Test Bank Advanced Accounting 8E by Baker 19 chapter PDF

Preview

Summary

Chapter 19Not-For-Profit EntitiesMultiple Choice Questions Which rule-making body is currently setting standards of financial reporting for private not-for-profit universities and for public (governmental) universities? A. Option A B. Option B C. Option C D. Option D Net assets restricted as to time...

Description

Chapter 19 - Not-For-Profit Entities

Chapter 19 Not-For-Profit Entities Multiple Choice Questions

1. Which rule-making body is currently setting standards of financial reporting for private not-for-profit universities and for public (governmental) universities?

A. Option A B. Option B C. Option C D. Option D

2. Net assets restricted as to time or purpose should be classified as: I. temporarily restricted. II. permanently restricted. A. I only B. II only C. Both I and II D. Neither I nor II

19-1

Chapter 19 - Not-For-Profit Entities

3. A not-for-profit organization received a donation temporarily restricted as to use. The donated amount was later spent in accordance with the restriction. In which category(ies) of net assets should the related revenues and expenses be recognized?

A. Option A B. Option B C. Option C D. Option D

4. According to FASB 93, "Recognition of Depreciation by Not-For-Profit (NFP) Entities," NFP entities should recognize depreciation: I. on all long-lived tangible assets. II. on all long-lived intangible assets. A. I only B. II only C. Both I and II D. Neither I nor II

5. The term "restricted" as used in university accounting refers to a constraint on the use of funds which has been: I. internally imposed. II. externally imposed. A. I only B. II only C. Either I or II D. Neither I nor II

19-2

Chapter 19 - Not-For-Profit Entities

6. According to Statement of Financial Accounting Standards 117, the statement of financial position of a private university should report the excess of the university's assets over its liabilities as: A. fund balance. B. unrestricted and restricted fund balance. C. retained earnings. D. unrestricted, temporarily restricted, and permanently restricted net assets.

7. Which of the following is an example of volunteer services received by a not-for-profit entity that should be recognized as revenue? I. Services requiring specialized skills, provided by individuals with those skills, that otherwise would have to be purchased. II. Services of lay faculty at a private university operated by a religious order. III. Services that create or enhance non-financial assets, regardless of whether or not they require specialized skills. A. I only B. I and III only C. II and III only D. I, II, and III

8. In a university, class cancellation refunds of tuition and fees should be recorded as: I. a reduction of revenue from tuition and fees. II. a reduction of accounts receivable. A. I only B. II only C. Either I or II D. Neither I nor II

19-3

Chapter 19 - Not-For-Profit Entities

9. Which of the following recognition and measurement bases best summarizes the usual treatment of current contributions to private not-for-profit entities in accordance with FASB 116?

A. Option A B. Option B C. Option C D. Option D

10. According to FASB 124, not-for-profit entities should report investments in the financial statements at: I. fair market value. II. lower of cost or market. A. I only B. II only C. Either I or II D. Neither I nor II

11. Investment income for not-for-profit entities may include: I. interest from debt investments. II. dividends from equity investments. III. changes in the fair values of both debt and equity investments. A. I only B. I and II only C. I and III only D. I, II, and III

19-4

Chapter 19 - Not-For-Profit Entities

12. A private university received $280,000 from student tuition and fees for the year 2009 summer session. The session began on June 20, 2009, and ended on July 30, 2009. The university's fiscal year end is June 30. According to the AICPA College and University Audit Guide, how should the university report the $280,000 of receipts in its financial statements for the year ended June 30, 2009? A. Current revenue of $280,000. B. Current revenue of $70,000 and deferred revenue of $210,000. C. Deferred revenue of $280,000. D. Restricted current revenue of $280,000.

13. Assume that a private university collects tuition and fees at the beginning of summer school, in which two weeks are offered in the first fiscal year and the remaining six weeks are offered in the second fiscal year. According to the approach recommended by the National Association of College and University Business Officers (NACUBO), the university would: A. record the collections as a debit to Cash and a credit to Deferred Revenue for the entire amount of the collections. B. record the collections as a debit to Cash and a credit to Restricted current revenue for the entire amount of the collections. C. account for the entire tuition and fees as revenue in the first fiscal period. D. recognize revenue in the first fiscal period for two-eighths of the tuition and fees and record six-eighths of the collections as a deferred revenue.

14. A private university offers graduate assistantships to qualified students each year. In exchange for the waiver of tuition, graduate assistants are required to assist faculty members with research and other activities. Assume a graduate assistant received a $4,000 tuition waiver for the current academic year. Based on these facts, the university should record A. tuition revenues of $4,000 and expenditures of $4,000. B. tuition revenues of $0 and expenditures of $0. C. tuition revenues of $4,000 and expenditures of $0. D. tuition revenues of $4,000 and a reduction of tuition revenues of $4,000.

19-5

Chapter 19 - Not-For-Profit Entities

15. For the year ended June 30, 2009, a university assessed its students a total of $4,000,000 for tuition and fees. Included in this amount was $300,000 of tuition remissions awarded to graduate teaching assistants, and $150,000 of scholarships awarded to undergraduate students. Tuition and fees totaling $3,550,000 were collected during the year ended June 30, 2009. What amount should be reported in the unrestricted fund as net revenue from tuition and fees for the year ended June 30, 2009? A. $4,000,000 B. $3,550,000 C. $3,700,000 D. $3,850,000

16. A private not-for-profit university generally must depreciate all tangible fixed assets, except: I. works of art and other historical treasures. II. administration buildings. A. I only B. II only C. Both I and II D. Neither I nor II

17. A private college received an offer from a CPA who is an alumnus to teach a onesemester advanced accounting course at no cost. FASB 116 prescribes that this contribution of service: A. need only be disclosed in the footnotes to the financial statements. B. be recorded as an asset with an equivalent amount recorded in the unrestricted fund balance. C. be recorded as a revenue with an equivalent amount recorded as an expenditure. D. need not be recorded if the service is for a period less than one academic year.

18. In accordance with FASB 117, contributions from donors which are to be permanently invested should be disclosed on the statement of activities of a private university as an increase in: A. Permanently restricted net assets. B. Permanently restricted fund balance. C. Endowment fund balance. D. Deferred revenues.

19-6

Chapter 19 - Not-For-Profit Entities

19. For the year ended June 30, 2009, a private college received contributions from alumni which were restricted for faculty research stipends to be awarded during the next fiscal year. For the year ended June 30, 2009, these contributions should be disclosed on the statement of activities of the private college as an increase in: A. the fund balance of the restricted current fund. B. temporarily restricted net assets. C. deferred revenues. D. temporarily restricted fund balance.

20. A private, not-for-profit university should prepare which of the following financial statements?

A. I, II, and III. B. II, III, and IV. C. I, II, and IV. D. II, III, and V.

21. Unrestricted gifts and endowment income of a private university are reported as A. increases in the unrestricted current fund balance on the statement of changes in fund balances. B. unrestricted revenues on the statement of current funds revenues, expenditures, and other changes. C. unrestricted revenues on the statement of activities. D. increases in the unrestricted current fund balance on the statement of activities.

19-7

Chapter 19 - Not-For-Profit Entities

22. One of the major objectives of FASB 117 is to A. emphasize the different fund structures that currently exist for all private, nonprofit organizations. B. change the reporting for governmental organizations so that their reporting is comparable to that of private, nonprofit organizations. C. report combined financial statements, instead of individual fund financial statements, for all private, nonprofit organizations. D. bring about greater uniformity in the financial statements of all private, not-for-profit organizations.

23. A not-for-profit private college in Virginia created a separate foundation responsible for obtaining financial support from alumni and others. Foundation assets are used for the benefit of the college. Donations made to the foundation and subsequently transferred to the college should be: A. recognized as revenues by the foundation when received, and as revenues of the college when transferred. B. recognized as revenues by the foundation when received and as expenses by the foundation when transferred. C. recognized both as a change in its interest in the foundation and as revenues by the college when the donation is received by the foundation. D. recognized as an increase in net assets of the foundation and as revenues of the college when the donation is received by the college.

24. FASB 93: A. guides depreciation. B. guides accounting for contributions. C. establishes financial display requirements. D. establishes the accounting for investments.

19-8

Chapter 19 - Not-For-Profit Entities

25. On the statement of operations prepared for a private, not-for-profit hospital, patient service revenue earned during the year is reported net of amounts for which of the following items? I. Contractual adjustments II. Bad debts expense A. I only B. II only C. I and II D. Neither I nor II

26. A private, not-for-profit hospital received a cash contribution of $100,000 from Samantha Hicks on November 14, 2008. Ms. Hicks specified the money be used to acquire equipment. On December 31, 2008, the hospital had not expended any of Ms. Hicks' contribution. On the statement of changes in net assets for the year ended December 31, 2008, the hospital should report the contribution as a $100,000 increase in A. temporarily restricted net assets. B. unrestricted net assets. C. fund balance. D. deferred revenue.

27. Unrestricted current funds of a private university designated by the governing board for a specific future purpose should be reported as part of: A. unrestricted net assets. B. temporarily restricted net assets. C. board-restricted net assets. D. term endowments.

28. A private, not-for-profit geographic society received cash contributions which were restricted by the donors for the acquisition of fixed assets. In which section of the statement of cash flows would these cash contributions be reported? A. Financing activities B. Investing activities C. Operating activities D. Capital and related financing activities

19-9

Chapter 19 - Not-For-Profit Entities

29. On the statement of activities for a private, not-for-profit literary society, expenses decrease which of the following classes of net assets? I. temporarily restricted net assets II. unrestricted net assets A. I only B. II only C. Either I or II D. Neither I nor II

30. Bridger Hospital, which is operated by a religious organization, provides charity care for the indigent living in the region served by the hospital. How should Bridger report the amount of its charity care on its financial statements? A. In the notes to the financial statements only. B. As unrestricted revenues on the statement of operations. C. As net patient service revenue and as an expense, equal to the net patient service revenue, on the statement of operations. D. As temporarily restricted revenue on the statement of operations.

31. The governing board of Samaritan Hospital, which is operated by a religious organization, designated $500,000 of cash for future expansion of the hospital. On the hospital's balance sheet, the cash designated for future plant expansion would be disclosed in which of the following classes of net assets? A. Temporarily restricted net assets B. Unrestricted net assets C. Plant replacement and expansion. D. Board designated net assets

32. Good Care Hospital, which is operated by a religious organization, received contributions of $1,000,000 from donors who stipulated that the cash be used to construct an addition to the hospital. As of the balance sheet date, none of the contributions had been expended for construction. On the hospital's balance sheet, the cash contributions would be disclosed in which of the following classes of net assets? A. Temporarily restricted net assets B. Donor restricted net assets C. Assets whose use is limited D. Permanently restricted net assets

19-10

Chapter 19 - Not-For-Profit Entities

33. A private, not-for-profit hospital received contributions of $50,000 from donors on June 15, 2009. The donors stipulated that their contributions be used to purchase equipment for the hospital. As of June 30, 2009, the end of the hospital's fiscal year, $12,000 of the contributions had been spent on equipment acquisitions. In the hospital's general fund, what account would be credited to recognize the release of the restrictions on the temporarily restricted contributions used to acquire equipment? A. Revenue released from equipment acquisition restriction B. Other financing sources C. Net assets released from equipment acquisition restriction D. Unrestricted net assets released from equipment acquisition restriction

34. A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. The hospital's revenues from nursing programs and gift shops should be accounted for in the: A. specific purpose fund. B. restricted current fund. C. general fund. D. time-restricted fund.

35. A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. Contributions received from donors for research to be conducted by the hospital should be accounted for in the: A. specific purpose fund. B. time-restricted fund. C. general fund. D. restricted current fund.

36. On June 30, 2009, a voluntary health and welfare organization received pledges from donors amounting to $50,000. The donors did not place any time or use restrictions on the amount pledged. It was estimated that 10 percent of the pledges would not be collected. How should the voluntary health and welfare organization report these pledges on its financial statements prepared at the end of its fiscal year, June 30, 2009? A. As fund balance for $45,000. B. As contribution revenue-unrestricted for $45,000. C. As contribution revenue-unrestricted for $50,000. D. As fund balance-unrestricted for $50,000.

19-11

Chapter 19 - Not-For-Profit Entities

37. The restricted funds of a not-for-profit hospital are often termed "______" funds because they must hold the restricted assets and transfer expendable resources to the general fund for expenditure. A. specific B. controlled C. limited D. holding

38. All restricted funds of private, not-for-profit hospitals account for resources: A. whose use is restricted by the donor. B. received and expended in the hospital's primary health care mission. C. that are only temporarily restricted. D. received or pledged by donors for use in future periods.

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization. The donor did not place any use restrictions on the amount pledged. The stream of the payments is discounted at 6 percent. The first payment of $5,000 is received at the end of the first year. The present value factor for a five-payment annuity due on June 30, 2009, at 6 percent is 4.2124.

39. Based on the preceding information, the journal entry to recognize present value at the time the pledge is received includes: A. a credit to Pledges Receivable—Temporarily Restricted for $25,000. B. a debit to Contributions—Temporarily Restricted for $21,062. C. a debit to Pledges Receivable—Temporarily Restricted for $21,062. D. a credit to Contributions—Temporarily Restricted for $25,000.

40. Based on the preceding information, at the end of the first year, the pledge increased unrestricted net assets by: A. $25,000. B. $21,062. C. $4,212. D. $5,000.

19-12

Chapter 19 - Not-For-Profit Entities

41. Based on the preceding information, the increase in present value of the contributions receivable recognized at the end of the first year equals: A. $5,000. B. $1,264. C. $4212. D. $787.

42. A private, not-for-profit hospital received a donation of medicine from the XYZ Pharmaceutical Company on March 15, 2009. The cost of the medicine to the company was $66,000, and its market value was $110,000. Twenty percent of the medicine was used by the hospital during the year ended June 30, 2009. On the hospital's statement of operations for the year ended June 30, 2009, the contribution of medicine would increase operating revenues by A. $66,000. B. $110,000. C. $52,800. D. $88,000.

43. In accordance with FASB 116, contributions of services are recognized as increases in unrestricted net assets by a private, not for profit entity if which of the following criteria are satisfied? I. The services received create or enhance nonfinancial assets. II. The services require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donations. III. The services will be performed within the current fiscal year. A. I or II. B. I or III. C. II or III. D. I, II, III.

19-13

Chapter 19 - Not-For-Profit Entities

44. The disclosure, "net assets released from restrictions," is reported on which of the following financial statements for a voluntary health and welfare organization? I. The statement of cash flows. II. The statement of activities. A. I only B. II only C. Both I and II. D. Neither I nor II.

45. Good Faith Hospital, operated by a religious organization, billed patients $4,000,000 for services rendered during the year ended June 30, 2009. The hospital realized cash of $3,500,000 from the patient billings because of the following reductions: (1) contractual adjustments of $140,000 granted to private insurance companies and to the federal government; and (2) uncollectible accounts receivable of $360,000. On the statement of operations prepared for the year ended June 30, 2009, Good Faith Hospital should report net patient service revenue of: A. $3,500,000. B. $3,860,000. C. $4,000,000. D. $3,640,000.

46. During the fiscal year ended June 30, 2009, a private, not-for-profit hospital acquired equipment costing $75,000, with cash contributed by donors who restricted their contributions for this purpose. On the hospital's statement of cash flows for the year ended June 30, 2009, the equipment acquisition should be reported in which of the following sections? I. Operating activities II. Financing activities III. Investing activities A. I B. II C. III D. I, II, III

19-14

Chapter 19 - Not-For-Profit Entities

47. During the fiscal year ended June 30, 2009, Globa...