NFP Final Chapter 12 Review UPDATED
ACTUAL Exam Questions and CORRECT
Answers
A NFP organization receives a restricted gift from a donor. When, and in which type of fund,
should it recognize the revenue? When, and in which type of fund, should it recognize the related
expense? - CORRECT ANSWER - Restricted contributions should be recognized as
revenue in a fund restricted by donors when the contribution (even if only a pledge) is received.
Expenses should be recognized in a fund without donor restrictions when the funds are used. As
the contributions are used, the restrictions are met, and the resources are released from the
restricted by donors fund to the categories without donor restrictions.
In a recent month a CPA provided 10hrs of volunteer time to the Society for the Visually
Impaired. He devoted 7 hours to maintaining the orgs financial records and 3 to recording tapes
of newspapers and magazine articles. If volunteers had not provided these services, the org
would have had to hire paid personnel. Should the organization give accounting recognition to
the CPA's services? - CORRECT ANSWER - NFPs should recognize volunteer services
that require specialized skills, are provided by individuals possessing those skills, and would
typically need to be purchased if not provided by donation. These types of skills are provided by
"professionals and craftsmen". Record for the 7hrs of accounting, not the 3 of recording mags.
A museum received gifts of two valuable paintings. It recorded the value of one as an asset and
recognized the corresponding revenue. It gave no accounting recognition to the other. What
might be a legitimate explanation for such an apparent inconsistency? - CORRECT
ANSWER - Entities need not recognize contributions of collectibles as long as the items
satisfy all 3 criteria:
they are held for public exhibition, education, or research in furtherance of public service rather
than financial gain
They are protected, kept unencumbered, cared for, and preserved.
They are subject to an organizational policy that requires proceeds from sales of collection items
to be used to acquire other items for collections.
What special abuse does the AICPA address in its statement of position on the allocation of fund-
raising costs? What general criteria does it establish as to when common costs of materials and
activities that include a fund-raising appeal can be allocated to programmatic, rather than fund-
, raising, activities? - CORRECT ANSWER - The SOP requires that all costs of materials
and activities that include a fund-raising appeal be considered fund-raising costs, unless three
criteria are satisfied: purpose of the combined activity is to fulfill a program, management or
general function, audience for materials/activities is selected principally on its need for the
program or for ability to further program goals other than financially, and content must call for
specific action.
A term endowment is a gift - CORRECT ANSWER - the principal of which is available
for expenditure after a specified period of time
A NFP maintains an endowment of $1million, 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... - CORRECT ANSWER - Net assets without donor restrictions
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 restricted by donor fund? - CORRECT ANSWER - Net
assets released from restriction
The statement of cash flows of a NFP should divided into which of the following categories of
cash flows? - CORRECT ANSWER - Operating activities, financing activities, investing
activities
The Senior league, a NFP welfare agency, redeemed a $100,000 bond that it had held as an
investment of resources without donor restrictions. It also received an interest payment of
$6,000. In its statement of cash flows, the league should report? - CORRECT ANSWER -
$100,000 from investing activities
6,000 from operating activities
Enrex corporation gave a NFP 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 issues as a consequence of the research, and controlled when and where the research
results would be published. At the time of the receipt of the $500,000, the foundation should
ACTUAL Exam Questions and CORRECT
Answers
A NFP organization receives a restricted gift from a donor. When, and in which type of fund,
should it recognize the revenue? When, and in which type of fund, should it recognize the related
expense? - CORRECT ANSWER - Restricted contributions should be recognized as
revenue in a fund restricted by donors when the contribution (even if only a pledge) is received.
Expenses should be recognized in a fund without donor restrictions when the funds are used. As
the contributions are used, the restrictions are met, and the resources are released from the
restricted by donors fund to the categories without donor restrictions.
In a recent month a CPA provided 10hrs of volunteer time to the Society for the Visually
Impaired. He devoted 7 hours to maintaining the orgs financial records and 3 to recording tapes
of newspapers and magazine articles. If volunteers had not provided these services, the org
would have had to hire paid personnel. Should the organization give accounting recognition to
the CPA's services? - CORRECT ANSWER - NFPs should recognize volunteer services
that require specialized skills, are provided by individuals possessing those skills, and would
typically need to be purchased if not provided by donation. These types of skills are provided by
"professionals and craftsmen". Record for the 7hrs of accounting, not the 3 of recording mags.
A museum received gifts of two valuable paintings. It recorded the value of one as an asset and
recognized the corresponding revenue. It gave no accounting recognition to the other. What
might be a legitimate explanation for such an apparent inconsistency? - CORRECT
ANSWER - Entities need not recognize contributions of collectibles as long as the items
satisfy all 3 criteria:
they are held for public exhibition, education, or research in furtherance of public service rather
than financial gain
They are protected, kept unencumbered, cared for, and preserved.
They are subject to an organizational policy that requires proceeds from sales of collection items
to be used to acquire other items for collections.
What special abuse does the AICPA address in its statement of position on the allocation of fund-
raising costs? What general criteria does it establish as to when common costs of materials and
activities that include a fund-raising appeal can be allocated to programmatic, rather than fund-
, raising, activities? - CORRECT ANSWER - The SOP requires that all costs of materials
and activities that include a fund-raising appeal be considered fund-raising costs, unless three
criteria are satisfied: purpose of the combined activity is to fulfill a program, management or
general function, audience for materials/activities is selected principally on its need for the
program or for ability to further program goals other than financially, and content must call for
specific action.
A term endowment is a gift - CORRECT ANSWER - the principal of which is available
for expenditure after a specified period of time
A NFP maintains an endowment of $1million, 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... - CORRECT ANSWER - Net assets without donor restrictions
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 restricted by donor fund? - CORRECT ANSWER - Net
assets released from restriction
The statement of cash flows of a NFP should divided into which of the following categories of
cash flows? - CORRECT ANSWER - Operating activities, financing activities, investing
activities
The Senior league, a NFP welfare agency, redeemed a $100,000 bond that it had held as an
investment of resources without donor restrictions. It also received an interest payment of
$6,000. In its statement of cash flows, the league should report? - CORRECT ANSWER -
$100,000 from investing activities
6,000 from operating activities
Enrex corporation gave a NFP 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 issues as a consequence of the research, and controlled when and where the research
results would be published. At the time of the receipt of the $500,000, the foundation should
