Multiple Choice Please choose the correct answer 1 A statement of activities shows account balances in two separate columns How are those columns labeled Current and noncurrent Temporary and permanent Without donor restrictions and with donor restrictions Contributed funds and funds from exchange transactions 2 What are the three types of restricted net assets Current, noncurrent, structural Purpose, time, permanent Immediate, longer than one year, longer than five years Monetary, nonmonetary, leveraged 3 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 The direct method is the traditional approach for private not for profit entities An indirect method reconciliation does not have to be included as it does with for profit entities The indirect method does not conform as easily with a private not for profit entity and its operations The direct method is likely to show a more positive amount of operating activity cash inflows 4 A private not for profit entity receives three large cash donations One gift of $87,000 is restricted by the donor so that it cannot be spent for four years One gift of $107,000 is restricted to pay the salaries of the entity's workers One gift of $137,000 must be held forever with the income to be used to provide food for needy families In the current year, income of $27,000 was earned but not spent What is the increase in the current year in net assets with donor restrictions Multiple Choice $224,000 $244,000 $331,000 $358,000 5 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 gift 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 but not spent What is the increase in the current year in net assets with donor restrictions Multiple Choice $190,000 $210,000 $280,000 $290,000 6 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 Multiple Choice Net assets without donor restrictions should show an increase of $30,000 for net assets reclassified Net assets without donor restrictions should report revenue of $1 million Net assets without donor restrictions should report expenses of $30,000 Net assets without donor restrictions should report a direct reduction of $220,000 in reporting the tuition revenue 7 Which of the following statements about the reporting of functional expenses is not true Multiple Choice A statement of functional expenses is now required of all private not for profit entities Functional expenses are divided between program services and supporting services Functional expenses can be reported as a footnote rather than as a separate statement of functional expenses Functional expenses can be reported within the statement of activities rather than as a separate statement of functional expenses 8 A private not for profit entity has the following expenses for the current year Research to cure disease$60,000Fundraising costs70,000Work to help individuals with disabilities40,000Administrative salaries90,000 How should the not for profit entity report these costs Multiple Choice Program service expenses of $100,000 and supporting service expenses of $160,000 Program service expenses of $160,000 and supporting service expenses of $100,000 Program service expenses of $170,000 and supporting service expenses of $90,000 Program service expenses of $190,000 and supporting service expenses of $70,000 9 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 Multiple Choice No part of the $100,000 can be reported as a program service expense Some part of the $100,000 must be reported as a program service expense No authoritative guidance exists, so the entity can allocate the cost as it believes best Under certain circumstances, the entity should allocate a portion of the $100,000 to program service expenses 10 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 charitys stated mission In addition, 80 percent of the mailed material is educational in nature, providing information about the entitys goals Which of the following is true Multiple Choice Some part of the $22,000 should be reported as a program service cost because of the educational materials included No part of the $22,000 should be reported as a program service cost because there is no specific call to action No part of the $22,000 should be reported as a program service cost because the mailing was sent to both current and former members regardless of their donation history Some part of the $22,000 should be reported as a program service cost because more than 50 percent of the material was educational in nature 11 A private not for profit entity has the following activities performed by volunteers who work at no charge In which case should no contribution be reported Multiple Choice A carpenter builds a porch on the back of one building so that patients can sit outside An accountant does the organizations financial reporting A local librarian comes each day to read the newspaper to the patients A computer expert repairs the organizations computer 12 A private not for profit entity receives a gift of new furniture from a retail department store The furniture has a fair value of $2,100 The entity holds the furniture for several weeks After a flood, the entity gives the furniture to several needy families How should the NFP entity record these conveyances Multiple Choice No entries are required Record contribution revenue of $2,100 and community assistance expense of $2,100 Record only a community assistance expense of $2,100 Record only a contributed revenue of $2,100 13 George H Ruth takes a leave of absence from his job to work full time for a charity for six months Ruth fills the position of finance director, a position that normally pays $88,000 per year Ruth accepts no remuneration for his work What recording does the charity make Multiple Choice As contribution revenue of $44,000 and salary expense of $44,000 No entries should be made because no cash was paid or received As a contribution revenue of $44,000 only As a deferred revenue of $44,000 14 The Houston Corporation signs a formal pledge to give $100,000 in cash to a private not for profit entity within the next year The money must be spent to upgrade important equipment used by the charity The pledge is judged to be a conditional contribution Which of the following is recorded by the private not for profit entity for this pledge Multiple Choice A liability No journal entry is made Contributed revenue reported within net assets with donor restrictions Contributed revenue reported within net assets without donor restrictions 15 A local private not for profit entity receives a large monetary pledge Accountants are attempting to determine if the contribution is conditional They are assessing the possible existence of a barrier that has to be overcome Which of the following is not an indication of a barrier of this type Multiple Choice Measurable performance related barrier Stipulation limiting discretion by the recipient on the conduct of an activity Requirement preventing the money from being spent until a specific date in the future Stipulation that ties into the agreement 16 AB is a private not for profit entity It acquires YZ, another private not for profit entity The acquisition price is $1 04 million YZ has net assets with a net book value of $604,000 but a fair value of $708,000 Officials for AB expect that the primary support for YZ in the future will be contributions After the acquisition, what amount of goodwill will be reported on the consolidated balance sheet Multiple Choice $ 0 $104,000 $332,000 $376,000 17 BC and OP are both private not for profit entities They combine to create LM, a new private not for profit entity with an entirely new board of directors BC holds land with a book value of $300,000 and a fair value of $400,000 OP holds land with a book value of $500,000 and a fair value of $550,000 After LM has been formed, what is the reported value of the land account Multiple Choice $800,000 $850,000 $900,000 $950,000 18 Southwest is a private not for profit entity It acquires Northeast, another private not for profit entity The acquisition value is $980,000 Northeast has two assets (and no liabilities) equipment with a net book value of $120,000 but a fair value of $150,000 and a building with a net book value of $500,000 but a fair value of $800,000 In the future, Northeast expects to receive some support through donations Nonetheless, the entity is not expected to be predominantly supported by these donations and any investment income earned After the combination, what amount should be reported for goodwill Multiple Choice $ 0 $30,000 $60,000 $360,000 19 Which of these forms must most tax exempt organizations file annually with the Internal Revenue Service Multiple Choice 990 1203 501 501(c)(3) 20 Belwood College is a private not for profit institution that has tax exempt status Which of the following is most likely to be the specific tax exempt status that Belwood College holds Multiple Choice 501(c)(3) 501(c)(4) 501(c)(5) 501(c)(6) 21 Which of the following are unique to the reporting of revenue by a health care entity Multiple Choice Charity care must be reported even if the entity does not anticipate seeking collection The patients pay for little of the services, and significant discounts are common Reported bad debt expenses will increase significantly under new rules Standard charges are recorded as the revenue and receivable balances 22 A health care entity provides services to a patient Those services have a standard charge of $76,000 The insurance company that represents the patient has a contract with the entity that leads to a $20,000 reduction in that charge That reduction is referred to by which of the following labels Multiple Choice Standard legal hospital abatement amount Implicit price concession Discounted health care monitoring fee Explicit price concession 23 Which of the following is not true about the application of new revenue recognition rules to private not for profit health care entities Multiple Choice Revenues are likely to be much lower than under previous rules Bad debts will be recorded as direct reductions to revenue rather than as a separate expense A portfolio approach can be used rather than having to record on a contract by contract basis Variable consideration can be reported by either the expected amount method or the most likely outcome method 24 Mike Jones spends five days in a local private not for profit hospital The hospital charges him $170,000 for the services His insurance company has contracts with the hospital that will lower the amount that has to be paid The hospital believes it has a 60 percent chance that the reduction will be $70,000 and a 40 percent chance that the reduction will be $100,000 The hospital applies the expected amount method to variable consideration What amount of revenue should be reported Multiple Choice $ 0 $70,000 $88,000 $100,000

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Multiple Choice Please choose the correct answer. 1.A statement of activities shows account balances in two separate columns. How are those columns labeled? Current and

Multiple Choice

Please choose the correct answer.

1.A statement of activities shows account balances in two separate columns. How are those columns labeled?

Current and noncurrent
Temporary and permanent
Without donor restrictions and with donor restrictions
Contributed funds and funds from exchange transactions

2.What are the three types of restricted net assets?

Current, noncurrent, structural
Purpose, time, permanent
Immediate, longer than one year, longer than five years
Monetary, nonmonetary, leveraged

3.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?

The direct method is the traditional approach for private not-for-profit entities.
An indirect method reconciliation does not have to be included as it does with for-profit entities.
The indirect method does not conform as easily with a private not-for-profit entity and its operations.
The direct method is likely to show a more positive amount of operating activity cash inflows.

4.A private not-for-profit entity receives three large cash donations:

One gift of $87,000 is restricted by the donor so that it cannot be spent for four years.
One gift of $107,000 is restricted to pay the salaries of the entity's workers.
One gift of $137,000 must be held forever with the income to be used to provide food for needy families. In the current year, income of $27,000 was earned but not spent.

What is the increase in the current year in net assets with donor restrictions?

Multiple Choice

$224,000
$244,000
$331,000
$358,000

5.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 gift 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 but not spent.

What is the increase in the current year in net assets with donor restrictions?

Multiple Choice

$190,000
$210,000
$280,000
$290,000

6.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?

Multiple Choice

Net assets without donor restrictions should show an increase of $30,000 for net assets reclassified.
Net assets without donor restrictions should report revenue of $1 million.
Net assets without donor restrictions should report expenses of $30,000.
Net assets without donor restrictions should report a direct reduction of $220,000 in reporting the tuition revenue.

7.Which of the following statements about the reporting of functional expenses is not true?

Multiple Choice

A statement of functional expenses is now required of all private not-for-profit entities.
Functional expenses are divided between program services and supporting services.
Functional expenses can be reported as a footnote rather than as a separate statement of functional expenses.
Functional expenses can be reported within the statement of activities rather than as a separate statement of functional expenses.

8.A private not-for-profit entity has the following expenses for the current year.

Research to cure disease$60,000Fundraising costs70,000Work to help individuals with disabilities40,000Administrative salaries90,000

How should the not-for-profit entity report these costs?

Multiple Choice

Program service expenses of $100,000 and supporting service expenses of $160,000
Program service expenses of $160,000 and supporting service expenses of $100,000
Program service expenses of $170,000 and supporting service expenses of $90,000
Program service expenses of $190,000 and supporting service expenses of $70,000

9.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?

Multiple Choice

No part of the $100,000 can be reported as a program service expense.
Some part of the $100,000 must be reported as a program service expense.
No authoritative guidance exists, so the entity can allocate the cost as it believes best.
Under certain circumstances, the entity should allocate a portion of the $100,000 to program service expenses.

10.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 charitys stated mission. In addition, 80 percent of the mailed material is educational in nature, providing information about the entitys goals. Which of the following is true?

Multiple Choice

Some part of the $22,000 should be reported as a program service cost because of the educational materials included.
No part of the $22,000 should be reported as a program service cost because there is no specific call to action.
No part of the $22,000 should be reported as a program service cost because the mailing was sent to both current and former members regardless of their donation history.
Some part of the $22,000 should be reported as a program service cost because more than 50 percent of the material was educational in nature.

11.A private not-for-profit entity has the following activities performed by volunteers who work at no charge. In which case should no contribution be reported?

Multiple Choice

A carpenter builds a porch on the back of one building so that patients can sit outside.
An accountant does the organizations financial reporting.
A local librarian comes each day to read the newspaper to the patients.
A computer expert repairs the organizations computer.

12.A private not-for-profit entity receives a gift of new furniture from a retail department store. The furniture has a fair value of $2,100. The entity holds the furniture for several weeks. After a flood, the entity gives the furniture to several needy families. How should the NFP entity record these conveyances?

Multiple Choice

No entries are required.
Record contribution revenue of $2,100 and community assistance expense of $2,100.
Record only a community assistance expense of $2,100.
Record only a contributed revenue of $2,100.

13.George H. Ruth takes a leave of absence from his job to work full time for a charity for six months. Ruth fills the position of finance director, a position that normally pays $88,000 per year. Ruth accepts no remuneration for his work. What recording does the charity make?

Multiple Choice

As contribution revenue of $44,000 and salary expense of $44,000.
No entries should be made because no cash was paid or received.
As a contribution revenue of $44,000 only.
As a deferred revenue of $44,000.

14.The Houston Corporation signs a formal pledge to give $100,000 in cash to a private not-for-profit entity within the next year. The money must be spent to upgrade important equipment used by the charity. The pledge is judged to be a conditional contribution. Which of the following is recorded by the private not-for-profit entity for this pledge?

Multiple Choice

A liability
No journal entry is made.
Contributed revenue reported within net assets with donor restrictions
Contributed revenue reported within net assets without donor restrictions

15.A local private not-for-profit entity receives a large monetary pledge. Accountants are attempting to determine if the contribution is conditional. They are assessing the possible existence of a barrier that has to be overcome. Which of the following is not an indication of a barrier of this type?

Multiple Choice

Measurable performance related barrier
Stipulation limiting discretion by the recipient on the conduct of an activity
Requirement preventing the money from being spent until a specific date in the future
Stipulation that ties into the agreement

16.AB is a private not-for-profit entity. It acquires YZ, another private not-for-profit entity. The acquisition price is $1.04 million. YZ has net assets with a net book value of $604,000 but a fair value of $708,000. Officials for AB expect that the primary support for YZ in the future will be contributions. After the acquisition, what amount of goodwill will be reported on the consolidated balance sheet?

Multiple Choice

$-0-
$104,000
$332,000
$376,000

17.BC and OP are both private not-for-profit entities. They combine to create LM, a new private not-for-profit entity with an entirely new board of directors. BC holds land with a book value of $300,000 and a fair value of $400,000. OP holds land with a book value of $500,000 and a fair value of $550,000. After LM has been formed, what is the reported value of the land account?

Multiple Choice

$800,000
$850,000
$900,000
$950,000

18.Southwest is a private not-for-profit entity. It acquires Northeast, another private not-for-profit entity. The acquisition value is $980,000. Northeast has two assets (and no liabilities): equipment with a net book value of $120,000 but a fair value of $150,000 and a building with a net book value of $500,000 but a fair value of $800,000. In the future, Northeast expects to receive some support through donations. Nonetheless, the entity is not expected to be predominantly supported by these donations and any investment income earned. After the combination, what amount should be reported for goodwill?

Multiple Choice

$-0-
$30,000
$60,000
$360,000

19.Which of these forms must most tax-exempt organizations file annually with the Internal Revenue Service?

Multiple Choice

990
1203
501
501(c)(3)

20.Belwood College is a private not-for-profit institution that has tax-exempt status. Which of the following is most likely to be the specific tax-exempt status that Belwood College holds?

Multiple Choice

501(c)(3)
501(c)(4)
501(c)(5)
501(c)(6)

21.Which of the following are unique to the reporting of revenue by a health care entity?

Multiple Choice

Charity care must be reported even if the entity does not anticipate seeking collection.
The patients pay for little of the services, and significant discounts are common.
Reported bad debt expenses will increase significantly under new rules.
Standard charges are recorded as the revenue and receivable balances.

22.A health care entity provides services to a patient. Those services have a standard charge of $76,000. The insurance company that represents the patient has a contract with the entity that leads to a $20,000 reduction in that charge. That reduction is referred to by which of the following labels?

Multiple Choice

Standard legal hospital abatement amount
Implicit price concession
Discounted health care monitoring fee
Explicit price concession

23.Which of the following is not true about the application of new revenue recognition rules to private not-for-profit health care entities?

Multiple Choice

Revenues are likely to be much lower than under previous rules.
Bad debts will be recorded as direct reductions to revenue rather than as a separate expense.
A portfolio approach can be used rather than having to record on a contract-by-contract basis.
Variable consideration can be reported by either the expected amount method or the most likely outcome method.

24.Mike Jones spends five days in a local private not-for-profit hospital. The hospital charges him $170,000 for the services. His insurance company has contracts with the hospital that will lower the amount that has to be paid. The hospital believes it has a 60 percent chance that the reduction will be $70,000 and a 40 percent chance that the reduction will be $100,000. The hospital applies the expected amount method to variable consideration. What amount of revenue should be reported?

Multiple Choice