2 million; Contributed Revenue $0

25. Mary's Extended Care Center, a not-for-profit entity, enjoys the services of a group of high school age people who each agree to work three afternoons a week for three hours each afternoon performing a variety of patient-related services such as writing letters for those who are unable to do so, delivering mail to the patient rooms, and pushing wheel-chair patients across the grounds. The services rendered by these young people enhance the quality of life for the residents. They could not be provided if they were not donated because there are not enough resources to do so. The past year the young people donated 5000 hours in total. The services would have cost $6.00 per hour if they had been purchased but they were worth $10 an hour to St. Mary's. What is the amount of contributed revenue that should be recognized by St. Mary's related to these services? a) $50,000. b) $30,000 c) $0. d) Cannot determine

26. Simplex Games, a not-for-profit entity organized to provide athletic competition opportunities for high school students, utilizes a number of volunteers in carrying out its mission. At the 2011 Games 50 volunteers provided a total of 1000 hours of service performing tasks such as picking up litter and delivering water to the athletes. A local CPA firm donates its services to prepare the annual tax return and other federal and state required paperwork which must be filed to maintain its status as a tax-exempt organization. During 2011 the CPA firm provided 50 hours of service. If purchased, the CPA services would have cost $60 per hour and the game workers would have cost $6 per hour. How much contributed service revenue should Simplex Games recognize in 2011? a) $9,000. b) $6,000. c) $3,000. d) $0.

27. A not-for-profit Art Museum that has elected not to capitalize its art collection receives a donation of a rare piece of Tlinket Indian art. The donor paid $8,000 for the piece several years ago. Today the piece has an estimated fair value of $50,000. What entry should the Art Museum make upon receipt of this donation? a) Debit Collection items $50,000; Credit Donated revenue $50,000. b) Debit Collection items $8,000; Credit Donated revenue $8,000. c) Debit Collection items $50,000; Credit Unrestricted net assets $50,000. d) No entry required

28. Greene County Historical museum, a not-for-profit entity that capitalizes its collection items, received a gift of several Civil War artifacts to be used for display and research. The donor found these items while cleaning out the closet of an old house. The fair value is hard to estimate but a dealer in these types of artifacts estimates their value at $2,000. The entry to record this donation is a) Debit Collection expense, $2,000; Credit Contributions revenue $2,000. b) Debit Collection items $2,000; Credit Contributions revenue $2,000. c) No entry is required because the cost to the donor was $0. d) No entry required because the value of the items is estimated

29. Native Art Museum, a not-for-profit entity that elects not to capitalize its collection items, purchased for $10,000 a wonderful totem pole for display near the door of the Museum. As a result of this transaction, which of the following entries should be made? a) Debit Collection items $10,000; Credit Cash $10,000. b) Debit Collection expense $10,000; Credit Cash $10,000. c) Debit Unrestricted net assets $10,000; Credit Cash $10,000. d) No entry is required

30. The Nature Conservatory, a not-for-profit entity, engaged in a fundraising drive to raise money to buy land to provide a habitat for the endangered Sleepy Eagle. A donor pledged $1 million to the project provided that the Nature Conservatory was able to raise an additional $1.5 million from other sources. What entry should the Nature Conservatory make at the time of the $1 million pledge? a) Debit Pledge receivable $1 million; Credit Unrestricted revenue $1 million. b) Debit Pledges receivable $1 million; Credit Temporarily restricted revenue $1 million. c) Debit Pledges receivable $1 million; Credit Temporarily restricted net assets $1 million. d) No entry is made at the time of the pledge

31. When should a not-for-profit entity recognize pledge revenue that is contingent upon raising a matching amount? a) When the pledge is made. b) When the cash is received. c) When the matching funds have been raised. d) When the project is completed

32. A donor pledges $100,000 to the Shakespeare Foundation to be used only to support the summer Shakespeare Theater—an event that has been held every summer for 38 years. This is an example of a a) Conditional Contribution. b) Unconditional contribution. c) Restricted contribution. d) Unrestricted contribution

33. United Charities accepted a contribution from a donor and agreed to transfer the assets to Aid for Friends, a not-for-profit that provides temporary shelter to the homeless. United Charities should debit cash or other assets and credit a) Unrestricted revenue. b) Temporarily restricted revenue. c) Liability to Aid for Friends. d) United Charities should not make an entry

34. Music Lovers Foundation, a not-for-profit governed by an independent board, was founded to support the Northern State University Choir until such time as the state legislature shall adequately fund the choir. When the Choir is adequately funded by appropriation the Foundation may direct resources to other music projects that it deems acceptable. When Music Lovers accepts a contribution from a donor it should debit cash and/or other assets and credit a) Unrestricted revenue. b) Temporarily restricted revenue. c) Liability. d) It should not make an entry

35. The Save the Animals Foundation received a gift of $500,000 from a donor who wanted the gift used to acquire habitat for endangered snails. The money may be invested but all earnings are restricted to habitat acquisition. During the year the entire gift was invested in corporate securities. At year-end, the securities had a value of $501,000. The appropriate way to recognize the change in fair value is a) Debit Investments $1,000; Credit Unrestricted revenue $1,000. b) Debit Investments $1,000; Credit Temporarily restricted revenue $1,000. c) Debit Investments $1,000; Credit Permanently restricted revenue $1,000. d) No entry should be made until the securities are sold.

36. During the year, a not-for-profit entity received $30,000 in dividends and $24,000 in interest on its investment portfolio. The entity also accrued $6,000 in interest on the portfolio. The increase in fair value of the portfolio during the year was $8,000. How much should the entity report for investment earnings during the year? a) $62,000. b) $54,000. c) $8,000. d) $0

37. The Friends of the Library (FOL), a not-for-profit entity, received a gift restricted to acquisition of a special piece of the equipment used to restore books. Late last year FOL acquired the machine at a total cost of $19,000. The machine is estimated to have a useful life of eight years and a salvage value of $3,000. In what fund should FOL make the entry to record the depreciation for the current year? a) Unrestricted fund. b) Temporarily restricted fund. c) Permanently restricted fund. d) FOL should not recognize depreciation

38. Which of the following entities should recognize depreciation expense on its operating statement? a) Not-for-profit university. b) Not-for-profit foundation. c) Not-for-profit hospital. d) All of the above.

39. A not-for-profit would include which of the following financial statements in its Basic Financial Statements? a) Statement of Financial Position and Statement of Activities. b) Statement of Financial Position, Statement of Activities, and Cash Flow Statement. c) Statement of Financial Position, Statement of Activities, Cash Flow Statement, and a Statement of Functional Expenses. d) Statement of Financial Position, Statement of Activities, and a Statement of Functional Expenses