Gen Purpose Fin Reporting NFPs Flashcards
(35 cards)
A not-for-profit voluntary health and welfare organization received a $500,000 permanent endowment during the year. The donor stipulated that the income must be used for a mental health program. The endowment fund reported $30,000 in investment income. The organization spent $45,000 on the mental health program during the year. What amount of increase in net assets with donor restrictions should the organization report?
A. $455,000
B. $470,000
C. $485,000
D. $500,000
D. $500,000
In this scenario, the VHWO will record the endowment activities as follows:
Net assets with restrictions will increase by $500,000 to reflect the funds donated. The endowment is permanent, which means the principal cannot be spent.
Because the donor stipulated that the endowment’s income must be used for a mental health program (ie, restricted purpose), the $30,000 in investment earnings will increase net assets with restrictions.
Net assets with restrictions will decrease by the $30,000 used for the mental health program. A total $45,000 was expended for the program; therefore, the remaining $15,000 must come from other, unrestricted sources.
Therefore, the VHWO’s net assets with donor restrictions increased by $500,000 ($500,000 + $30,000 – $30,000) in the current year.
Oz, a nongovernmental not-for-profit arts organization, received $50,000 from Ame Company to sponsor a play given by Oz at the local theater. Oz gave Ame 25 tickets, which generally cost $100 each. Ame received no other benefits. What amount of ticket sales revenue should Oz record?
A. $0
B. $2,500
C. $47,500
D. $50,000
B. $2,500
Because NFPs are retarded you include the gift as income.
Azim Services, a nongovernmental not-for-profit organization, received dues of $100 from its members. Azim provided its members with a newsletter that had a $25 value. All other services were valued at $10 per member. What is the amount of contribution made to Azim by each member?
A. $10
B. $25
C. $65
D. $100
C. $65
Azim receives dues of $100 and in return provides each member with a newsletter and other services. Because the newsletter and other services are valued at $35 (25 + 10), the member (ie, resource provider) receives some direct benefit. The amount provided (ie, membership dues) exceeds the fair value received for those items. As a result, Azim will report $65 (100 − 35) of contribution revenue.
How should unconditional pledges received by a nongovernmental not-for-profit organization that will be collected over more than one year be reported?
A. Long-term pledges receivable, valued at the expected collection amount.
B. Pledges receivable, valued at their present values.
C. Deferred revenue, valued at present value.
D. Long-term pledges receivable, valued at the amount pledged.
B. Pledges receivable, valued at their present values.
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 $50,000 in the next year. For the current fiscal year, what element of Pahn’s statement of financial position will increase as a result of the unconditional pledge?
A. Cash and cash equivalents.
B. Pledge receivables.
C. Revenue without donor restrictions.
D. Deferred contributions.
B. Pledge receivables.
In this scenario, a donor pledged an amount to Pahn that will not be received until the following year (ie, timing restriction). This amount is still revenue because no further action is required by Pahn to receive the amount promised (ie, unconditional). To acknowledge the future receipt of cash, Pahn will record a pledge receivable
In a not-for-profit organization, which of the following should be included in total expenses?
Grants to other organizations
Depreciation
A. Yes Yes
B. Yes No
C. No Yes
D. No No
A. Yes Yes
How should a nongovernmental not-for-profit organization classify gains and losses on investments purchased with an endowment fund?
A. Gains may not be netted against losses in the statement of activities.
B. Gains and losses can only be reported net of expenses in the statement of activities.
C. Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of activities as increases or decreases in net assets without donor restrictions.
D. Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of activities as increases or decreases in the endowment fund itself.
C. Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of activities as increases or decreases in net assets without donor restrictions.
A nongovernmental, not-for-profit hospital reported the following information for the year ended December 31:
Gross patient service charges at the hospital’s full established rates $775,000
Credit loss expense 100,000
Difference between billing rates and contracted rates with third-party payors 70,000
Gross patient service charges include charity care of $25,000. What amount should the hospital report as net patient service revenue in its statement of operations for the year ended December 31?
A. $605,000
B. $650,000
C. $680,000
D. $705,000
C. $680,000
It asks for patient service revenue and credit losses would be a separate expense.
What are the three financing activites in CF statement of a NFP?
Donor-restricted contributions for LT purposes
Proceeds from debt
payment of debt
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?
A. Operating activities.
B. Financing activities.
C. Capital financing activities.
D. Investing activities.
B. Financing activities.
At which of the following amounts should a nongovernmental not-for-profit organization report investments in debt securities?
A. Potential proceeds from liquidation sale.
B. Discounted expected future cash flows.
C. Quoted market prices.
D. Historical cost.
C. Quoted market prices.
Which of the following types of information would be included in total net assets in the statement of financial position for a nongovernmental, not-for-profit organization?
A. Total current net assets and total other assets.
B. Total current assets and assets with donor restrictions.
C. Net assets without donor restrictions and net assets with donor restrictions.
D. Net assets without donor restrictions, net assets with donor restrictions, and total current assets.
C. Net assets without donor restrictions and net assets with donor restrictions.
During the current fiscal year, Foxx, a nongovernmental not-for-profit organization, received unconditional pledges of $300,000. Of the 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 restricted support (contributions) in the statement of activities for the current year?
A. $200,000
B. $190,000
C. $100,000
D. $95,000
D. $95,000
In this scenario, Foxx received a pledge of $300,000, of which 5% is expected to be uncollectible. Of the amount pledged, $200,000 ($190,000 net of its share of uncollectible allowance) can be spent in the current year (ie, unrestricted) and $100,000 ($95,000 net of its share of uncollectible allowance) cannot be spent until the following year (ie, time restriction). Foxx will therefore record the following entry:
Pledge receivable 300,000
Allowance for uncollectible pledges ($300,000 × 5%)
15,000
Contribution revenue without donor restrictions [$200,000 × (1 − 0.05)]
190,000
Contribution revenue with donor restrictions [$100,000 × (1 − 0.05)]
95,000
A statement of financial position, which reports net assets with donor restriction and net assets without donor restriction, is required for which one of the following organizations?
I. A public university
II. A private, not-for-profit hospital
A. I and II.
B. I only.
C. Neither I nor II.
D. II only.
D. II only.
Correct! ASU 2016-14, which requires reporting of net asset contributions with donor restrictions and without donor restrictions, among other items, applies only to private not-for-profit organizations. Governmentally-affiliated, not-for-profit organizations follow guidance promulgated by GASB, not FASB. Therefore, reporting of net assets with donor restrictions and net assets without donor restrictions IS required for a private, not-for-profit hospital, but is NOT required for a public university, which is supported by government.
A nongovernmental, not-for-profit entity recorded the following transactions during its first year of operation:
Donor A contributed $1,000,000 to acquire the necessary assets to expand the entity’s services to a nearby city. The project was completed during Year 1 at total cost of $1.25 million.
The entity’s board of directors designated $250,000 of net assets to complete the expansion project.
Donor B contributed $500,000 to establish a perpetual endowment fund whose investment returns must be used for the maintenance of a building owned by the entity.
What amount should be reported as the balance in net assets with donor restrictions in the year-end statement of financial position?
A. $500,000
B. $750,000
C. $1,500,000
D. $1,750,000
A. $500,000
In this scenario, the NPO will report the donations as follows:
The $1,000,000 contributed by Donor A was initially subject to a donor-imposed restriction (ie, had to be used to acquire assets for a specific project). During the year, the NPO satisfied the restriction by completing the project. Because the restriction was satisfied, the funds are reclassified from with donor restrictions to without donor restrictions
The $250,000 to complete the expansion project was designated by the board of directors, not a donor. Therefore, this amount is without donor restrictions
The $500,000 contributed by Donor B is a perpetual endowment. These funds (the endowment’s principal) have a donor-imposed restriction because the NPO must retain and invest them
How should operating expenses for a nongovernmental not-for-profit organization be reported on the statement of activities?
A. Cash flows from operating activities.
B. Change in net assets without donor restrictions.
C. Net assets released from donor restrictions.
D. Net assets without donor restrictions.
B. Change in net assets without donor restrictions.
On December 31, 20X1, the Board of Trustees of a private, not-for-profit college designated $5,000,000 of net assets without donor restriction for the construction of an addition to the music building. What effect does this board designation have on the college’s categories of net assets shown on the statement of financial position on December 31, 20X1?
Net assets Without Donor Restriction Net Assets with Donor Restriction
No effect No effect
Decrease Increase
Decrease No effect
No effect Increase
A. Row A
B. Row B
C. Row C
D. Row D
A. Row A
Correct! Since the restriction is an internal, not an external, restriction, the classification net assets does not change.
A donor gifted a rare antique with a fair value of $6,000 to a not-for-profit museum. The donor previously paid $8,000 for the antique. The donor gave the antique to the museum with the stipulation that the antique must be held for display to the public as part of the museum’s permanent collection and cannot be sold. The museum reported the donation as an $8,000 increase to net assets. Did the museum account for the donation of the antique correctly?
A. Yes, because the antique is recognized at the donor’s carrying value.
B. No, because the antique should be recognized as an increase to the investment trust fund.
C. No, because the antique should be recognized at fair value.
D. No, because the antique should not be recognized on the financial statements.
D. No, because the antique should not be recognized on the financial statements.
Typically, noncash donations of property (one type of gifts in kind) are initially recorded as a debit to assets and a credit to contribution revenue (ie, an increase in net assets) at the item’s FV on the date received (Choice A). However, a special rule applies to certain noncash donations—donations of collectibles (eg, art, artifacts, antiques). An NPO need not recognize a donated collectible on its F/S if:
The collectible is intended to be used only for display or research purposes,
The collectible is protected and preserved, and
If the collectible is sold, the proceeds are either reinvested or used for the care of existing collectibles.
Nongovernmental not-for-profit organizations are required to report their financial statements on
A. A current financial resources measurement focus.
B. An economic resources measurement focus.
C. A cash measurement focus.
D. None of the above.
B. An economic resources measurement focus.
Formula for contribution revenue is?
FV of amount received - FV of resources given up
A nongovernmental, not-for-profit organization receives $150 from a donor. The donor receives two tickets to a theater show and an acknowledgment in the theater program. The tickets have a fair value of $100. What amount is recorded as contribution revenue?
A. $0
B. $50
C. $100
D. $150
B. $50
In this scenario, the NPO engaged in an exchange but must recognize contribution revenue for any amount received in excess of the FV of the theater tickets provided to the donor (Choice C). Therefore, $50 (150 received − 100 in tickets provided) is contribution revenue to the NPO.
The net asset reclassifications of a nongovernmental not-for-profit organization would be reported on which of the following?
A. Statement of financial position.
B. Statement of activities.
C. Statement of cash flows.
D. Statement of functional expenses.
B. Statement of activities.
Although net assets with and without restrictions are reported on the statement of financial position, any reclassifications between the two must first be reported on the statement of activities. Net assets released are then closed each year to net assets, similar to how revenue and expense accounts are closed.
What is the appropriate characterization of the net assets of a nongovernmental not-for-profit organization?
A. Residual interest.
B. Equity interest.
C. Donors’ equity.
D. Owners’ equity.
A. Residual interest.
A cash donation from a resource provider should be reported as contribution revenue by a recipient organization when which of the following exists?
A. The recipient organization and beneficiary are not financially interrelated.
B. The resource provider does not allow the recipient organization to use the donation for beneficiaries other than those specified by the resource provider.
C. The resource provider does not grant variance power to the recipient organization to redirect the donation to other beneficiaries.
D. The resource provider grants variance power to the recipient organization to redirect the donation to other beneficiaries.
D. The resource provider grants variance power to the recipient organization to redirect the donation to other beneficiaries.
