Question

Select the best answer.
1. A term endowment is a gift
a. The principal of which must be returned to the donor after a specified period of time
b. The principal of which is available for expenditure after a specified period of time
c. The income from which must be expended within a specified period of time
d. The income of which must be added to the principal for a specified period of time

2. 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 donor's specifications. The expense should be reported as a decrease in
a. Permanently restricted net assets
b. Temporarily restricted net assets
c. Unrestricted net assets
d. Any of the above

3. A private think tank receives a gift of $100,000 that must be used to fund a symposium on federal accounting. When the institution conducts the symposium, which of the following accounts should be debited in a temporarily restricted fund?
a. Program expense
b. Deferred revenue
c. Net assets released from restriction
d. Deferred program expense

4. The statement of cash flows of a not-for-profit should be divided into which of the following categories of cash flows?
a. Operating activities, noncapital financing activities, capital and related financing activities, investing activities
b. Operating activities, capital activities, investing activities
c. Operating activities, financing activities, capital activities
d. Operating activities, financing activities, investing activities

5. The Senior League, a not-for-profit welfare agency, redeemed a $100,000 bond that it had held as an investment of unrestricted resources. It also received an interest payment of $6,000. In its statement of cash flows, the league should report
a. $106,000 as a cash flow from investing activities
b. $106,000 as a cash flow from operating activities
c. $100,000 as a cash flow from investing activities and $6,000 as a cash flow from financing activities
d. $100,000 as a cash flow from investing activities and $6,000 as a cash flow from operating activities

6. Enrex Corporation gave a not-for-profit research foundation $500,000 to conduct research relating to the development of a new type of battery. Per the terms of the gift, Enrex owned the rights to any patents issued as a consequence of the research, and controlled when and where the research results would be published. At the time of receipt of the $500,000, the foundation should recognize
a. Revenue of $500,000 in a temporarily restricted fund
b. Revenue of $500,000 in an unrestricted fund
c. Deferred revenue of $500,000 in a temporarily restricted fund
d. Deferred revenue of $500,000 in an unrestricted fund

7. Harley Safe Place, a not-for-profit organization, received an unrestricted pledge of $600,000. The donor promised to make payment within six months (which would be in the organization's next fiscal year).
At the time of the pledge, the organization should recognize
a. Revenue of $600,000 in a temporarily restricted fund
b. Revenue of $600,000 in an unrestricted fund
c. Deferred revenue of $600,000 in a temporarily restricted fund
d. Deferred revenue of $600,000 in an unrestricted fund


8. 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
a. Zero revenue
b. Revenue of $1 million in a permanently restricted fund
c. Revenue of $1 million in a temporarily restricted fund
d. Deferred revenue of $1 million in a permanently restricted fund

9. Emerson Museum received a cash gift of $7 million. The board of trustees decided that the gift should be used to establish a permanent endowment, the income from which would be used to provide research grants to Impressionist art historians. The museum should report the gift as an increase in
a. Unrestricted resources
b. Temporarily restricted resources
c. Permanently restricted resources
d. Board-restricted resources

10. The Fellowship Church of America issues $10 million in bonds, the proceeds of which must be used to construct new facilities. Included in the bond indenture is aprovisionthatthechurchmustmaintain$400,000in a specially designated bank account to ensure timely payment of principal and interest. Upon receiving the $10 million in bond proceeds and placing the $400,000 in the designated bank account, the church should report
a. Cash of $9.6 million in an unrestricted fund and $400,000 in a temporarily restricted fund
b. Cash of $10 million in an unrestricted fund
c. Cash of $10 million in a temporarily restricted fund
d. Cash of $9.6 million in a temporarily restricted fund and $400,000 in a permanently restricted fund

11. 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
a. Purpose
b. Audience
c. Content
d. Fiscal viability
12. In allocating joint costs between fund-raising and other activities, a not-for-profit could use all of the following methods except
a. Physical units
b. Relative direct cost
c. Straight-line
d. Stand-alone costs



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  • CreatedAugust 13, 2014
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