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Question(s) / Instruction(s):

     21.     Not-for-profit colleges and universities are required to follow the accounting standards of which standard-setting body?
          a.     FASB
          b.     GASB
          c.     GASAC
          d.     PCAOB

 

     22.     A not-for-profit arts organization receives a $300,000 gift from a donor who specifies that the gift must be maintained in perpetuity, and the income from the gift is to be used only to take disabled persons to the theater. How should the entity report the $300,000 gift in the net asset section of its statement of financial position?
          a.     as unrestricted
          b.     as temporarily restricted
          c.     as restricted for programs for the disabled
          d.     as permanently restricted


     

     23.     A not-for-profit arts organization receives a $300,000 gift from a donor who specifies that the gift must be maintained in perpetuity, and the income from the gift is to be used only to take disabled persons to the theater. The entity derives $20,000 from investing the gift, but has not spent it by year-end. How should the entity report the $20,000 of resources in the net asset section of its statement of financial position?
          a.     as unrestricted
          b.     as temporarily restricted
          c.     as permanently restricted
          d.     as permanently restricted, with a note describing how the resources will be used

     24.     A not-for-profit museum holds a valuable collection of art works. On reviewing the museum's financial statements, a new trustee notices that the statement of financial position contains no line item for inventory of art works. He is told by the accountant that the museum has never taken an inventory because "it would cost too much." What are the accounting requirements regarding capitalization of the art works?
          a.     All collections of art works must be capitalized, regardless of the circumstances.
          b.     Collections of art works are not required to be capitalized under any circumstances.
          c.     If collections of art works meet certain criteria (such as being protected and preserved), they must be capitalized.
          d.     If collections of art works meet certain criteria (such as being protected and preserved), the museum has an option either to capitalize or not capitalize them.

 

     25.     A not-for-profit museum holds a collection of historical treasures. It manages the treasures in a manner that meets all three criteria permitting the option to either capitalize the collection or not. The museum has chosen not to capitalize its collection. It then receives a donation of several items that it intends to sell in to help meet operating expenses. How should the museum account for the donated items?
          a.     It must recognize the fair value of the treasures as revenues or gains and assets when it receives the donation.
          b.     It has an option either to recognize or not to recognize the fair value of the treasures as revenues or gains when it receives the donation.
          c.     It may not recognize a revenue or gain until it sells the treasures.
          d.     It must disclose the donation in the notes to the financial statements, but it may not recognize a revenue or gain until it sells the treasures.

 


     
     26.     A not-for-profit entity receives a donation of 100 shares of securities listed on the New York Stock Exchange. As a general rule, when it prepares its statement of financial position at year-end, the entity must report the securities at:
          a.     their fair value at time of donation
          b.     their fair value at date of the statement of financial position
          c.     the lower of their fair value at date of donation or their fair value at date of the statement of financial position
          d.     the lower of the cost to the donor or the fair value at date of the statement of financial position.

 

     27.     A not-for-profit museum owns a building and a large collection of art works. Both the building and the art works are capitalized on the entity's statement of financial position. What is the general rule regarding depreciation of the building and the art works?
          a.     The building must be depreciated, but the art works cannot be depreciated.
          b.     Both the building and the art works must be depreciated.
          c.     Neither the building nor the art works can be depreciated.
          d.     The building must be depreciated, but the art works need not be depreciated if their estimated useful lives are extraordinarily long and the entity has the technological and financial capacity to preserve them.

 

     28.     On March 1, 2008, a not-for-profit organization received a donation of securities worth $4,500. When it prepared its financial statements at December 31, 2008, the securities had a fair value of $5,200. When it sold the securities on June 30, 2009, it received $4,600. The entity's accounting procedures call for reporting all unrealized and realized gains and losses in a single account. How should it report its gains and losses in 2008 and 2009?
          a.     no change in 2008; a gain of $100 in 2009
          b.     a gain of $100 in 2008; no change in 2009
          c.     a gain of $700 in 2008; a loss of $600 in 2009
          d.     no change in 2008; a loss of $600 in 2009

 

 

 

 

     
     29.     In not-for-profit accounting, under what circumstances does a reclassification occur?
          a.     Net assets of restricted resources are released from time or purpose restrictions.
          b.     Unrestricted net assets are reclassified to temporarily restricted net assets.
          c.     Resources of the current unrestricted fund are transferred to the land, building and equipment fund.
          d.     A pledge previously classified as a "conditional promise" becomes "unconditional."

 

     30.     A donor had previously donated $2,000 to a not-for-profit entity, stipulating that the gift must be used to finance the annual Easter festival. The festival is held and the gift is used for the stipulated purpose. Which of the following best describes the effect of the journal entries needed to record the expense resulting from use of the gift?
          a.     An expense is reported in the temporarily restricted column of the statement of activities.
          b.     An expense is reported in the temporarily restricted column of the statement of activities, temporarily restricted net assets are increased, and unrestricted net assets are decreased.
          c.     An expense is reported in the unrestricted column of the statement of activities.
          d.     An expense is reported in the unrestricted column of the statement of activities, unrestricted net assets are increased, and temporarily restricted net assets are decreased.

 

     31.     A not-for-profit organization uses fund accounting. Which of the following transactions is likely to be accounted for in a Restricted Current Fund?
          a.     a donation of $10,000 that may be used for any purpose designated by the trustees
          b.     a donation of $50,000 that must be used to purchase a new building
          c.     a donation of $500,000 that must be kept intact in perpetuity
          d.     a grant of $30,000 that must be used to operate a day-care center for one year

 

 

 

 

 


     
     32.     A not-for-profit university uses fund accounting. The university's governing board decides to set aside $500,000 in a separate fund called the Student Performance Quasi-Endowment Fund, the income of which will be used to finance a long-term study on the career paths of the university's graduates. In which net asset classification of the university's statement of financial position should this fund be reported?
          a.     Unrestricted
          b.     Temporarily restricted
          c.     Permanently restricted
          d.     Endowment funds

 

     33.     A not-for-profit university uses fund accounting. It maintains a Loan Fund to account for its extensive program of financial assistance to students. The Loan Funds are derived from many sources, including both donations and amounts set aside by the university's governing board. When it prepares its statement of financial position, how should the university classify the net assets of the Loan Fund?
          a.     All net assets should be classified as temporarily restricted.
          b.     All net assets should be classified as permanently restricted.
          c.     Net assets should be classified as either temporarily or permanently restricted, depending on the restrictions imposed by the governing board and the donors.
          d.     Net assets set aside by the governing board should be classified as unrestricted, and net assets from donations should be classified as temporarily or permanently restricted, depending on the nature of the donor-imposed restrictions.

     34.     Diet for Life, a not-for-profit entity devoted to informing the public about the hazards of poor nutrition, sends out brochures to a large number of doctors, urging that the brochures be placed in the doctors' waiting rooms. The four-page brochure contains a description of good eating habits and nutritious foods, but half of the last page contains an appeal for funds, in relatively large type. How should the entity report the $30,000 expense of preparing, printing, and mailing the brochure in its statement of activities?
          a.     The entire $30,000 must be reported as a fund-raising expense.
          b.     The entire $30,000 must be reported as a program expense.
          c.     The $30,000 should be allocated between fund-raising and program expenses, using appropriate cost accounting techniques.
          d.     The $30,000 should be reported under the caption "Program and fund-raising expenses."

 

     

     35.     A not-for-profit secondary school sends a 8-page brochure to the parents and alumni of the school. The brochure describes the school's programs and discusses the achievements of some of its graduates. Five pages list the names of all contributors during the previous year and the last page contains an appeal for funds. How should the organization report the expense of printing and mailing the brochure?
          a.     All costs should be reported as program expenses.
          b.     All costs should be reported as fund-raising expenses.
          c.     The costs should be allocated between program and fund-raising expenses, using appropriate cost accounting techniques.
          d.     All costs should be reported under a single caption "Program and fund-raising expenses."

 

     36.     A not-for-profit entity that conducts numerous programs receives investments as a donation. The donor, in a letter accompanying the donation, states that the principal of the donation must be maintained intact permanently, and that the income from the investment must be used to finance research in multiple sclerosis. If the entity receives income of $8,000 from these investments, how should be income be reported?
          a.     as an increase in unrestricted net assets
          b.     as an increase in temporarily restricted net assets
          c.     as an increase in permanently restricted net assets
          d.     as an increase in any of the net asset classifications directed by the entity's trustees


     
     37.     A not-for-profit entity receives equipment having a fair value of $50,000 as a gift. How should the gift be reported in the entity's financial statements?
          a.     as an asset and as an increase in permanently restricted net assets
          b.     as an asset and as an increase in unrestricted net assets
          c.     as a footnote only, because gifts of equipment are not be reported on the face of financial statements
          d.     as an asset and as an increase in temporarily restricted net assets


     38.     Which of the following is true regarding the Financial Accounting Standards Board requirements for a not-for-profit entity's accounting and financial reporting?
          a.     Both fund accounting and reporting by net asset classification are required.
          b.     Neither fund accounting nor reporting by net asset classification are required.
          c.     Fund accounting is required, but reporting by net asset classification is not required.
          d.     Fund accounting is not required, but reporting by net asset classification is required.

     

     39.     Which of the following is an example of a mandatory transfer in college and university accounting?
          a.     a transfer to a Plant Fund to set aside amounts that will be used to pay debt service in accordance with a clause in a bond agreement
          b.     a transfer to a Plant Fund based on a decision by the Board of Trustees to build a new school of engineering
          c.     a transfer to a Plant Fund based on a decision by management to build new box seats in the football stadium for major donors
          d.     a reclassification from temporarily restricted to unrestricted net assets

 

     40.     Which of the following best describes standards for reporting expenses by function (such as instruction and research) or by natural classification (such as salaries and supplies) in the statement of activities prepared by colleges and universities?
          a.     all expenses must be reported by function on the face of the statement.
          b.     all expenses must be reported by natural classification on the face of the statement.
          c.     they may report by either method on the face of the statements; if they report by natural classification on the face, they must report functional expenses in the notes.
          d.     colleges and universities may report by either method on the face of the statement.

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