Ch. 13 - Acct 365

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Ch. 13 - Acct 365
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  • 1. 
    The FASB's objectives of financial reporting for not-for-profit organizations include(s) which of the following?
    • A. 

      Assessing fiscal accountability

    • B. 

      Assessing management stewardship and performance

    • C. 

      Assessing budget to actual performance for the period

    • D. 

      All of the above are objectives


  • 2. 
    Voluntary health and welfare organizations are required to present which of the following financial statements?
    • A. 

      Statement of financial position

    • B. 

      Statement of cash flows

    • C. 

      Statement of functional expenses

    • D. 

      All of the above are required


  • 3. 
    Temporarily restricted net assets may be released from restriction by:
    • A. 

      Written authorization of the organization's board of directors

    • B. 

      Approval of the independent auditor

    • C. 

      Satisfaction of purpose restrictions

    • D. 

      Advice of legal counsel


  • 4. 
    In a local NFP elementary school's statement of cash flows, a contribution restricted for use on new building project would be reported as:
    • A. 

      A financing activity

    • B. 

      A capital and related financing activity

    • C. 

      An investing activity

    • D. 

      An operating activity


  • 5. 
    A wealthy donor promised $1 million to the local art museum to expand the size of its building, contingent on the museum obtaining a grant from the State Endowment for the Arts of at least $500,000. Upon completing a signed agreement with the donor, the museum should:
    • A. 

      Record a debit to Contributions Receivable -- Temporarily Restricted in the amount of $1,000,000

    • B. 

      Record a debit to Contributions Receivable -- Temporarily Restricted in the amount of $500,000

    • C. 

      Not make a journal entry until the conditions of the agreement have been met

    • D. 

      Either A or C are permissible, depending on the museum's established policy


  • 6. 
    Bro Stewart, a local CPA, volunteered his time to develop a new computerized accounting system for an after-school development program for disadvantaged children. If Bro had not volunteered his time, it would have been necessary for the organization to hire an accountant for this project. The value of Bro's time to this project should be recorded as:
    • A. 

      Contribution revenue

    • B. 

      A supporting services expense

    • C. 

      Neither A or B are correct

    • D. 

      Both A and B are correct


  • 7. 
    The Antioch Cultural Center recently conducted a successful talent show in which local talent performed for a nominal prize. The talent show is an ongoing major event and is central to the center's mission. The event raised $4,800 in gross revenue. Expenses related to the event included $1,000 to rent an auditorium, $1,200 to advertise the event, $500 for trophies and other awards for the winner and runners up, and $100 for printing and mailing tickets. The center believes there was no monetary value received by donors (attendees). To report this event in its statement of activities, the center will report:
    • A. 

      Special event revenue of $4,800 and special event expense of $1,500

    • B. 

      Special event revenue of $4,800 and fund-raising expense of $1,300

    • C. 

      Special event revenue of $2,300 and fund-raising expense of $1,300

    • D. 

      Both A and B are correct


  • 8. 
    Many not-for-profit organizations attempt to classify fund-raising expenses as program services expenses by making the activities look educational in nature or advocating for the mission of the organization. For such expenses to be reported as program services, they must meet which of the following three criteria:
    • A. 

      Purpose, mission-related, and benefit to the public

    • B. 

      Purpose, audience, and content

    • C. 

      Purpose, expand donor base, and content

    • D. 

      Reasonable, improve financial condition, and benefit to the public


  • 9. 
    Which of the following would not be considered a support expense by the NFP organization Save Our Lakes?
    • A. 

      The cost of printing the annual report

    • B. 

      The cost of a mailing to past contributors requesting donations for lakeshore cleanup

    • C. 

      The cost of the annual lakeshore cleanup activities

    • D. 

      Neither A nor C are considered support expenses


  • 10. 
    A particular organization functions as an intermediary between donors and other beneficiary organizations. The intermediary organization must report contribution revenue from donors if:
    • A. 

      The organization has variance power

    • B. 

      The organization elects to consistently report such donor gifts as contribution revenue

    • C. 

      The beneficiary organization requests a delay in receiving the contribution from the intermediary organization

    • D. 

      All of the above are correct


  • 11. 
    Which of the following characteristics of not-for-profit organizations (NFPs) can be used to distinguish a nongovernmental from a governmental NFP? 
    • A. 

      Contributions by resource providers who do not expect a return on investment.

    • B. 

      Ability to impose taxes on citizens.

    • C. 

      Absence of ownership interests.

    • D. 

      All of the above characteristics are generally different for nongovernmental versus governmental NFPs.


  • 12. 
    Under FASB standards how would a not-for-profit organization recognize a conditional pledge?
    • A. 

      It would debit Pledges Receivable and credit Contributions—Temporarily Restricted.

    • B. 

      It would debit Pledges Receivable and credit Deferred Contributions.

    • C. 

      It would disclose the amount of the conditional pledge in the notes to the financial statements.

    • D. 

      It would not recognize the conditional pledge until pledge conditions are substantially met.


  • 13. 
    The FASB Codification requires the following financial statements for all nongovernmental, not-for- profit organizations:
    • A. 

      Statement of financial position, statement of activities, statement of cash flows, and statement of functional expenses.

    • B. 

       Statement of financial position, statement of operations, statement of cash flows, and statement of functional expenses.

    • C. 

      Statement of financial position, statement of activities, and statement of cash flows.

    • D. 

      Statement of financial position, statement of revenues and expenses, statement of cash flows, and statement of functional expenses.


  • 14. 
    Which of the following is a condition that must be met for contributed services to a not-for-profit organization (NFP) to be recorded as both a contribution and as an expense?
    • A. 

      The service creates or enhances nonfinancial assets, such as a carpenter renovating a building.

    • B. 

      The service requires a specialized skill and is provided by someone who possesses the specialized skill, such as a lawyer preparing contracts.

    • C. 

      The service supplements the management function, such as an auditor preparing a program audit, which is not normally done

    • D. 

      All of the above must be met for contributed services to be recognized as a contribution and an expense.


  • 15. 
    Investments in equity securities that have a readily determinable market value and all debt securities of a not-for-profit organization are reported at: 
    • A. 

      Lower of cost or market

    • B. 

      Amortized cost

    • C. 

      Fair value

    • D. 

      Cost


  • 16. 
    An example of an increase in net assets for a not-for-profit organization that would be labeled revenue rather than support is:
    • A. 

      An unconditional promise to give.

    • B. 

      Investment income.

    • C. 

      A restricted gift.

    • D. 

      An allocation of funds from the local United Way organization.


  • 17. 
    A donor provides a large cash contribution that is to be used for acquisition of a new building. Under FASB standards, how would this contribution be reported by a not-for-profit organization on its statement of cash flows?
    • A. 

      Operating activity.

    • B. 

      Investing activity.

    • C. 

      Financing activity.

    • D. 

      Capital and related financing activity.


  • 18. 
    A not-for-profit organization that follows FASB standards must display the changes in all classes of net assets on the:
    • A. 

      Statement of activities.

    • B. 

      Statement of financial position.

    • C. 

      Statement of cash flows.

    • D. 

      Statement of functional expenses.


  • 19. 
     Unrealized gains on the investment portfolio of a nongovernmental not-for-profit organization are:
    • A. 

      Not recognized.

    • B. 

      Reported in the net asset section of the balance sheet.

    • C. 

      Reported according to whether the gains relate to trading, available-for-sale, or held-to-maturity assets.

    • D. 

      Reported on the statement of activities.


  • 20. 
    Which of the following statements is correct regarding reporting of special events and related direct costs under current FASB standards?
    • A. 

      Special events and related direct costs must be reported separately at their gross amounts if they relate to the ongoing major operations of a nonprofit organization.

    • B. 

      Special events revenues are to be reported at goss amounts, even if direct costs are of a peripheral or incidental nature.

    • C. 

      With few exceptions, special events revenues are reported net of related direct costs.

    • D. 

      Expenses of promoting and conducting special events should be netted directly against special events revenue.


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