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Multiple-Choice Questions (1-83)A. FASB and AICPA Standards for Private SectorNonprofits1. A statement of functional expenses is required for which one of the following private nonprofit organizations?a. Colleges. b. Hospitals. c. Voluntary health and welfare organizations. d. Performing arts organi...

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Multiple-Choice Questions (1-83) A. FASB and AICPA Standards for Private Sector Nonprofits 1. A statement of functional expenses is required for which one of the following private nonprofit organizations? a. b. c. d.

Colleges. Hospitals. Voluntary health and welfare organizations. Performing arts organizations.

2. The statement of financial position (balance sheet) for Founders Library, a private nonprofit organization, should report separate dollar amounts for the library’s net assets according to which of the following classifications? a. Unrestricted and permanently restricted. b. Temporarily restricted and permanently restricted. c. Unrestricted and temporarily restricted. d. Unrestricted, temporarily restricted, and permanently restricted. 3. Chicago Museum, a private nonprofit organization, has both regular and term endowments. On the museum’s statement of financial position (balance sheet), how should the net assets of each type of endowment be reported? Term endowments Regular endowments a. Temporarily restricted Permanently restricted b. Permanently restricted Permanently restricted c. Unrestricted Temporarily restricted d. Temporarily restricted Temporarily restricted 4. Kerry College, a private not-for-profit college, received $25,000 from Ms. Mary Smith on April 30, 2012. Ms. Smith stipulated that her contribution be used to support faculty research during the fiscal year beginning on July 1, 2012. On July 15, 2012, administrators of Kerry awarded research grants totaling $25,000 to several faculty in accordance with the wishes of Ms. Smith. For the year ended June 30, 2012, Kerry College should report the $25,000 contribution as a. Temporarily restricted revenues on the statement of activities. b. Unrestricted revenue on the statement of activities. c. Temporarily restricted deferred revenue on the statement of activities. d. An increase in fund balance on the statement of financial position.

5. Good Hope, a private not-for-profit voluntary health and welfare organization, received a cash donation of $500,000 from Mr. Charles Peobody on November 15, 2012. Mr. Peobody directed that his donation be used to acquire equipment for the organization. Good Hope used the donation to acquire equipment costing $500,000 in January of 2013. For the year ended December 31, 2012, Good Hope should report the $500,000 contribution on its a. Statement of activities as unrestricted revenue. b. Statement of financial position as temporarily restricted deferred revenue. c. Statement of financial position as unrestricted deferred revenue. d. Statement of activities as temporarily restricted revenue. 6. On the statement of activities for a private not-for-profit performing arts center, expenses should be deducted from I. Unrestricted revenues. II. Temporarily restricted revenues. III. Permanently restricted revenues. a. b. c. d.

I, II, and III. Both I and II. I only. II only.

7. Albert University, a private not-for-profit university, had the following cash inflows during the year ended June 30, 2012: I. $500,000 from students for tuition. II. $300,000 from a donor who stipulated that the money be invested indefinitely. III. $100,000 from a donor who stipulated that the money be spent in accordance with the wishes of Albert’s governing board. On Albert University’s statement of cash flows for the year ended June 30, 2012, what amount of these cash flows should be reported as operating activities? a. b. c. d.

$900,000 $400,000 $800,000 $600,000

8. Gamma Pi, a private nonprofit fraternal organization, should prepare a statement of financial position and which of the following financial statements? I. Statement of activities. II. Statement of changes in fund balances. III. Statement of cash flows.

a. b. c. d.

I, II, and III. III only. II and III. I and III.

9. Save the Planet, a private nonprofit research organization, received a $500,000 contribution from Ms. Susan Clark. Ms. Clark stipulated that her donation be used to purchase new computer equipment for Save the Planet’s research staff. The contribution was received in August of 2012, and the computers were acquired in January of 2013. For the year ended December 31, 2012, the $500,000 contribution should be reported by Save the Planet on its a. b. c. d.

Statement Statement Statement Statement

of of of of

activities as unrestricted revenue. activities as deferred revenue. activities as temporarily restricted revenue. financial position as deferred revenue.

10. United Ways, a private not-for-profit voluntary health and welfare organization, received a contribution of $10,000 from a donor in 2011. The donor did not specify any use restrictions on the contribution; however, the donor specified that the donation should not be used until 2012. The governing board of United Ways spent the contribution in 2012 for fund-raising expenses. For the year ended December 31, 2011, United Ways should report the contribution on its a. b. c. d.

Statement Statement Statement Statement

of of of of

financial position as deferred revenue. activities as unrestricted revenue. financial position as an increase in fund balance. activities as temporarily restricted revenue.

11. The statement of cash flows for a private not-for-profit hospital should report cash flows according to which of the following classifications? I. Operating activities. II. Investing activities. III. Financing activities. a. b. c. d.

I, II, and III. II and III. I only. I and III.

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

b. Statement of cash flows. c. Statement of changes in fund balance. d. Statement of revenue, expenses and changes in fund balance. 13. Stanton College, a not-for-profit organization, received a building with no donor stipulations as to its use. Stanton does not have an accounting policy implying a time restriction on donated fixed assets. What type of net assets should be increased when the building is received? I. Unrestricted. II. Temporarily restricted. III. Permanently restricted. a. b. c. d.

I only. II only. III only. II or III.

14. Sea Lion Park, a private not-for-profit zoological society, received contributions restricted for research totaling $50,000 in 2011. None of the contributions were spent on research in 2011. In 2012, $35,000 of the contributions were used to support the research activities of the society. The net effect on the statement of activities for the year ended December 31, 2012, for Sea Lion Park would be a a. $15,000 increase in temporarily restricted net assets. b. $35,000 decrease in temporarily restricted net assets. c. $35,000 increase in unrestricted net assets. d. $35,000 decrease in unrestricted net assets. 15. Clara Hospital, a private not-for-profit hospital, earned $250,000 of gift shop revenues and spent $50,000 on research during the year ended December 31, 2012. The $50,000 spent on research was part of a $75,000 contribution received during December of 2011 from a donor who stipulated that the donation be used for medical research. Assume none of the gift shop revenues were spent in 2012. For the year ended December 31, 2012, what was the increase in unrestricted net assets from the events occurring during 2012? a. b. c. d.

$300,000 $200,000 $250,000 $275,000

16. Which of the following transactions of a private not-for-profit voluntary health and welfare organization would increase temporarily restricted net assets on the statement of activities for the year ended June 30, 2012? I. Received a contribution of $10,000 from a donor on May 15, 2012, who stipulated that the donation not be spent until August of 2012. II. Spent $25,000 for fund-raising on June 20, 2012. The amount expended came from a $25,000 contribution on March 12, 2012. The donor stipulated that the contribution be used for fund-raising activities. a. b. c. d.

Both I and II. Neither I nor II. I only. II only.

17. Catherine College, a private not-for-profit college, received the following contributions during 2012: I. $5,000,000 from alumni for construction of a new wing on the science building to be constructed in 2012. II. $1,000,000 from a donor who stipulated that the contribution be invested indefinitely and that the earnings be used for scholarships. As of December 31, 2012, earnings from investments amounted to $50,000. For the year ended December 31, 2012, what amount of these contributions should be reported as temporarily restricted revenues on the statement of activities? a. b. c. d.

$ 50,000 $5,050,000 $5,000,000 $6,050,000

18. On December 31, 2012, Hope Haven, a private not-for-profit voluntary health and welfare organization, received a pledge from a donor who stipulated that $1,000 would be given to the organization each year for the next five years, starting on December 31, 2013. Present value factors at 6% for five periods are presented below. Present value of an ordinary annuity for 5 periods at 6% 4.21236 Present value of an annuity due for 5 periods at 6% 4.46511 For the year ended December 31, 2012, Hope Haven should report, on its statement of activities, a. b. c. d.

Unrestricted revenues of $5,000. Temporarily restricted revenues of $4,465. Unrestricted revenues of $4,465. Temporarily restricted revenues of $4,212.

19. For Guiding Light, a nongovernmental nonprofit religious organization, net assets that can be expended in accordance with the wishes of the governing board of the organization should be reported as I. Unrestricted. II. Temporarily restricted. III. Permanently restricted. a. b. c. d.

I only. Both I and II. I, II, and III. Either I or II.

20. The Jackson Foundation, a private not-for-profit organization, had the following cash contributions and expenditures in 2012: Unrestricted cash contributions of $500,000. Cash contributions of $200,000 restricted by the donor to the acquisition of property. Cash expenditures of $200,000 to acquire property with the donation in the above item. Jackson’s statement of cash flows should include which of the following amounts? 21. United Hope, a private not-for-profit voluntary health and welfare organization, received the following contributions in 2012: I. $500 from donors who stipulated that the money not be spent until 2013. II. $1,000 from donors who stipulated that the contributions be used for the acquisition of equipment, none of which was acquired in 2012. Which of the above events increased temporarily restricted net assets for the year ending December 31, 2012? a. I only. b. Both I and II. c. II only. d. Neither I nor II. 22. A statement of financial position (balance sheet), which reports unrestricted, temporarily restricted, and permanently restricted net assets, is required for which one of the following organizations? I. A public university. II. A private, not-for-profit hospital. a. Both I and II. b. I only. c. Neither I nor II.

d. II only. 23. A storm broke glass windows in the building of Lea Meditators, a not-for-profit religious organization. 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. b. c. d.

Not be reported. Be reported by note disclosure only. Be reported as an increase in both expenses and contributions. Be reported as an increase in both net assets and contributions.

24. Financial statements of not-for-profit organizations focus on a. Basic information for the organization as a whole. b. Standardization of funds nomenclature. c. Inherent differences of not-for-profit organizations that impact reporting presentations. d. Distinctions between current fund and noncurrent fund presentations. 25. On December 30, 2012, Leigh Museum, a not-for-profit organization, received a $7,000,000 donation of Day Co. shares with donor-stipulated requirements as follows: Shares valued at $5,000,000 are to be sold, with the proceeds used to erect a public viewing building. Shares valued at $2,000,000 are to be retained, with the dividends used to support current operations. As a consequence of the receipt of the Day shares, how much should Leigh report as temporarily restricted net assets on its 2012 statement of financial position (balance sheet)? a. b. c. d.

$0 $2,000,000 $5,000,000 $7,000,000

26. The Jones family lost its home in a fire. On December 25, 2012, a philanthropist sent money to the Amer Benevolent Society, a notfor-profit organization, to purchase furniture for the Jones family. During January 2013, Amer purchased this furniture for the Jones family. How should Amer report the receipt of the money in its 2012 financial statements? a. b. c. d.

As As As As

an unrestricted contribution. a temporarily restricted contribution. a permanently restricted contribution. a liability.

27. If the Pel Museum, a not-for-profit organization, received a contribution of historical artifacts, it need not recognize the contribution if the artifacts are to be sold and the proceeds used to a. Support general museum activities. b. Acquire other items for collections. c. Repair existing collections. d. Purchase buildings to house collections. 28. A large not-for-profit organization’s statement of activities should report the net change for net assets that are Unrestricted Permanently restricted a. Yes Yes b. Yes No c. No No d. No Yes 29. Which of the following classifications is required for reporting of expenses by all not-for-profit organizations? a. Natural classification in the statement of activities or notes to the financial statements. b. Functional classification in the statement of activities or notes to the financial statements. c. Functional classification in the statement of activities and natural classification in a matrix format in a separate statement. d. Functional classification in the statement of activities and natural classification in the notes to the financial statements. 30. Rosary Botanical Gardens, a private not-for-profit organization, established a $500,000 quasi endowment on September 1, 2012. On the garden’s statement of financial position at December 31, 2012, the assets in this quasi endowment should be included in which of the following classifications? a. Temporarily restricted net assets. b. Unrestricted net assets. c. Permanently restricted net assets. d. Either temporarily or permanently restricted net assets, depending on the expected term of the quasi endowment. 31. During 2011, an alumnus of Smith College, a private not-forprofit college, transferred $100,000 to the college with the stipulation that it be spent for library acquisitions. However, the alumnus specified that none of the cash transferred could be spent until the college had matched the entire amount transferred with

donations from other alumni by December 31, 2012. As of December 31, 2011, the college had received matching cash donations of only $5,000 from other alumni, and the college estimated that it was reasonably possible that it would not reach the goal of $100,000 by December 31, 2012. If the funds are not matched by December 31, 2012, the cash will be returned to the alumnus. On the college’s statement of financial position at December 31, 2011, the cash transfer of $100,000 would be included in the amount reported for a. b. c. d.

Liabilities. Unrestricted net assets. Temporarily restricted net assets. Permanently restricted net assets.

32. During the year ended December 31, 2012, a not-for-profit performing arts entity received the following donor-restricted contribution and investment income: Cash contribution of $100,000 to be permanently invested. Cash dividends and interest of $6,000 to be used for the acquisition of theater equipment. As a result of these cash receipts, the statement of cash flows for the year ended December 31, 2012, would report an increase of a. $106,000 from operating activities. b. $106,000 from financing activities. c. $6,000 from operating activities and an increase of $100,000 from financing activities. d. $100,000 from operating activities and an increase of $6,000 from financing activities. 33. Which of the following private, nonprofit entities is required to report expenses both by function and by natural classification? a. b. c. d.

Hospitals. Colleges and universities. Voluntary health and welfare organizations. Performing arts organizations.

34. On December 5, 2012, Jones Heating and Air Conditioning Service repaired the heating system in the building occupied by Good Hope, a private not-for-profit voluntary health and welfare organization. An invoice for $1,500 was received by Good Hope for the repairs on December 15, 2012. On December 30, 2012, Jones notified Good Hope that the invoice was canceled and that the repairs were being donated without charge. For the year ended December 31, 2012, how should Good Hope report these contributed services? a. Only in the notes to the financial statements.

b. No disclosure is required either in the financial statements or in the notes. c. As an increase in unrestricted revenues and as an increase in expenses on the statements of activities. d. As an increase in temporarily restricted net assets on the statement of activities. 35. During the year ended December 31, 2012, the James Community Foundation, a private not-for-profit organization, received the following contributed services: I. Anderson & Anderson, attorneys-at-law, contributed their services which involved advice related to the foundation’s regular endowments. II. Senior citizens participated in a telethon to raise money for a new music building. Which of these contributed services should be included in unrestricted revenues, gains, and other support on James Community Foundation’s statement of activities for the year ended December 31, 2012? a. b. c. d.

Both I and II. Neither I nor II. II only. I only.

36. 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 2012: $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 only 50% complete at December 31, 2012. What amount should Child Care Centers record as contribution revenue in its 2012 Statement of Activities? a. b. c. d.

$ 2,000 $ 2,500 $10,000 $11,000

37. On December 20, 2012, United Appeal, a private not-for-profit voluntary $25,000 from a local computer retailer. The equipment is expected to have a useful life of three years. The donor placed no restrictions on how long the computer equipment was to be used, and United has an accounting policy that does not imply a time restriction on gifts of long-lived assets. On United’s statement of activities prepared for the year ended December 31, 2012, the donation of computer equipment should be reported a. b. c. d. an

As an increase in temporarily restricted net assets. Only in the notes to the financial statements. As an increase in unrestricted net assets. As either an increase in temporarily restricted net assets or as increase in unrestricted net assets.

38. On December 30, 2012, the Board of Trustees of Henry Museum, a private not-for-profit organization, designated $4,000,000 of unrestricted net assets for the construction of an addition to its building. What effect does this designation have on the museum’s unrestricted and temporarily restricted net assets which are reported on the statement of financial position (balance sheet) at December 31, 2012? U...