32) Goodwill created because a not-for-profit organization obtains control of another organization
is always recorded as an asset.
33) Which of the following characteristics of not-for-profit organizations (NFPs) can be used to
distinguish a nongovernmental from a governmental NFP?
A) Contributions by resource providers who do not expect a return on investment.
B) Ability to impose taxes on citizens.
C) Absence of ownership interests.
D) All of the given characteristics are generally different for nongovernmental versus
governmental NFPs.
34) Responsibility for establishing generally accepted accounting principles (GAAP) for
nongovernmental, not-for-profit organizations rests with the FASB and was most clearly
established:
A) By the FASB Codification.
B) When the FASB was created in 1974.
C) When the GASB was created in 1984.
D) In the AICPA’s Statement of Auditing Standards No. 69 (hierarchy of GAAP).
35) Under FASB standards how would a not-for-profit organization recognize a conditional
pledge?
A) Debit Pledges Receivable and credit Contributions—With Donor Restrictions.
B) Debit Pledges Receivable and credit Deferred Contributions.
C) Debit Conditional Pledges Receivable and Credit Deferred Contributions.
D) It would not recognize the conditional pledge until pledge conditions are substantially met.
36) The FASB Codification requires the following financial statements for all not-for-profit
organizations:
A) Statement of financial position, statement of activities, and statement of cash flows.
B) Statement of financial position, statement of operations, and statement of cash flows.
C) Statement of financial position, statement of activities, and statement of net assets.
D) Statement of financial position, statement of revenues and expenses, and statement of cash
flows.
37) Which of the following statements is true regarding fund accounting for not-for-profit
organizations (NFPs)?
A) Fund accounting can be used by NFPs for external purposes, but not internal purposes.
B) Fund accounting can provide a good mechanism for facilitating reporting to donors.
C) Fund accounting is not allowed.
D) Fund accounting for internal and external reporting purposes has been replaced by FASB with
the two classes of net assets (without donor restrictions, and net investment in restricted assets).
38) According to the FASB Codification, which of the following is a condition that must be met
for contributed services to a not-for-profit organization (NFP) to be recorded as both a contribution
and as an expense?
A) The service creates or enhances nonfinancial assets, such as a carpenter renovating a building.
B) The service requires a specialized skill and is provided by someone who possesses the
specialized skill, such as a lawyer preparing contracts.
C) The service supplements the management function, such as an auditor preparing a program
audit, which is not normally done.
D) All of the given conditions must be met for contributed services to be recognized as a
contribution and an expense.
39) The FASB requires investments in equity securities that have a readily determinable market
value of a not-for-profit organization be reported at:
A) Lower of cost or market.
B) Amortized cost.
C) Fair value.
D) Cost.
40) An example of an increase in net assets for a not-for-profit organization that would be labeled
revenue rather than support is:
A) An unconditional promise to give.
B) Investment income.
C) A restricted gift.
D) An allocation of funds from the local United Way organization.
41) A donor provides a large cash contribution that is to be used for acquisition of a new building.
Under FASB standards, how would this contribution be reported by a not-for-profit organization
on its statement of cash flows?
A) Operating activity.
B) Investing activity.
C) Financing activity.
D) Capital and related financing activity.
42) The FASB states that depreciation expense in a not-for-profit organization should be:
A) Assigned to or allocated to the functions to which it relates.
B) Reported under the management and general function.
C) Disclosed in the notes to the financial statements.
D) Allocated to program but not support functions.
43) A not-for-profit (NFP) organization acting as a financial intermediary receives a contribution.
Under the FASB Codification the NFP would be most likely to recognize the contribution as a
liability under which of the following situations?
A) The NFP has variance power.
B) The NFP is acting as an agent, receiving the contribution on behalf of another organization.
C) The NFP is financially interrelated with the organization on whose behalf it received the
contribution.
D) The NFP has a 51 percent interest in the organization on whose behalf it received the
contribution.
44) According to the FASB, net assets with donor restrictions are released from restrictions:
A) At the end of each fiscal year.
B) As assets are spent for the purposes intended by the donor.
C) When funds are returned to the donor.
D) When all donor conditions have been met.
45) A local philanthropist made an unconditional pledge to donate $100,000 to a not-for-profit
organization to be paid in five equal installments of $20,000 beginning in two years. Under FASB
standards the pledge would be recognized as:
A) A contribution of $20,000 in each of the five years a contribution is made.
B) A contribution of $100,000 in the year the pledge is made, adjusted for the estimated
uncollectible amount.
C) Deferred support of $100,000 in the year the pledge was made.
D) A contribution of $100,000 in the year the pledge was made, discounted for the difference
between the pledge and its present value.
46) Which of the following statements is correct regarding reporting of special events and related
direct costs under current FASB standards?
A) Special events and related direct costs must be reported separately at their gross amounts if they
relate to the ongoing major operations of a not-for-profit.
B) Special events revenues are to be reported at gross amounts, even if direct costs are of a
peripheral or incidental nature.
C) With few exceptions special events revenues are reported net of related direct costs.
D) Expenses of promoting and conducting special events should be netted directly against special
events revenue.
47) A not-for-profit organization incurred $10,000 in management and general expenses in the
current fiscal year. When reporting the expenses by function, the $10,000 would be reported as:
A) A deduction from program revenue.
B) Fund-raising expense.
C) Program services expenses.
D) Supporting services expenses.
48) Which of the following would be considered “contribution revenue or support” of a
not-for-profit organization under FASB standards?
A) Gain on disposal of capital assets.
B) Money received from a fund-raising campaign.
C) Money received from rental of surplus office space.
D) Investment earnings.
49) In accordance with FASB standards, securities donated to a not-for-profit organization should
be recorded at the:
A) Donor’s recorded amount.
B) Fair value at the date of the gift, or the donor’s recorded amount, whichever is lower.
C) Fair value at the date of the gift, or the donor‘s recorded amount, whichever is higher.
D) Fair value at the date of the gift.
50) Which of the following would be reported as an Asset with Restrictions on Use?
A) A cash contribution for a program activity, such as diabetes research.
B) A cash contribution for a new building.
C) Cash restricted by debt covenants with lenders.
D) Cash restricted by the board for purchase of new computer equipment.
51) Under FASB standards, which of the following contributions would not have to be reported as
an asset on the statement of financial position of a not-for-profit organization?
A) Land was donated to the Friends of the Forest Society for conversion into a nature trail.
B) The original courthouse was donated to the Historical Preservation Society for conversion into
a museum.
C) An art collector donated a famous oil painting to a local art museum for display in its exhibit
hall.
D) A valuable coin collection was donated to the Youth for Conservation organization, which the
organization plans to sell at current market prices.
52) According to the FASB, a not-for-profit arts organization would report the account Provision
for Uncollectible Pledges as which of the following?
A) Expense.
B) Contra revenue.
C) Contra asset.
D) FASB allows management to determine its policy for reporting the Provision for Uncollectible
Pledges.