Multiple Choice Questions
Identify the best answer for each of the following:
1. VHWO GAAP financial statements are prepared under which basis of accounting?
a. Cash
b. Accrual
c. Modified accrual
d. Modified cash

2. The primary financial statement(s) that must be prepared by ONPOs do not include a:
a. Balance Sheet.
b. Statement of Cash Flows.
c. Statement of Functional Expenses.
d. Statement of Activities.

3. On December 31, 20X7, the Greater Ottumwa (Iowa) United Fund, a VHWO, had $150,000 in pledges receivable from 20X7 pledges, all of which were receivable during 20X8. During the past five years, this nongovernment agency has collected an average of 90% of all pledges. With respect to the agency’s 20X7 financial statements, what amount of contributions revenue should be recognized for the pledges?
a. $0
b. $135,000
c. $150,000
d. $135,000 or $150,000, depending on the VHWO’s policy

4. Unconditional promises to give that are restricted for the purpose of acquiring fixed assets should be recognized as contributions revenue by nongovernment VHWOs and ONPOs in the period(s) that
a. the unconditional promises are made.
b. the promised amounts are received.
c. the donated resources are used to acquire the fixed assets.
d. the assets purchased with the donated resources are placed in service.

5. A nongovernment ONPO incurred expenses for its public service programs. The ONPO had resources available from prior year donations that were restricted by donors to finance expenses for these public service programs. Which of the following is (are) true?
a. The ONPO should recognize the expenses as decreases in temporarily restricted net assets—because they are financed from temporarily restricted net assets.
b. The ONPO should recognize contributions revenue in the current year as an increase in unrestricted net assets.
c. This transaction will reduce temporarily restricted net assets.
d. The ONPO should recognize contributions revenue in the current year as an increase in temporarily restricted net assets.

6. Which of the following would not affect a nongovernment ONPO Statement of Activities?
a. Depreciation expense
b. Expenditure of restricted contributions for the restricted purpose in the current year (but cash was received in a prior year)
c. Gain on the sale of investments
d. Proceeds from issuing bonds to finance a capital project

7. A regular contributor to a not-for-profit organization has agreed to directly pay the rental charges for a local banquet facility that will be used for the organization’s annual financial campaign kick-off event. How should this transaction be reported in the financial statements of the not-for-profit organization?
a. If material, the rental costs paid on its behalf should be disclosed in the notes.
b. The not-for-profit organization should only report expenses for which it expended funds or incurred liabilities.
c. The costs paid on its behalf would be reported both as a revenue and an expense of the not-for-profit organization.
d. The transaction would not affect the financial report of the organization.

8. What characteristics distinguish not-for-profit contributions from exchange or agency transactions?
a. They are generally unconditional (i.e., not subject to future or uncertain events that would require their return).
b. The contributions are typically conditional and nonreciprocal in nature.
c. They are generally unconditional and nonreciprocal in nature.
d. An ownership interest is typically established.

9. Nongovernment not-for-profit organizations present a Statement of Cash Flows in accordance with
a. GASB Statement No. 9.
b. GASB Statement No. 34.
c. The FASB Accounting Standards Codification.
d. Either b or c, at management’s discretion.

10. A nongovernment not-for-profit organization would present all of the following categories of cash flows except
a. cash flows from financing activities.
b. cash flows from noncapital financing activities.
c. cash flows from investing activities.
d. cash flows from operating activities.