ACCT 401 Test #3

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Which of the following is not a true statement about tax-exempt organizations?
A) They must be organized to serve the charitable needs of the public at large.
B) They must first become a not-for-profit corporation or charitable trust.
C) They are permitted to do some political lobbying if guidelines are met.
D) Their unrelated business income is taxed at corporate income tax rates.
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Which of the following is not a true statement about tax-exempt organizations?
A) They must be organized to serve the charitable needs of the public at large.
B) They must first become a not-for-profit corporation or charitable trust.
C) They are permitted to do some political lobbying if guidelines are met.
D) Their unrelated business income is taxed at corporate income tax rates.
A) They must be organized to serve the charitable needs of the public at large.
Which of the following is a reason why a not-for-profit organization might fail to qualify for tax-exempt status?
A) It is operated primarily for the benefit of its members.
B) Its officers are paid excessive wages.
C) Its primary purpose is to promote the election of a senate candidate.
D) It has unrelated business income.
C) Its primary purpose is to promote the election of a senate candidate.
The Internal Revenue Service may impose intermediate sanctions on all of the following transactions between a not-for-profit organization and its executive officer except:
A) Excessive compensation.
B) More than the fair rental value for property owned by the officer.
C) A bargain on the sale of assets.
D) Fringe benefits comparable to those given to all employees.
D) Fringe benefits comparable to those given to all employees.
The organization Shelter the Needy is completing its Form 990 and it is trying to determine if it has unrelated business income on which it must pay taxes. Which of the following would be subject to unrelated business income taxes?
A) The Shelter sold art work it had received as a donation.
B) Volunteers raised several thousand dollars in a marathon sponsored for the benefit of the Shelter.
C) The Shelter earned revenues from the self-service laundry facilities it provides for the benefit of tenants of its low-income temporary housing facilities.
D) None of the items listed would be subject to unrelated business income taxes.
D) None of the items listed would be subject to unrelated business income taxes.
A good measure that can be used to help assess whether a not-for-profit organization is spending too much on overhead, such as general and administrative expenses, is:
A) Percentage of unrestricted net assets to operating expenses.
B) Current ratio.
C) Total revenues divided by total expenses.
D) Percentage of program expenses to total expenses.
D) Percentage of program expenses to total expenses.
A good measure of whether a not-for-profit organization is a "going concern" and can sustain its operations into the future is:
A) Total revenues divided by assets.
B) Percentage of unrestricted net assets to operating expenses.
C) Percentage of program expenses to total expenses.
D) Fund-raising expenses as a percentage of public support.
B) Percentage of unrestricted net assets to operating expenses.
A good measure of whether a not-for-profit organization is "liquid" and can meet its short-term obligations is:
A) Percentage of program expenses to total expenses.
B) Total revenues divided by total expenses.
C) Current assets divided by current liabilities.
D) Percentage of unrestricted net assets to operating expenses.
C) Current assets divided by current liabilities.
A good measure of whether a not-for-profit organization is efficient in its fund-raising efforts is:
A) Fund-raising expenses as a percentage of public support.
B) The ratio of program expenses to number of clients served.
C) Total revenues divided by total expenses.
D) Percentage of program expenses to total expenses.
A) Fund-raising expenses as a percentage of public support.
A good measure of whether a not-for-profit organization is operating its programs efficiently is:
A) Fund-raising expenses as a percentage of public support.
B) The ratio of program expenses to number of clients served.
C) Total revenues divided by total expenses.
D) Percentage of program expenses to total expenses.
B) The ratio of program expenses to number of clients served.
Which of the following defines an appeal to the public to take action on a legislative matter?
A) Grass-roots lobbying.
B) Propaganda.
C) Lobbying.
D) Political influence.
A) Grass-roots lobbying.
An individual can generally receive a tax deduction for contributions to which type of not-for-profit organization? A) 501(c)(1) organization. B) 501(c)(3) organization. C) 527 organization. D) Any not-for-profit organization granted tax exemption by the IRS.B) 501(c)(3) organization.Definition: A not-for-profit exempt under IRC Sec. 501(c)(3) that receives most of its support from a small number of donors or investment income than it does from the public at large. Term Options: A. Unrelated business income B. Public charity C. Charitable solicitation D. Lobbying E. Debt financed income F. Private foundation G. PropagandaF. Private foundationDefinition: A direct request for credit or financial assistance that will be used for the 501(c)(3)'s mission. Term Options: A. Unrelated business income B. Public charity C. Charitable solicitation D. Lobbying E. Debt financed income F. Private foundation G. PropagandaC. Charitable solicitationDefinition: Information that is skewed toward a particular belief with little basis in fact. Term Options: A. Unrelated business income B. Public charity C. Charitable solicitation D. Lobbying E. Debt financed income F. Private foundation G. PropagandaG. PropagandaDefinition: Gross income from a trade or business regularly carried on by a tax-exempt organization. Term Options: A. Unrelated business income B. Public charity C. Charitable solicitation D. Lobbying E. Debt financed income F. Private foundation G. PropagandaA. Unrelated business incomeDefinition: Contacting elected officials to encourage specific legislative action. Term Options: A. Unrelated business income B. Public charity C. Charitable solicitation D. Lobbying E. Debt financed income F. Private foundation G. PropagandaD. LobbyingUnder FASB standards how would a not-for-profit organization recognize a conditional pledge? A) Debit Pledges Receivable and credit Contributions—With Donor Restrictions. B) Debit Pledges Receivable and credit Deferred Contributions. C) Debit Conditional Pledges Receivable and Credit Deferred Contributions. D) It would not recognize the conditional pledge until pledge conditions are substantially met.D) It would not recognize the conditional pledge until pledge conditions are substantially met.According to the FASB Codification, 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 given conditions must be met for contributed services to be recognized as a contribution and an expense.B) The service requires a specialized skill and is provided by someone who possesses the specialized skill, such as a lawyer preparing contracts.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.C) Financing activity.According to the FASB, net assets with donor restrictions are released from restrictions: A) At the end of each fiscal year. B) As assets are spent for the purposes intended by the donor. C) When funds are returned to the donor. D) When all donor conditions have been met.B) As assets are spent for the purposes intended by the donor.A local philanthropist made an unconditional pledge to donate $100,000 to a not-for-profit organization to be paid in five equal installments of $20,000 beginning in two years. Under FASB standards the pledge would be recognized as: A) A contribution of $20,000 in each of the five years a contribution is made. B) A contribution of $100,000 in the year the pledge is made, adjusted for the estimated uncollectible amount. C) Deferred support of $100,000 in the year the pledge was made. D) A contribution of $100,000 in the year the pledge was made, discounted for the difference between the pledge and its present value.D) A contribution of $100,000 in the year the pledge was made, discounted for the difference between the pledge and its present value.According to the FASB, a not-for-profit arts organization would report the account Provision for Uncollectible Pledges as which of the following? A) Expense. B) Contra revenue. C) Contra asset. D) FASB allows management to determine its policy for reporting the Provision for Uncollectible Pledges.A) Expense.Which of the following is not one of the criteria specified in the FASB Codification for determining whether joint costs with a fund-raising appeal can be reported with program expenses rather than as fund-raising expenses? A) Purpose. B) Audience. C) Time period. D) Content.C) Time period.A local CPA volunteered his time to prepare the Form 990 for an after-school development organization that serves disadvantaged children. If the services had not been donated the organization would have had to hire a CPA to prepare the return. In accordance with the FASB Codification, the value of the CPA's time devoted to helping the organization should be recorded as: A) Contribution—With Donor Restrictions. B) Support Expense. C) Machinery & Equipment. D) It would not be recorded.B) Support Expense.Definition: Unrestricted net assets that the governing body decides to set aside for specific purposes Term Options: A. Nonexchange transactions B. Net assets with donor restrictions C. Collections D. Variance power E. Exchange transactions F. Board-designated net assets G. Endowment H. Promise to giveF. Board-designated net assetsDefinition: The unilateral power of an organization to redirect donated assets to a different beneficiary than initially indicated by the donor Term Options: A. Nonexchange transactions B. Net assets with donor restrictions C. Collections D. Variance power E. Exchange transactions F. Board-designated net assets G. Endowment H. Promise to giveD. Variance powerDefinition: Net assets for which the donor has indicated use in a future period or for a particular purpose Term Options: A. Nonexchange transactions B. Net assets with donor restrictions C. Collections D. Variance power E. Exchange transactions F. Board-designated net assets G. Endowment H. Promise to giveB. Net assets with donor restrictionsDefinition: Transactions in which the donor derives no direct tangible benefits Term Options: A. Nonexchange transactions B. Net assets with donor restrictions C. Collections D. Variance power E. Exchange transactions F. Board-designated net assets G. Endowment H. Promise to giveA. Nonexchange transactionsDefinition: Works or art, historical treasures, or similar assets held and protected for public exhibition, and, if sold, proceeds would be used to acquire similar assets Term Options: A. Nonexchange transactions B. Net assets with donor restrictions C. Collections D. Variance power E. Exchange transactions F. Board-designated net assets G. Endowment H. Promise to giveC. Collections