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Final Exam
- United Together, a labor union, had the following revenues and expenses for the year ended December 31, Year 1:
Receipts:
Per capita dues $680,000
Initiation fees 90,000
Sales of organizational supplies 60,000
Nonexpendable gift restricted by donor for loan purposes for 10 years 30,000
Nonexpendable gift restricted by donor for loan purposes in perpetuity 25,000
Expenses:
Labor negotiations $740,000
Fundraising 100,000
Membership development 50,000
Administrative and general 200,000
Additional information:
The union’s constitution provides that 10 percent of the per capita dues are designated for the Strike Insurance Fund to be distributed for strike relief at the discretion of the union’s executive board.
In United Togethers statement of activity’ for the year ended December 31, Year 1, what amount should be reported under the classification of revenues, gains, and other support wth0Jt donor restrictions?
$740,000
$762,000
$770,000
$830,000
- A nongovernmental not-for-profit organization’s statement of activities is similar to which of the following for-profit financial statements?
Balance sheet
Statement of cash flows.
Statement Of retained earnings.
Income statement.
- A nongovernmental not-for-profit organization received a $2 million gift from a donor who specified it be used to create an endowment fund that would be invested in perpetuity at the end of the year. The income from the fund is to be used to support a specific program in the second year and beyond. An investment purchased with the gift at the beginning of Year 2 earned $40,000. At the end of Year 2, the fair value of the investment was $2,010, 000. is the net effect on net assets with donor restrictions at the end of Year 2?
$0
$10,000 increase.
$40,000 increase.
$50,000 increase.
- The Harrison School of Fine Arts is organized as a not-for-profit institution of higher learning. The Harrison School is required to produce which of the following financial statements?
Statement of Statement of Statement of Statement of
Financial Position Activities Cash Flows Functional Expenses
Yes Yes Yes Yes
Yes Yes No Yes
Yes Yes Yes No
Yes Yes No No
- The Jupiter Children’s Center, a not-for-profit organization, receives State grants to fund its ongoing programming. Grants are annual contracts that are structured as cost reimbursement agreements requiring expenditure of grant funding before revenues are deemed to be earned. Assuming the Jupiter Children’s Center expended all grant funds in accordance with program requirements, the center would likely record grant revenues as:
Revenue with donor restrictions and a reclassification that decreases net assets donor restrictions and increases net assets without donor restrictions.
Support (contribution revenue) without donor restrictions. provided that the center discloses and consistently applies this accounting policy.
Conditional revenue with donor restrictions.
A refundable advance and a reclassification to support without restrictions.
- In the preparation of the statement of activities for a nongovernmental not-for-profit organization, all expenses are reported as decreases in which of the following net asset classes?
Board-designated endowment funds
Net assets without donor restrictions
Net assets with donor restrictions
Board-designated net assets (for future expenditures)
- How should operating expenses for a nongovernmental not-for-profit organization be reported?
Change in net assets donor restrictions.
Change in net assets without donor restrictions.
Change in Board designated net assets (for future expenditures).
Contra-account to associated revenues.
- Applebee Farms, a not-for-profit organization, has received the following support during its fiscal year ended June 30, Year 1:
- A contribution of $300,000 stipulating that the gift is to be used for research.
- A pledge from a long-time benefactor for 250,000 intended for the support of the mission of Applebee Farms. The pledge was collected August 13, Year 1.
- A contribution of $50,000 along with a pledge for an additional $150,000 to be used for programming consistent with the organization’s mission only upon completion of a new research facility. The research facility was 80 percent complete at fiscal year end.
In its June 30, Year 1 financial statements, Applebee Farms would report:
Revenue Without Revenue With
Donor Restrictions Donor Restrictions
$40,000 $700,000
$0 $550,000
$250,000 $350,000
$300,000 $450,000
- A not-for-profit voluntary health and welfare organization should report a contribution for the construction of a new building as cash flows from which of the following in the statement of cash flows?
Operating activities.
Financing activities.
Capital financing activities.
Investing activities.
- Whitestone, a nongovernmental not-for-profit organization, received a contribution in December, Year 1. The donor restricted use of the contribution until March, Year 2. How should Whitestone record the contribution?
Footnote the contribution in Year 1 and record as income when it becomes available in Year 2.
No entry required in Year 1 and record as income in Year 2 when it becomes available.
Report as income in Year 1.
Report as deferred income in Year 1.
- What is a primary purpose and focus of the statement of activities for a nongovernmental, not-for-profit organization?
To demonstrate the ability of the organization to meet donor-imposed restrictions on resources.
To demonstrate how the organization’s resources are used in providing various programs and services.
To provide relevant information about the cash receipts and cash payments of the organization during a period.
To provide a cost-benefit analysis of the use of the organization’s resources.
- Community Enhancers, a nongovernmental not-for-profit organization, received the following pledges:
Without donor restrictions $400,000
With donor restrictions for capital additions 300,000
All pledges are legally enforceable. However. Community’s experience indicates that 5% of all pledges prove to be uncollectible. What amount should Community report as pledges receivable. net of any required allowance account?
$700,000
$665,000
$380,000
$285,000
- How should a nongovernmental, not-for-profit organization report donor-restricted cash contributions for long-term-purposes in its statement of cash flows?
Operating activity inflow.
Investing activity inflow.
Financing activity inflow.
As a noncash transaction.
- A statement of financial position for a nongovernmental, not-for-profit organization reports amounts for which of the following classes of net assets?
Current
Long-term
With donor restrictions
Conditionally restricted
- A donor gives $10,000 to a nongovernmental, not-for-profit organization with instructions that it must be used to fund the organization’s general operating expenses during the following fiscal year. The donation will increase the organization’s:
Net assets without donor restrictions
Net assets donor restrictions
Board-designated net assets (for future expenditures)
Restricted retained earnings
- A statement of activities prepared by a nongovernmental not-for-profit organization is most similar to which of the following financial statements prepared by a for-profit entity?
Income statement
Balance sheet
Statement of cash flows
Statement of changes in stockholders’ equity
- A large not-for-profit organization’s statement of activities should report the net change for net assets that are:
Without Donor Restrictions With Donor Restrictions
Yes Yes
Yes No
No No
No Yes
- What is the primary purpose of the statement of activities of a nongovernmental not-for-profit organization?
To report the change in net assets for the period.
To report the liquidity of the entity as of a specific date.
To report assets, liabilities, and net assets as of a specific date.
To report the cash now position of the entity for the period.
- Arc Hospital received an unconditional pledge for $1 million, which will be paid in four installments of $250,000 over four years.
What amount of installment pledge revenue should be recognized in the second year?
$0
$250,000
$500,000
$1,000,000
- Ragg Coalition. a nongovernmental not-for-profit organization. received a gift of Treasury bills. The cost to the donor vas $20,000. with an additional $500 for brokerage fees that were paid by the donor prior to the transfer of the Treasury bills. The Treasury bills had a fair value of $15,000 at the time of the transfer. At what amount should Ragg report the Treasury bills in its statement of financial position?
$15,000
$15,500
$20,000
$20,500
- Balfour Charities, a not-for-profit organization. received a $200,000 cash donation from Emily Balfour under a charitable remainder annuity trust agreement designating the Balfour Charities as both trustee and remainder beneficiary, The trust agreement specifies that Balfour Charities must both invest the $200,000 and pay $10,000 per year to Roscoe Balfour, Emily’s cousin, until his death. Any funds remaining after Roscoe’s death will be retained by Balfour Charities and used in a manner consistent with their vision. The present value of the annuity payable to Roscoe is $65,000. As a result of this transaction, Balfour would recognize contributions of:
$200,000
$135,000
$65,000
$0
- The League, a not-for-profit organization, received the following pledges:
Without donor restrictions $200,000
With donor restrictions for capital additions 150,000
All pledges are legally enforceable; however. the League’s experience indicates that 10 percent of all pledges prove to be
uncollectible. What amount should the League report as pledges receivable, net of any required allowance account?
$135,000
$180,000
$315,000
$350,000
- During the current year, a nongovernmental, not-for-profit hospital received a gift of $10 million to be used for an addition to the physical therapy unit in addition. the hospital also received an investment valued at $3 million with a donor-imposed restriction allowing only the use of the investment earnings for paying the salary of an additional physical therapist. As Of the end of the current year. a physical therapist had not been hired, and earnings on the investment for the year were $150,000. What amount should be reported as net assets with donor restrictions in the year-end statement of financial position?
$150,000
$10,000,000
$10,150,000
$13,150,000
- A storm damaged the roof of a nongovernmental. not-for-profit organization’s building. A professional roofer repaired the roof at no charge. How should the roof repairs be recognized in the statement of activities?
As an increase in expenses and an increase in contributions from donated services.
As an increase in the building account and an increase in net assets without donor restrictions.
As an increase in fixed assets and an increase in contributions from donated services.
No recognition is required in the financial statements, but a note disclosure is required.
- Cancer Educators, a not-for-profit organization, incurred costs of $10,000 when it combined program functions with fundraising functions. Which of the following cost allocations might Cancer report in its statement of activities?
Program services Fund raising General services
$0 $0 $10,000
$0 $6,000 $4,000
$6,000 $4,000 $0
$10,000 $0 $0
- Hann School, a nongovernmental not-for-profit organization, spent $1 million of cash donor restrictions to acquire land and building a manner consistent with the donor’s stipulations. How should this be reported in the statement of activities?
Increase in net assets without donor restrictions
Increase in net assets with donor restrictions
Decrease in board-designated net assets (for future expenditures)
Decrease in endowment funds
- Financial statements prepared by a voluntary health-and-welfare nongovernmental not-for-profit organization must report expenses by the following classification(s):
Functional Natural
Yes Yes
Yes No
No Yes
No No
- During the current fiscal year. Foxx, a nongovernmental not-for-profit organization. received pledges without donor restrictions of $300,000. Foxx collected $210,000 Of the total pledge. Of the total pledged amount, $200,000 was designated by donors for use during the current year, and $100,000 was designated for next year. Five percent of the pledges are expected to be uncollectible.
What amount should Foxx report as contributions with donor restrictions in the statement of activities for the current year?
$200,000
$190,000
$100,000
$95,000
- During Year 7, Jones Foundation received the following support:
- A cash contribution of $875,000 to be used at the board of directors’ discretion
- A promise to contribute $500,000 in Year 8 from a supporter who has made similar contributions in prior periods
- Contributed legal services with a value of $100,000, Which Jones would have other wise purchased
At what amounts would Jones classify and record these transactions?
Revenues and Gains Without Donor Restrictions Revenues and Gains With Donor Restrictions
$1,375,000 $0
$875,000 $500,000
$975,000 $0
$975,000 $500,000
- A nongovernmental, not-for-profit organization provided the following data in regard to S500,000 of donations received during the year.
Purchase of investments to be held in perpetuity at the donor’s request $100,000
Future repairs to the organization’s building and equipment at the donor’s request 250,000
General operations at the discretion of the board of directors 100,000
Specific program services as indicated by the donor 50,000
In order to properly reflect receipt of the donations, net assets should increase in the amount of:
$400,000 without donor restrictions and $100,000 with donor restrictions.
$150,000 without donor restrictions, $250,000 board-designated net assets (for future expenditures), and $100,000 with donor restrictions.
$100,000 without donor restrictions, $300,000 board-designated net assets (for future expenditures), and $100,000 with donor restrictions.
$100,000 without donor restrictions and $400,000 with donor restrictions.
- During the current year, a voluntary health and welfare organization receives a total of $300,000 pledges without donor restrictions. Of this amount, $100,000 has been designated by donors for use next year to support operations. If the organization collected $200,000 of the total pledge and 15 percent of the pledges are expected to be uncollectible, what amount of support without donor restrictions should the organization recognize in its current year financial statements?
$300,000
$270,000
$200,000
$170,000
- In Year 1. Community Helpers, a private voluntary health and welfare organization, received a bequest of a $100,000 certificate of deposit maturing in Year 11. The testator’s only stipulations were that this certificate be held until maturity and that the interest revenue be used to finance salaries for a preschool program. Interest revenue for Year 11 was $8,000. When the certificate was redeemed, the board of trustees adopted a formal resolution designating 20,000 of the proceeds for the future purchase of equipment for the preschool program.
What should be reported as -contributions without donor restrictions” in the Year 11 statement of activity?
Investment income, $8,000
$20,000
$0
$108,000
- A nongovernmental not-for-profit organization may report on which of the following basis and remain compliance with generally accepted accounting principles (GAAP)?
Cash
Accrual
Modified cash
Modified accrual
- At the beginning of the year, the Baker Fund, a nongovernmental not-for-profit corporation, received a $125,000 contribution restricted to youth activity programs. During the year, youth activities generated revenue of $89,000 and had program expenses of $95,000. What amount should Baker report as net assets released from restrictions for the current year?
$0
$6,000
$95,000
$125,000
- On January 1, Read, a nongovernmental not-for-profit organization. received $20,000 and an unconditional pledge of $20,000 for each of the next four calendar years to be paid on the first day of each year The present value of an ordinary annuity for four years at a constant interest rate of 8 percent is 3.312. What amount of net assets with donor restrictions is reported in the year the pledge was received?
$66,240
$80,000
$86,240
$100,000
- Kind Nurses Assoc. is a voluntary health and welfare organization. Nurses are paid to visit homes of elderly people and are reimbursed for mileage and supplies. Which of the following items should Kind record as a support activity in its disclosure of functional expenses?
Nurses’ mileage expense.
Payment for nurses’ employee benefits.
Payment for nurses’ supplies.
Fundraising costs.
- Which of the following classifications is required for reporting of expenses by all not-for-profit organizations?
Natural classification in the statement of activities or notes to the financial statements.
Functional classification in the statement of activities or notes to the financial statements.
Functional classification in the statement of activities and natural classification in a matrix format in a separate statement
Functional classification in the statement of activities and natural classification analyzed by function in the notes to the
financial statements.
- Which of the following statements is not required of not-for-profit organizations?
Statement of financial position.
Statement of activities.
Statement of cash flows.
Statement of retained earnings.
- The Marble Foundation Inc., a not-for-profit organization, is financially interrelated its beneficiary organization, Boulder University. Receipts of the Marble Foundation would be displayed,’ disclosed in the Boulder University financial statements as:
A note disclosure.
An equity transaction within the net asset classification on the balance sheet
A change in the university’s interest in the foundation on the statement of activities.
An increase and decrease in donor-restricted conditional support.
- Valley’s community hospital normally includes proceeds from sale of cafeteria meals in:
Deductions from dietary service expenses.
Ancillary service revenues.
Patient service revenues.
Other revenues.
- A $100,000 gift was received by Group Home Projects, a nongovernmental not-for-profit organization. Group’s board of directors stipulated that this gift must be invested for a period of four years, with the income to be used for general operations. How should the gift be reported in Group Home’s statement of activities?
Contributions without donor restrictions.
Contributions with donor restrictions.
Contributions without donor restrictions of S25,000 and contributions with donor restrictions of $75,000.
Deferred revenue.
- During the current year. the Finn Foundation, a nongovernmental not-for-profit organization, received a $1,000,000 endowment from Chris. Chris stipulated that the income must be used to provide recreational activities for the elderly The endowment reported income of $80,000 in the current year. What amount of contribution revenue with donor restrictions should Finn report at the end of the current year?
$1,080,000
$1,000,000
$80,000
$0
- A nongovernmental not-for-profit college has a portfolio of bond investments that had an original cost of The
college’s board of trustees voted to hold the principal of this fund intact in perpetuity and designated the earnings to reimburse faculty for travel to academic conferences. During the year, interest of S50,000 was earned in cash. The fair value of the bonds was $1,980,000. What amount should the college report as net assets donor restrictions at yearend?
$0
$1,980,000
$2,000,000
$2,030,000
- The outlays listed above should appear in which expense classifications:
Program Services Support Services
$465,000 $90,000
$715,000 $90,000
$245,000 $340,000
$245,000 $90,000
- Top Notch Golf & Country Club is organized as a not-for-profit organization. The club has experienced rapidly declining membership in recent years and its board of directors has made increased membership a major objective. The club incurred the following outlays at the end of the current fiscal year.
- $250,000 in renovations to locker rooms
- $180,000 for new assistant golf professionals
- $220,000 for upgrades to pro shop inventory
- $65,000 for upscale linens and restaurant supplies
- $95,000 for staff dedicated to membership development
- $55,000 for promotional and fund raising brochures
Which Of the following resources increases the net assets with donor restrictions of a nongovernmental, not-for-profit voluntary health and welfare organization?
Refundable advances for purchasing playground equipment.
Donor contributions to fund a resident camp program.
Membership fees to fund general operations.
Participants’ deposits for an entity-sponsored trip.
- In Year 1, Community Helpers. a private voluntary health and welfare organization. received a bequest of a $100,000 certificate of deposit maturing in Year 11. The testators only stipulations that this certificate be held until maturity and that the interest revenue be used to finance salaries for a preschool program. Interest revenue for Year 11 was $8,000 When the certificate was redeemed. the board of trustees adopted a formal resolution designating S20.000 of the proceeds for the future purchase of equipment for the preschool program.
In regard to the certificate of deposit, what should be reported in the Year 11 statement of activities?
Legacies and bequests, $100,000.
Reclassification from net assets with donor restrictions of $100,000.
Transfer to land building, and equipment fund, $20,000.
Revenues control, $100,000.
- Gridiron University is a private university. A successful alumnus has recently donated $1,000,000 to Gridiron for the purpose of funding a “center for the study of sports ethics.” This donation is conditional upon the university raising matching funds within the next 12 months. The university administrators estimate that they have a 50 percent chance of raising the additional money. How should this donation be accounted for?
As support with donor restrictions
As support without donor restrictions
As a refundable advance
As a memorandum entry reported in the footnotes
- Box, a nongovernmental not-for-profit organization. had the following transactions during the year:
Proceeds from sale of investments $ 80,000
Purchase of property, plant, and equipment $ 10,000
Proceeds from long-term debt $ 100,000
Loss on sale of investment $ 5,000
What amount should be reported as net cash provided by financing activities in Box’s statement of cash flows?
$70,000
$75,000
$80,000
$100,000
- Which of the following normally would be included in other operating revenues of a hospital?
Revenue from educational programs Gifts without donor restrictions
No No
No Yes
Yes No
Yes Yes
- Pahn, a nongovernmental not-for-profit organization, received an unconditional pledge of $50,000. The donor stipulated that the Pledge must be used in the next fiscal year. Pahn received and spent the S50,000 in the next year. For the current fiscal year, what element of Pahn’s statement of financial position increase as a result of the unconditional Pledge?
Cash and cash equivalents
Pledge receivables
Support without donor restrictions
Deferred contributions
Final Exam Answers
- A nongovernmental not-for-profit organization’s statement of activities is similar to which of the following for-profit financial statements?
Balance sheet
Statement of cash flows.
Statement Of retained earnings.
Income statement.
Answer: Income statement.