Advanced Accounting - Final Exam
The Financial reporting for private not-for-profit entities primarily focuses on:
a) Basic information for the organization as a whole
b) Standardization of the fund information that is reported
c) Inherent differences of various not-for-profit entities that impact reporting presentations
d) Distinctions between current fund and non-current fund Presentations - ANS a) Basic
information for the organization as a whole
A statement of activities shows account balances in two separate columns. How are these
columns labeled?
a) Current and noncurrent
b) Temporary and permanent
c) Without donor restrictions and with donor restrictions
d) Monetary, non-monetary, leveraged - ANS c) Without donor restrictions and with donor
restrictions
What are the three types of restricted net assets?
a) Current, non-current, structural
b) Purpose, time, permanent
c) Immediate, longer than one year, longer than five years
d) Monetary, non-monetary, leveraged - ANS b) Purpose, time, permanent
Why is a private not-for-profit entity more likely to use the direct method of reporting operating
activity cash flows than a for-profit business would be?
a) The direct method is the traditional approach for private not-for-profit entities
b) An indirect method reconciliation does not have to be included as it does with for-profit
entities
c) The indirect method does not conform as easily with a private not-for-profit entity and its
operations
d) The direct method is likely to show a more positive amount of operating activity cash inflows -
ANS b) An indirect method reconciliation does not have to be included as it does with for-profit
entities
In Year 6, a donor gives $112,000 to a private not-for-profit entity to enable it to buy a new bus
for transportation purposes. Near the end of Year 7, this money is used for the stipulated
purpose. The donor made no provisions about the accounting for this acquisition. Which of the
following is true about the statement of activities for Year 7?
a) Net assets without donor restrictions increased by $112,000
b) Net assets with donor restrictions did not change
c) Net assets without donor restrictions did not change
,d) Net assets with donor restrictions goes up by $112,000 and also down by $112,000 - ANS a)
Net assets without donor restrictions increased by $112,000
In year 6, a donor gives $112,000 to a private not-for-profit entity to enable it to pay the salary of
a new doctor to be hired by the organization. Near the end of Year 7, this money is used for the
stipulated purpose. Which of the following is true about the statement of activities for Year 7?
a) Net assets with donor restrictions increased by $112,000
b) Net assets with donor restrictions did not change
c) Net assets without donor restrictions goes up by $112,000 and also down by $112,000
d) Net assets with donor restrictions goes up by $112,000 and also down by $112,000 - ANS c)
Net assets without donor restrictions goes up by $112,000 and also down by $112,000
The governing board of a private not-for-profit entity votes to set $400,000 in cash aside in an
investment fund so that this money and future interest will be available in five years, when a
new building is scheduled for construction. Which of the following is not true?
a) The investments are reported on the statement of financial position as net assets without
donor restrictions
b) The acquisition of the investments is not reported on the statement of activities
c) Board-designated funds will appear in the net asset section of the statement of financial
position as net assets with donor restrictions
d) Income earned by these investments appears on the statement of activities under net assets
without donor restrictions - ANS c) Board-designated funds will appear in the net asset section
of the statement of financial position as net assets with donor restrictions
A private not-for-profit entity receives three large cash donations:
- One gift of $70,000 is restricted by the donor so that it cannot be spent for four years
- One gifts of $90,000 is restricted to pay the salaries of the entity's workers
- One gift of $120,000 must be held forever with the income to be used to provide food for
needy families. In the current year, income of $10,000 was earned by not spent.
What is the increase in the current year in net assets with donor restrictions?
a) $190,000
b) $210,000
c) $280,000
d) $290,000 - ANS d) $290,000
A private not-for-profit university charges student tuition of $1 million for the current year.
Financial aid grants total $220,000. The school also receives a $100,000 grant restricted for
faculty salaries. Of that amount, $30,000 is spent appropriately this year. In preparing a
statement of activities, which of the following is not true?
a) Net assets without donor restrictions should show an increase of $30,000 for net assets
reclassified
b) Net assets without donor restrictions should report revenue of $1 million
c) Net assets without donor restrictions should report expenses of $30,000
, d) Net assets without donor restrictions should report a direct reduction of $220,000 in reporting
the tuition revenue - ANS b) Net assets without donor restrictions should report revenue of $1
million
Which of the following statements about the reporting of functional expenses is not true?
a) A statement of functional expenses is now required of all private not-for-profit entities
b) Functional expenses are divided between program services and supporting Services
c) Functional expenses can be reported as a footnote rather than as a separate statement of
functional expenses
d) Functional expenses can be reported within the statement of activities rather than as a
separate statement of functional expenses - ANS a) A statement of functional expenses is now
required of all private not-for-profit entities
A private not-for-profit entity has the following expenses for the current year.
Research to cure disease $60,000
Fundraising costs $70,000
Work to help individuals with disabilities $40,000
Administrative salaries $ 90,000
How should the not-for-profit entity report these costs?
a) Program services expenses of $100,000 and supporting services expenses of $160,000
b) Program service expenses of $160,000 and supporting service expenses of $100,000
c) Program service expense of $170,000 and supporting service expenses of $90,000
d) Program service expenses of $190,000 and supporting service expenses of $70,000 - ANS
a) Program service expense of $100,000 and supporting service expense of $160,000
A private not-for-profit entity spends $100,000 to send a mailing that solicits donations and
provides educational and other information about the charity. Which of the following is true?
a) No part of the $100,000 can be reported as a program service expense
b) Some part of the $100,000 must be reported as a program service expense
c) No authoritative guidance exists, so the entity can allocate the cost as it believes best
d) Under certain circumstances, the entity should allocate a portion of the $100,000 to program
service expenses - ANS d) Under certain circumstances, the entity should allocate a portion of
the $100,000 to program service expenses
A private not-for-profit entity sends a mailing to all of its current and former members regardless
of whether they have ever donated money or not. The mailing has a total cost of $22,000. It
asks for monetary contributions to help achieve the charity's stated mission. In addition, 80% of
the mailed material is educational in nature, providing information about the entity's goals.
Which of the following is true?
a) Some part of the $22,000 should be reported as a program service cost because of the
educational materials included
b) No part of the $22,000 should be reported as a program service cost because there is no
specific call to action
