AICPA-Final Questions with Correct Answers (Grade A+)
Question 1: When should a conditional pledge to a nongovernmental not-for-profit organization be
recognized as revenue?
A. Immediately.
B. When the cash is received.
C. When the pledge conditions are met.
D. At the beginning of the next fiscal period.
Answer: C. When the pledge conditions are met.
Question 2: What is the appropriate characterization of the net assets of a nongovernmental
not-for-profit organization?
A. Residual interest.
B. Ownership interest.
C. Donor's interest.
D. Equity interest.
Answer: A. Residual interest.
Question 3: A nongovernmental, not-for-profit organization had the following investments: Investment
Bonds Stock A (100 shares) Stock B (200 shares) Cost $9,900 $50 per share $40 per share Fair Value
(Beginning of Year) $10,000 $45 $41 Fair Value (End of Year) $9,950 $51 $49 What amount should be
the total value of investments reported in the year-end statement of financial position?
A. $24,850
B. $24,800
C. $23,800
D. $22,900
Answer: A. $24,850
Question 4: The purpose of a statement of financial position for a nongovernmental not-for-profit
entity is to provide relevant information about
A. The cash receipts and cash payments during a period in time.
B. The effects of transactions and other events and circumstances that change the amount and nature of net
assets.
C. The assets, liabilities, and net assets, and about their relationships to one another at a moment in time.
D. The changes in permanently restricted net assets, temporarily restricted net assets, and unrestricted net assets
for a period of time.
Answer: C. The assets, liabilities, and net assets, and about their relationships to one another at a moment in
time.
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,Question 5: The net asset reclassifications of a nongovernmental not-for-profit organization would be
reported on which of the following?
A. Statement of financial position.
B. Statement of activities.
C. Statement of cash flows.
D. Statement of functional expenses.
Answer: B. Statement of activities.
Question 6: The Cats and Dogs League was organized as a nongovernmental not-for-profit
organization. The League received a pledge of $10,000 to be used to build an addition to the kennel.
This donation will not be received for three years. How should this pledge be recorded?
A. As temporarily restricted support of the present value of $10,000.
B. As temporarily restricted support of $10,000.
C. As a conditional promise to give of $10,000.
D. It should not be accounted for until it is received
Answer: A. As temporarily restricted support of the present value of $10,000.
Question 7: A donor provided a $10 million gift for a specific program to a nongovernmental,
not-for-profit organization. The organization cannot spend the $10 million, but it may use the income
on the gift for the donor-specified program. In the organization's statement of activities, the gift should
be reported as part of the change in
A. Temporarily restricted net assets.
B. Permanently restricted net assets.
C. Restricted - nonspendable.
D. Unrestricted net assets.
Answer: B. Permanently restricted net assets.
Question 8: During the current year, a nongovernmental, not-for-profit hospital received a gift of $10
million to be used for an addition to the physical therapy unit. In addition, the hospital also received an
investment valued at $3 million with a donor-imposed restriction allowing only the use of the
investment earnings for paying the salary of an additional physical therapist. As of the end of the
current year, a physical therapist had not been hired, and earnings on the investment for the year were
$150,000. What amount should be reported as temporarily restricted net assets in the year-end
statement of financial position?
A. $150,000
B. $10,000,000
C. $10,150,000
D. $13,150,000
Answer: C. $10,150,000
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, Question 9: A statement of financial position for a nongovernmental not-for-profit organization reports
amounts for which of the following classes of net assets?
A. Current.
B. Long-term.
C. Permanently restricted.
D. Temporarily unrestricted.
Answer: C. Permanently restricted.
Question 10: A nongovernmental not-for-profit college has a portfolio of bond investments that had an
original cost of $2,000,000. The college's board of trustees voted to hold the principal of this fund intact
in perpetuity and designated the earnings to reimburse faculty for travel to academic conferences.
During the year, interest of $50,000 was earned in cash. The fair value of the bonds was $1,980,000.
What amount should the college report as permanently restricted net assets at year end?
A. $0
B. $1,980,000
C. $2,000,000
D. $2,030,000
Answer: A. $0
Question 11: A storm damaged the roof of a nongovernmental, not-for-profit organization's building. A
professional roofer repaired the roof at no charge. How should the roof repairs be recognized in the
statement of activities?
A. As an increase in expenses and an increase in contributions from donated services.
B. As an increase in the building account and an increase in unrestricted net assets.
C. As an increase in fixed assets and an increase in contributions from donated services.
D. No recognition is required in the financial statements, but a note disclosure is required.
Answer: A. As an increase in expenses and an increase in contributions from donated services.
Question 12: A donor gives $10,000 to a nongovernmental, not-for-profit organization with instructions
that it must be used to fund the organization's general operating expenses during the following fiscal
year. The donation will increase the organization's
A. Unrestricted net assets.
B. Temporarily restricted net assets.
C. Restricted net assets.
D. Restricted retained earnings.
Answer: B. Temporarily restricted net assets.
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Question 1: When should a conditional pledge to a nongovernmental not-for-profit organization be
recognized as revenue?
A. Immediately.
B. When the cash is received.
C. When the pledge conditions are met.
D. At the beginning of the next fiscal period.
Answer: C. When the pledge conditions are met.
Question 2: What is the appropriate characterization of the net assets of a nongovernmental
not-for-profit organization?
A. Residual interest.
B. Ownership interest.
C. Donor's interest.
D. Equity interest.
Answer: A. Residual interest.
Question 3: A nongovernmental, not-for-profit organization had the following investments: Investment
Bonds Stock A (100 shares) Stock B (200 shares) Cost $9,900 $50 per share $40 per share Fair Value
(Beginning of Year) $10,000 $45 $41 Fair Value (End of Year) $9,950 $51 $49 What amount should be
the total value of investments reported in the year-end statement of financial position?
A. $24,850
B. $24,800
C. $23,800
D. $22,900
Answer: A. $24,850
Question 4: The purpose of a statement of financial position for a nongovernmental not-for-profit
entity is to provide relevant information about
A. The cash receipts and cash payments during a period in time.
B. The effects of transactions and other events and circumstances that change the amount and nature of net
assets.
C. The assets, liabilities, and net assets, and about their relationships to one another at a moment in time.
D. The changes in permanently restricted net assets, temporarily restricted net assets, and unrestricted net assets
for a period of time.
Answer: C. The assets, liabilities, and net assets, and about their relationships to one another at a moment in
time.
Page 1
,Question 5: The net asset reclassifications of a nongovernmental not-for-profit organization would be
reported on which of the following?
A. Statement of financial position.
B. Statement of activities.
C. Statement of cash flows.
D. Statement of functional expenses.
Answer: B. Statement of activities.
Question 6: The Cats and Dogs League was organized as a nongovernmental not-for-profit
organization. The League received a pledge of $10,000 to be used to build an addition to the kennel.
This donation will not be received for three years. How should this pledge be recorded?
A. As temporarily restricted support of the present value of $10,000.
B. As temporarily restricted support of $10,000.
C. As a conditional promise to give of $10,000.
D. It should not be accounted for until it is received
Answer: A. As temporarily restricted support of the present value of $10,000.
Question 7: A donor provided a $10 million gift for a specific program to a nongovernmental,
not-for-profit organization. The organization cannot spend the $10 million, but it may use the income
on the gift for the donor-specified program. In the organization's statement of activities, the gift should
be reported as part of the change in
A. Temporarily restricted net assets.
B. Permanently restricted net assets.
C. Restricted - nonspendable.
D. Unrestricted net assets.
Answer: B. Permanently restricted net assets.
Question 8: During the current year, a nongovernmental, not-for-profit hospital received a gift of $10
million to be used for an addition to the physical therapy unit. In addition, the hospital also received an
investment valued at $3 million with a donor-imposed restriction allowing only the use of the
investment earnings for paying the salary of an additional physical therapist. As of the end of the
current year, a physical therapist had not been hired, and earnings on the investment for the year were
$150,000. What amount should be reported as temporarily restricted net assets in the year-end
statement of financial position?
A. $150,000
B. $10,000,000
C. $10,150,000
D. $13,150,000
Answer: C. $10,150,000
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, Question 9: A statement of financial position for a nongovernmental not-for-profit organization reports
amounts for which of the following classes of net assets?
A. Current.
B. Long-term.
C. Permanently restricted.
D. Temporarily unrestricted.
Answer: C. Permanently restricted.
Question 10: A nongovernmental not-for-profit college has a portfolio of bond investments that had an
original cost of $2,000,000. The college's board of trustees voted to hold the principal of this fund intact
in perpetuity and designated the earnings to reimburse faculty for travel to academic conferences.
During the year, interest of $50,000 was earned in cash. The fair value of the bonds was $1,980,000.
What amount should the college report as permanently restricted net assets at year end?
A. $0
B. $1,980,000
C. $2,000,000
D. $2,030,000
Answer: A. $0
Question 11: A storm damaged the roof of a nongovernmental, not-for-profit organization's building. A
professional roofer repaired the roof at no charge. How should the roof repairs be recognized in the
statement of activities?
A. As an increase in expenses and an increase in contributions from donated services.
B. As an increase in the building account and an increase in unrestricted net assets.
C. As an increase in fixed assets and an increase in contributions from donated services.
D. No recognition is required in the financial statements, but a note disclosure is required.
Answer: A. As an increase in expenses and an increase in contributions from donated services.
Question 12: A donor gives $10,000 to a nongovernmental, not-for-profit organization with instructions
that it must be used to fund the organization's general operating expenses during the following fiscal
year. The donation will increase the organization's
A. Unrestricted net assets.
B. Temporarily restricted net assets.
C. Restricted net assets.
D. Restricted retained earnings.
Answer: B. Temporarily restricted net assets.
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