Select the best answer. 1. A local chapter of the Society for Protection of the Environment beneted

Select the best answer.
1. A local chapter of the Society for Protection of the Environment benefited from the voluntary services of two attorneys. One served as a member of the Society's board of directors, performing tasks comparable to other directors. During the year, he attended 20 hours of meetings. The other drew up a lease agreement with a tenant in a building owned by the Society.
She spent five hours on the project. The billing rate of both attorneys is $200 per hour. In the year in which the services were provided, the Society should recognize revenues from contributed services of
a. $0
b. $1,000
c. $4,000
d. $5,000

2. The Museum of Contemporary Art received two valuable paintings. The museum has determined that one, with a market value of $7,000, is inappropriate for display and therefore will be sold and the proceeds will be used to acquire another painting that can be displayed. The other, with a market value of $10,000, will be placed on exhibit. The museum has a policy of not capitalizing works of art unless required to do so. In the year that it receives the two paintings, it should recognize contribution revenues of
a. $0
b. $7,000
c. $10,000
d. $17,000

3. The United Way of Lano County distributes all contributions to not-for-profit organizations within the area it serves. Donors have a choice: They can either designate the organization to which their contributions will be given, or permit the United Way to distribute their contributions as it deems appropriate.
During the current year, the United Way received $1 million of specifically designated contributions and $6 million of undesignated contributions. It should recognize contribution revenue of
a. $0
b. $1 million
c. $6 million
d. $7 million

4. Variance power refers to the ability
a. Of a not-for-profit organization to use property for commercial purposes even though it was zoned for residential purposes
b. Of a charitable organization to unilaterally decide to direct the use of donated assets to a beneficiary other than that specified by the donor
c. Of a donor to change the beneficiary of a gift from that which was initially specified
d. Of a not-for-profit organization to alter the terms of any purpose restrictions associated with a contribution that it received

5. The Association for Educational Enrichment receives a contribution of $400,000 that must be used for student scholarships. Prior to granting any scholarships, the Association invests the funds received in marketable securities. During the year, the securities pay dividends of $10,000 and increase in market value to $440,000. The association should report
a. Unrestricted investment earnings of $50,000
b. Temporarily restricted investment earnings of $50,000
c. Unrestricted investment earnings of $10,000 and temporarily restricted investment earnings of $40,000
d. Temporarily restricted investment earnings of $10,000

6. Carter Research Center, a not-for-profit entity, acquires $50,000 of laboratory instruments with funds that were donated and restricted for the purchase of equipment. The instruments have a useful life of five years and no salvage value. During each of the five years of the instruments' useful life, the Center should recognize depreciation expense of
a. $0
b. $10,000 in a temporarily restricted fund
c. $10,000 in an unrestricted fund
d. $10,000 in either a temporarily restricted fund or an unrestricted fund, depending on which fund is used to account for the instruments

7. With respect to the statement of cash flows
a. Both the FASB and the GASB encourage entities to use the direct method
b. The GASB, but not the FASB, requires entities to use the direct method
c. The FASB, but not the GASB, requires entities to use the direct method
d. Both the FASB and the GASB require entities to use the direct method

8. The Friends of the Opera, a financially interrelated fund-raising support group for the City Opera Company, receives $100,000 in donations, all of which will eventually be transferred to the City Opera Company.
When Friends of the Opera receives the gift
a. Friends of the Opera should recognize revenue of $100,000, and the City Opera Company should make no journal entries.
b. Friends of the Opera should recognize a liability of $100,000, and the City Opera Company should recognize a receivable.
c. Friends of the Opera should recognize revenue of $100,000, and the City Opera Company should recognize an increase of $100,000 in its interest in the net assets of Friends of the Opera.
d. Friends of the Opera should recognize a liability of $100,000, and the City Opera Company should make no entry.

9. At the start of the year, the permanent endowment fund of the State Performing Arts Festival Association reported net assets of $1 million. During the year, it earned $40,000 in interest and dividends, but its investments lost $60,000 in market value. The association spent the entire $40,000 of interest and dividends. At year-end the permanent endowment fund should report net assets of
a. $1,000,000
b. $980,000
c. $960,000
d. $940,000

10. The Mountain Research Institute began the year with net assets in its permanent endowment fund of $1million. During the year it earned $70,000, and the fair value of its investments increased by $20,000. However, the institute's policy, decided upon by its board of directors, is to permit earnings to be spent only to the extent that they exceed an amount necessary to cover inflation. The inflation rate for the year was 3 percent. During the year, the institute spent none of the $70,000. At year-end, the permanent endowment fund should report net assets of
a. $1,000,000
b. $1,020,000
c. $1,030,000
d. $1,090,000