53) A not-for-profit organization that follows FASB standards must display the changes in all
classes of net assets on which of the following statements?
A) Statement of activities.
B) Statement of financial position.
C) Statement of cash flows.
D) Statement of functional expenses.
54) When a nongovernmental not-for-profit organization spends money for the purpose for which
an external donor intended, the expense is reported as a:
A) Decrease in net assets with donor restrictions.
B) Decrease in net assets without donor restrictions.
C) Decrease in current-restricted fund balance.
D) Decrease in committed fund balance.
55) Not-for-profits can report expenses by nature and function:
A) In the notes to the financial statements.
B) As a separate financial statement.
C) In the statement of activities.
D) All of the options are correct.
56) According to the FASB, how should unrealized gains on the investment portfolio of a
not-for-profit organization be recognized?
A) Not recognized.
B) Reported in the net asset section of the balance sheet.
C) Reported according to whether the gains relate to trading, or held-to–maturity assets.
D) Reported on the statement of activities.
57) Which of the following is not one of the criteria specified in the FASB Codification for
determining whether joint costs with a fund-raising appeal can be reported with program expenses
rather than as fund-raising expenses?
A) Purpose.
B) Audience.
C) Time period.
D) Content.
58) Which of the following terms is used to indicate that a donor provided a gift with explicit
instructions that the gift is to be used for a specific purpose by the not-for-profit but the entire
amount may be spent right away?
A) Board-designated net assets.
B) Net assets without donor restrictions.
C) Endowment assets.
D) Net assets with donor restrictions.
59) In the current year, the not-for-profit organization Save the Butterflies Foundation received
cash of $500 to be used as the Foundation wishes and $1,000 to be used for butterfly research. Save
the Butterflies also received pledges of $700 that it can use as it wishes and $600 for its building
fund. All pledges are expected to be received next year. How much would Save the Butterflies
report as contributions with donor restrictions in the current year?
A) $1,000.
B) $1,600.
C) $1,300.
D) $2,300.
60) In the current year, the not-for-profit organization (NFP) How to Read Government Financial
Reports received both cash of $1,000 and pledges of $2,000 to be used for teaching citizens how to
read government financial reports. During the year the organization spent $1,500 teaching citizens
to read financial statements. Assuming the NFP has a policy of spending its restricted resources
first, in the current year what amount of contributions can be reclassified as without donor
restrictions?
A) $1,000.
B) $1,500.
C) $2,000.
D) $3,000.
61) The mission of the not-for-profit organization, Save Our Butterflies Foundation, is to provide
research and education concerning the conservation of butterflies. Which of the following
expenses would be reported as a support expense by the Foundation?
A) The costs of exhibiting at the local Nature Conservancy annual fair held for the general public.
B) The costs of depreciation on it butterfly facility.
C) The cost of printed materials distributed to the local elementary schools on how to start
butterfly gardens.
D) The cost of printing and distributing its annual report.
62) For financial reasons, two not-for-profit hospice organizations (hospices A and B) decided to
combine. As a result of the combination, the assets and liabilities of the combined hospice were
reported at the amounts that had been previously reported by A and B on their financial statements.
Under the FASB, the combining of hospices A and B would be classified as which of the
following?
A) Merger.
B) Consolidation.
C) Acquisition.
D) Component unit.
63) During the year a donor pledged $1,000,000 in funds to a not-for-profit private charter school.
The school will receive the pledge if it is able to raise $500,000 in funds over the next year.
According to the FASB, how would this pledge be recorded?
A) Contribution—With Donor Restrictions.
B) Contribution—Without Donor Restrictions.
C) Deferred Revenue.
D) It would not be recorded.
64) A local CPA volunteered his time to prepare the Form 990 for an after-school development
organization that serves disadvantaged children. If the services had not been donated the
organization would have had to hire a CPA to prepare the return. In accordance with the FASB
Codification, the value of the CPA’s time devoted to helping the organization should be recorded
as:
A) Contribution—With Donor Restrictions.
B) Support Expense.
C) Machinery & Equipment.
D) It would not be recorded.
65) The board of directors for a nongovernmental not-for-profit organization decided to designate
$20,000 each year for the next three years to fund a special research project it was planning to
conduct at the end of the three-year period. How would these board-designated resources be
reported on the statement of financial position?
A) Net assets with donor restrictions.
B) Net assets without donor restrictions.
C) Internal payable.
D) The resources would not be reported on the statement of financial position.
66) How does the FASB require not-for-profit organizations to report expenses?
A) Natural classification, such as salaries, rent, and supplies.
B) Functional classification, such as program and support.
C) Management has the option of reporting using natural classification or functional classification.
D) Both natural classification and functional classification must be reported.
67) In accordance with the FASB Codification, which of the following would not be classified as a
support expense by the not-for-profit organization Save Our Lakes?
A) The cost of printing and distributing the annual report.
B) The cost of a mailing to past contributors requesting donations for lakeshore cleanup.
C) The cost of the annual lakeshore cleanup activities.
D) The cost to have an attorney review the organization’s by-laws.
68) For each of the following definitions, indicate the key term from the list that best matches by
placing the appropriate terms.
A. Nonexchange transactions
B. Net assets with donor restrictions
C. Collections
D. Variance power
E. Exchange transactions
F. Board-designated net assets
G. Endowment
H. Promise to give
________ 1. Unrestricted net assets that the governing body decides to set aside for specific
purposes
________ 2. The unilateral power of an organization to redirect donated assets to a different
beneficiary than initially indicated by the donor
________ 3. Net assets for which the donor has indicated use in a future period or for a particular
purpose
________ 4. Transactions in which the donor derives no direct tangible benefits
________ 5. Works or art, historical treasures, or similar assets held and protected for public
exhibition, and, if sold, proceeds would be used to acquire similar assets