Government and Not For Profit Study for test 4 (28.1-28.3)
Terms in this set (60)
Performance indicators similar to a business enterprise's profit are
not ordinarily considered one of the major distinguisting characteristics of nonbusiness entities.
Which of the following is a characteristic of nonbusiness entities?
Both nonbusiness and business entities use scarce resources in the production and distribution of goods and services.
Net assets is an element of the financial statements of not for profit entities. It
is the residual interest in the assets of an NFP after subtracting its liabilities.
For external reporting purposes, the not for profit reporting model requires information about
The entity as a whole but not about individual funds.
GAAP applying to financial statements of not for profits entities focus on
Basic information for the entity as a whole.
Under what condition will Forkin be allowed to use "operating profit" and to separate its recurring items from its nonrecurring items in its statement of activities
the entity reports the change in unrestricted net assets for the period
In a statement of financial position, a not for profit entity should report amounts for which of the following classes of net assets?
Unrestricted, Temporarily restricted, Permanently restricted
A NFP may classify its assets and liabilities as
current or noncurrent
An endowment restricted to the purchase of endowment securities is
is not classified as current.
In its statement of activities, a not for profit entity may report expenses as a decrease in which of the flooing classes of net assets
Permanently Restricted- No
Temporarily Restricted- No
In a statement of activities, revenues and expenses are reported as
Revenues may be reported as increases in
either unrestsricted or restricted net assets.
Investment Revenues reported as increases in restricted or unrestricted net assets may be reported
net of related fees such as custodial fees and investment advisory fees if these fees are disclosed either on the face of the statement or in the related notes.
Pharm, a nongovernmental not for profit entity, is preparing its year end financial statements. What statement is required?
Statement of cash flows
A complete set of inancial statement of a NFP includes
a statement of financial position as of the end of the reporting period, a statement of activities, a statement of cash flows for the reporting period , and accompanying notes.
Depreciation should be recognized in a religious entity's genral purpose enternal financial statements for which asset?
the house of worship
Health Policy Foundaation, a voluntary health and welfare entity supported by contribution from the general public, included the following costs in its statement of functional expenses for the year:
The functional expenses for program services included
administrative expenses are classified as
supporting services expense
Functional expenses recorded in the general ledger of ABC, a nongovernmental not for profit entity are as follows:
soliciting members 45,000
Printing brochures 30,000
soliciting membership dues 25,000
maintaining donar list 10,000
What amount should be reported as fund raising expense?
Management and general, fund-raising, and membership development activities are considered
Fund raising expenses include
maintaining donor lists
soliciting members and dues, and printing membership brochures are
membership development activities
Revenues from exhange transactions are recognized in accordance with
The full amount of tuition assessed is reported as
revenue for the period
Tuition waivers, scholarships and like items are recorded as
Cancer Educators, a not for profit entity, incurred costs of 10,000 in its combined program services and fund raising activites. Which of the following cost allocations might cancer report in its statement of activities?
Program Services- 10,000, Fundraising -0, General Services-0
In year 1, a nonprofit trade association enrolled five new member companies, each of which obligated to pay nonrefundable initiation fees of 1,000. These fees were receivable by the association in year 2. Three of the new members paid the initiation fees in year 2, and the other two new paid in year 3. What amount of initiation fees from these five new members should thee association recognize as revenue in year 2?
When are nonrefundable initiation and life membership fees recognized as revenue?
when they are receivable if future dues and fees can be reasonably expected to cover the costs of the entity's services. Otherwise, they are amortized to future period.
Membership dues received or receivable in exchange transactions that relate to several accounting periods
should be allocated and regnized as revenue in those periods.
Supporting services expenses do not related to the primary mission of the entity and are
subdivided into three categories. 1.) management and general expense, 2.) fund raising expenses 3.) membership development costs.
Management and general expenses should be reported
as part of supporting services.
Unsolicited merchandise sent to encourage contributions are classified as
fund raising costs in the society's statement of activities.
Program service fees relate directly to
the primary purpose or mission of the entity.
What value are contributions recorded at when received?
An exhaustible fixed asset with an estimated useful life of 10 years and no salvage value that cost the donor 20,000 and fair value at the date of the gift was 30,000. should recognize what amount of depreciation in its current year financial statements?
3,000= (30,000 fair value-0 salvage value)+ 10 years)
A large not for profit entity's statement of activities should report the net change for net assets that are
unrestricted-yes, and permanetly restricted-yes
Labor negotiations are classified as
Program service expenses relate directly to
primary mission of the NFP.
Fund-raising, membership development , admistriative costs, and fund raising relate
to supporting services expenses.
restricted support can included
temporary and ppermanent assets.
All expenses are rported as decreases in
unrestricted net assets
The purchase of a truck for a non governmental not for profit entity is a
cash outflow from an investing activity
A freezer costing 150,000 for storing food for the soup kitchen must be
In a not for prot entity, which of the following should be included in total expenses?
Grants to other organizations-Yes
How should operating expenses for a non governmental not for profit organization be reported
as a change in unrestricted net assets.
Nongovernmental not for profit organizations are required to provide which of the following external financial statements?
Statement of financial position, statement of activites, statement of cash flows.
Fenn Museum, a nongovernmental NFP organization, had the following balances in its statement of functional expenses:
Management and general 200,000
What amount should Fenn report as expenses for support services?
Support services include
management and general, fundraising, and membership development
Education and research are
most likely program services
Program services relate to the NFP's
mission or service delivery
Unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets
will be included in total net assets in the statement of financial position for a nongovernmental NFP organization.
According to GAAP, accounting for contributions received and contributions made should be classified by not for profits as
Pica, a nongovernmental not for profit entity received unconditional promises of 100,000 expected to be collected within 1 year. Pica received 10,000 prior to year end. They anticipate collecting 90% of the contributions and has a June 30 fiscal year end. What amount should Pica record as contribution revenue as of June 30?
90,000 (100,000 * 90% collection percentage)
On December 31, year 3, Dahlia, a nongovernmental NFP entity, purchased a vehicle with 15,00 unrestricted cash and received a donated second vehicle having a fair value of 12,000. Dahlia expects each vehicle to provide it with equal service value over the next 5 years and then to have no residual value. They have an accounting policy that implies a time restriction on gifts of long-lived assets. In dahilia's year 4 statement of activities, what depreciation expense should be included under changes in unrestricted net assets?
5,400 (15,000 + 12,000) / 5 years useful life
The art museum, a nfp entity, received a contribution of historical artifacts. It need not recognize the contribution if the artifacts are to be sold and the proceeds used to
acquire other items for collections.
Contributions of such items as art works and historical treasures need not be capitalized and recognized as revenues if they are added to collections that are
1.) subject to a policy that requires the proceeds of sale of collection items to be used to acquire other collection items 2.) protected, kept unencumbered, cared for, and preserved, and 3.) held for public exhibition,education, or research for public service purposes rather than financial gain.
If proceeds for a sell of a valuable artifact are used to support general activities of a nfp organization, or repair existing buildings, or purchase building
the contribution must be recognized.
How should a nongovernmental not for profit organization classify gains and losses on investments purchased with permanently restricted assets?
Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of activities as increase or decreases in unrestricted net assets.
Which of the following resources increases the temporarily restricted net assets of a nongovernmental, not for profit voluntary health and welfare organization?
Donor contributions to fund a resident camp program.
During the current year, Mill Foundation, a nongovernmental nfp entity, received 100,000 in unrestricted contribution from the general public. Mill's board of directors stipulated that 75,000 of these contributions would be used to create an endowment. At the end of the current year, how should Mill report the 75,000 in the net assets section of the statement of financial position.
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