Governmental Accounting Chapter 10

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1. Which organization has standard setting authority over governmentally related not-for-profit organizations, such as hospitals colleges and universities.

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A) GASB.

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2. Private not-for-profits must follow all applicable ____ standards in recording transactions.

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B) FASB.

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3. Identify the standard setting body for private not-for-profit organizations and the basis of accounting that should be used.

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C) FASB & Accrual.

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4. Which of the following is not a distinguishing characteristic of a private not-for-profit organization according to FASB Statement No. 116?

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D-Upon dissolution of the organization, remaining assets are to be distributed to the original contributors.

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5. What are the financial statements required for all nongovernmental, not-for-profit organizations?

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D) Statement of Financial Position, Statement of Activities, Statement of Cash Flows.

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6. Which of the following are the net asset classes required by the FASB for private not-for-profit organizations?

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C) Permanently Restricted, Temporarily Restricted, Unrestricted.

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7. Which of the following is true regarding accounting and financial reporting for nongovernmental, not-for-profit organizations?

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B) Expenses must be reported by function, either in the statements or in the notes.

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8. Which of the following statements is not correct with respect to contributions to a private not-for-profit?

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B-Contributions of assets other than cash to a not-for-profit are recorded at the donor’s basis.

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9. Which of the following is not correct with respect to the reporting of expenses for a private not-for-profit?

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A) Expenses can be reported in the unrestricted net asset class or restricted net asset class, as appropriate.

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10. With the exception of collections, fixed assets may be recorded by a private not-for-profit as:

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C) Both A & B above.

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11. FASB Statement 124, Accounting for Certain Investments of Not-for-Profit Organizations:

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B- Requires that investments in debt securities be carried at fair value.

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12. Contributed services are recognized as revenue for a private not-for-profit when the service:

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B- Requires specialized skills, is provided by someone possessing those skills, and typically would be purchased if not provided by donation.

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13. Which of the following organizations would be subject to the accounting and reporting requirements of FASB Statements 116 (Accounting for Contributions) and 117 (Financial Reporting for Not-for-Profit Organizations)?

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B) St. Jude Children’s Hospital.

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14. Which of the following organizations would be subject to the (level b) accounting and reporting requirements of the AICPA's Audit and Accounting Guide: Not-for-Profit Organizations?

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A) The International Brotherhood of Electrical Workers.

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15. Which of the following is not true regarding the treatment of multiyear pledges, according to FASB Statement 116?

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D) At the end of each accounting period, the difference between the new and previously recorded present value is recorded as interest revenue.

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16. If a donor selects a scholarship recipient, and then donates cash to a ballet school to fund that scholarship, the ballet school would:

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A) Record a liability, as it is merely acting as an agent for the donation.

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17. Which of the following is part of the treatment of multi-year pledges as required by FASB Statement No. 116?

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C-At the end of each accounting period, the difference between the balance in the receivable account and the new present value is recorded as contribution revenue and the receivable is increased.

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18. A civic ballet company sells 100 “Benefactor” status memberships for $1,000 each. The Benefactors each receive a season ticket valued at $400, and a listing in the company’s program. How would the ballet company record the sale of these 100 memberships?

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D)Cash $100,000
Deferred Revenue $40,000
Contributions – Unrestricted $60,000

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19. Which of the following is true regarding the Statement of Financial Position for nongovernmental, not-for-profit organizations?

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B) The Statement must display totals for net assets separated between the categories of unrestricted, temporarily restricted, and permanently restricted.

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20. Which of the following is true regarding the Statement of Activities for nongovernmental, not-for-profit organizations?

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A) FASB requires that the change in net assets be reported for each of the net asset classes and in total.

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21. Which of the following is true regarding the Statement of Cash Flows for nongovernmental, not-for-profit organizations?

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C) Both of the above.

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22. Which of the following would be a contribution increasing permanently restricted net assets?

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D) Neither A nor B above

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23. A donor gave artwork to a nongovernmental, not-for-profit museum. The artwork qualified as a “collection,” under FASB rules. The not-for-profit could:

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C) Do either of the above, depending upon the policy of the not-for-profit.

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24. Which of the following contributed services would probably not be recognized as contribution revenue?

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D) State CPA society members hand out informational booklets at a shopping mall.

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25. A donor gave $60,000 to a nongovernmental, not-for-profit charity with instructions that the funds be transferred to Sam Smith, an individual who lost his home in a fire. The not-for-profit would:

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A) Record the $60,000 cash and credit a liability.

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26. A donor gave $100,000 to a foundation, which is financially related to a nongovernmental, not-for-profit organization. The foundation, which is also a nongovernmental, not-for-profit organization, would record the $100,000 as:

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A) A Revenue.

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27. Which of the following organizations does not follow the AICPA's Not-for-Profit Guide?

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C) City libraries.

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28. In which of the following categories may Investment Income be reported by Not-for-Profit organizations:

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D) I, II & III.

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29. A skilled carpenter repaired the roof of the administrative building for a private not-for-profit free of charge. The not-for-profit would have had to pay $2,000 for this service if not donated. What entry should the not-for-profit make?

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B)Supporting Service expense $2,000
Contribution revenue $2000

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30. Henry Highbrow promises to donate $50,000 to his church toward the purchase of a new pipe organ if the church is able to raise matching funds of $50,000 from other contributors. At what point should the church record revenue?

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C) When the matching funds are raised.

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31. Lisa informed her church that she had named the church in her will and later provided a written copy of the will to the church. At what point should the church record the contribution?

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D)At the date the probate court declares the will valid following her death.

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32. Care Foundation is a voluntary health and welfare organization funded by contributions from the general public. Care sold equipment for $30,000 which cost $40,000 and had a book value of $25,000 at the time of sale. In recording the sale, Care should:

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A)Record a gain of $ 5,000.

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33. An unconditional pledge of support is properly recorded as Temporarily Restricted Revenue at the time of the pledge. Changes in the present value of the receivable resulting from the passage of time is reported as:

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A) Contribution revenue.

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34. Care Foundation is a voluntary health and welfare organization funded by contributions from the general public. In its Statement of Activities, the annual provision for depreciation should:

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D) Be included as an element of expense.

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35. Uptown Church received a donation of marketable equity securities from a church member. In reviewing the financial press, it is determined that the securities had appreciated during the year. At what amount should Uptown report its marketable equity securities in the year-end balance sheet?

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B) Market value at the balance sheet date.

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36. Which of the following factors, if present, would indicate that a transaction is not a contribution?

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A) The resource provider received value in exchange.

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37. A donor made a gift of cash to a private not-for-profit organization in 2014 with an expressed purpose restriction. All the funds were expended in 2014. The organization must:

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D) Use either of the methods described in (a) or (b).

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

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C) Both (a) and (b) above.

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

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C) Program expenses divided by total expenses.

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40. A donor gave equipment valued at $50,000 at the beginning of 2014 to a private not-for-profit organization. The equipment had a 10-year life and depreciation of $5,000 was charged during 2014. At the end of the year, the net assets to be reported in unrestricted net assets related to this equipment would be:

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D) Either $45,000 or $0, depending upon the policy of the organization

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41. A private not-for-profit organization received a gift of $460,000 with purpose restrictions in 2013. In 2014 funds were expended for the purpose outlined in the gift, however, it was not possible to determine whether the restricted funds or unrestricted funds were used. The presumption should be:

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A) The restricted funds would have been used first.

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

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C) A pledge with no restrictions, but conditional on receiving matching pledges.

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43. Under FASB Statement 117, reclassifications of net assets are not made:

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D) For permanently restricted net assets.

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

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B) If the direct method is used, the not-for-profit must also present a reconciliation between total change in net assets and cash flows from operating activities.

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

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C) Unrealized gains (losses) on investments are shown only as increases (decreases) in unrestricted net assets.

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46. The Statement of Functional Expenses:

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D) Is required of voluntary health and welfare organizations.

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

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A) The individual providing the service provides an invoice detailing the hours contributed but waives the requirement for payment.

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

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C) Record the building as either unrestricted or temporarily restricted, as long as a consistent policy is followed.

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49. In 2014, a major drug company agreed to give a not-for-profit private college $300,000 to perform testing of a new drug. An advance payment of $200,000 was received in 2014. The college was to receive $1,500 per individual test. In 2014, the college completed 100 tests. How much revenue should the college report for 2014?

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C) $ 150,000

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50. A donor made a pledge in 2013 of $ 50,000 to a private not-for-profit organization with the intent to pay the cash in 2014 for unrestricted use in 2014. The organization should:

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C) Record the pledge as temporarily restricted revenue in 2013 and reclassify it to unrestricted in 2014.

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51. A donor gave $ 1,000,000 to a private not-for-profit organization to be held in endowment. In addition, the governing board permanently designated $ 500,000 to the endowment. In the Statement of Financial Position, how should these amounts be classified?

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B) Permanently Restricted: $1,000,000; Unrestricted: $ 500,000

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

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C) City owned hospital

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

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A) A state community college.

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

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D) All of the above.

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

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C. The organization’s revenues exceed expenses.

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

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C. Performing arts organizations.

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57. Reclassifications from permanently restricted net assets to temporarily restricted net assets would occur only under which of the following circumstances?

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D). Permanently restricted net assets would not be reclassified to temporarily restricted net assets

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58. FASB statement 116 requires contributions to be recorded as revenue when:

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A) The contribution is promised.

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

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B) An intention to give should be recorded as revenue when the intention is communicated to the not-for-profit.

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60. Donors to private not-for-profit entities are primarily concerned with which of the following performance measures?

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A) Program Expense Ratio.

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61. A Statement of Functional Expenses is required for:

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C) Voluntary health and welfare organizations.

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62. Supporting activities as classified in the Statement of Activities, normally include:

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D) All of the above.

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63. In 2014, Susan tells The Art Museum, a private not-for-profit organization, that she has named the museum in her will. When should the organization recognize the contribution revenue?

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A) Only after Susan dies and the will is declared valid.

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64. When should unconditional pledges be recorded as revenue?

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C) When the pledge is made.

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65. A membership pass to the YMCA (a private not-for-profit organization) includes unlimited rights to all facilities and a health magazine subscription. Non-members do not possess these rights. How must the YMCA account for membership dues?

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D) The dues are an exchange transaction, so it should report dues on a pro-rata basis determined by the length of the individual memberships.

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66. The entry to record the expiration of program restrictions includes which of the following?

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A) Debit Reclassification from Temporarily Restricted Net Assets.

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67. Which of the following is not an example of a donor imposed restriction?

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D) All of the above are examples of donor imposed restrictions.

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68. Which of the following is a legitimate reason for a private not-for-profit to generate a surplus?

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C) Both A & B above.

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69. The equity section of Statement of Financial Position for private not-for-profits includes which accounts?

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A) Unrestricted, Temporarily Restricted, Permanently Restricted Net Assets.

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70. The institution’s governing board decided to create an endowment from contributed funds, this is called a(n) ________ and the funds are unrestricted.

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C) Quasi-endowment.

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71. Which of the following financial statements are required for voluntary health and welfare organizations?

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C) Statement of Cash Flows.

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72. The FASB requires that expenses of voluntary health and welfare organizations be reported according to function. Which of the following are FASB required function categories:

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B) Program and Supporting Services.

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73. Investments by private not-for-profit organizations in equity securities should be carried at

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C) Fair Market Value.

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74. The three classes of net assets reported for a private not-for-profit organization include all of the following except:

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C) Capital restricted net assets.

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75. How is the receipt of an unconditional pledge to contribute to a private not-for-profit organization recorded?

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A) As revenue when pledged.

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76. How does a for-profit organization record contributions made to a private not-for-profit organization?

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A) As an expense when originally pledged.

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77. If a person names a private not-for-profit organization in his or her will, this is considered a(n) ________ and is __________.

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D) Intention to give; not recorded.

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78. The following treatment is correct with regards to payments that are partially exchange transactions and partially contributions:

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D) The two parts should be separately accounted for.

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79. Which of the following would not be recognized as contribution revenue by a private not-for-profit organization?

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B) A health clinic is paid to perform clinical trials of a new medicine.

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80. Which of the following is not correct with respect to mergers under the rules established by FASB Statement No. 164, Not-for-Profit Entities: Mergers and Acquisitions?

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B-Goodwill is recognized on long term assets only

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81. Which of the following is not correct with respect to acquisitions under the rules established by FASB Statement No. 164, Not-for-Profit Entities: Mergers and Acquisitions?

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D-Entities that derive their revenues from business-like activities are required to expense the goodwill at the date of acquisition.