1. At the beginning of 2017, a private not-for-profit museum receives a donation of equity securities valued at 10,000,000. The donor specifies that the securities be held as a permanent endowment, and income from the securities is restricted to the purchase of Native American artifacts. The securities have a fair value of $9,500,000 at the end of 2017. The museum reports the $500,000 decline in the value of the securities as

a. a reduction in permanently restricted net assets.

b. a reduction in temporarily restricted net assets.

c. a reduction in unrestricted net assets.

d. not reported

2. At the beginning of 2017, a private not-for-profit museum receives a donation of $10,000,000. The donor specifies that the donation be held as a permanent endowment, and income from its investment can be used for any purpose. The museum invests the $10,000,000 in equity securities. The securities have a fair value of $9,500,000 at the end of 2017. The museum reports the $500,000 decline in the value of the securities as

a. a reduction in permanently restricted net assets.

b. a reduction in temporarily restricted net assets.

c. a reduction in unrestricted net assets.

d. not reported

3. On its statement of activities, a private NFP hospital reports charity care

a. at cost.

b. at the fair value of services rendered.

c. at fair value net of cost to provide services.

d. in the footnotes to its financial statements, not on the statement of activities itself.

4. Critics of the FASBs reporting requirements for NFPs have a common concern, that current GAAP for not-for-profit organizations

a. does not accurately recognize pledges of contributions.

b. misreports the actual value of investments.

c. does not recognize all donations of services.

d. overstates resources available for spending.

5. Which of the following is most likely your major concern when auditing an NFP?

a. The NFP is overstating pledges receivable.

b. The NFP is understating fund-raising expenses.

c. The NFP is overstating investment income.

d. The NFP is understating cash contributions