ACCT 4421 final exam UPDATED ACTUAL
Exam Questions and CORRECT Answers
C - CORRECT ANSWER - 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 to 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
C - CORRECT ANSWER - 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 restrictions
d. Deferred program expense
A - CORRECT ANSWER - 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
, D - CORRECT ANSWER - 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 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.
A - CORRECT ANSWER - 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.
D - CORRECT ANSWER - 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
A - CORRECT ANSWER - 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
Exam Questions and CORRECT Answers
C - CORRECT ANSWER - 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 to 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
C - CORRECT ANSWER - 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 restrictions
d. Deferred program expense
A - CORRECT ANSWER - 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
, D - CORRECT ANSWER - 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 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.
A - CORRECT ANSWER - 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.
D - CORRECT ANSWER - 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
A - CORRECT ANSWER - 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
