QUESTION 1

1. A not-for-profit organization maintains an endowment of $1 million, the income from which must be used for research into substance abuse. In a particular year, the endowment had income of $60,000, all of which was expended in accord with the donors specifications. The expense should be reported as a decrease in

		It is not recorded because it is not an expense
		Net assets with donor restrictions
		Net assets without donor restrictions
		None of the answers

QUESTION 2

1. The statement of cash flows of a not-for-profit should be divided into which of the following categories of cash flows?

		Operating activities, noncapital financing activities, capital and related financing activities, investing activities
		Operating activities, capital activities, investing activities
		Operating activities, financing activities, capital activities
		Operating activities, financing activities, investing activities

QUESTION 3

1. The Senior League, a not-for-profit welfare agency, redeemed a $100,000 bond that it had held as an investment of resources without donor restrictions. It also received an interest payment of $6,000. In its statement of cash flows, the league should report

		$106,000 as a cash flow from investing activities
		$106,000 as a cash flow from operating activities
		$100,000 as a cash flow from investing activities and $6,000 as a cash flow from financing activities
		$100,000 as a cash flow from investing activities and $6,000 as a cash flow from operating activities

QUESTION 4

1. Harley Safe Place, a not-for-profit organization, received a pledge from a donor without restrictions of $600,000. The donor promised to make payment within six months (which would be in the organizations next fiscal year). At the time of the pledge, the organization should recognize

		Revenue of $600,000 in a fund restricted by donors
		Revenue of $600,000 in a fund without donor restrictions
		Deferred revenue of $600,000 in a fund restricted by donors
		Deferred revenue of $600,000 in a fund without donor restrictions

QUESTION 5

1. Walden Institute, a not-for-profit, politically oriented association, was promised a $1 million endowment on condition that it establish a program in entrepreneurial studies and hire a leading scholar to lead it. Upon receiving the pledge the institute should recognize

		Zero revenue
		Revenue of $1 million in a fund restricted by a donor
		Expense of $1 million in a fund restricted by a donor
		Deferred revenue of $1 million in a fund restricted by a donor

QUESTION 6

1. All costs of activities that have a fund-raising component must be classified as fund-raising costs unless it can be demonstrated that they satisfy the criteria dealing with all of the following except

		Purpose
		Audience
		Content
		Fiscal viability

QUESTION 7

1. 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

		0
		1000
		4000
		5000

QUESTION 8

1. 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

		1,000,000
		980,000
		960,000
		940,000

QUESTION 9

1. 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

		$0
		$10,000 in a fund restricted by donors
		$10,000 in a fund not restricted by donors
		$10,000 in either a fund restricted by donors or a fund without donor restrictions, depending on which fund is used to account for the instruments

QUESTION 10

1. 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

		Investment earnings without donor restrictions of $50,000
		Investment earnings with donor restrictions of $50,000
		Investment earnings without donor restrictions of $10,000 and investment earnings with donor restrictions of $40,000
		Investment earnings with donor restrictions of $10,000