Accounting for NFP Exam 1 UPDATED
ACTUAL Exam Questions and CORRECT
Answers
The Maryville Cultural Center recently conducted a successful talent show in which local talent
performed for a nominal prize. The talent show is an ongoing major event and is central to the
center's mission. The event raised $4,800 in gross revenue. Expenses related to the event
included $1,000 to rent an auditorium, $1,200 to advertise the event, $500 for trophies and other
awards for the winner and the runners up, and $100 for printing and mailing tickets. The center
believes there was no monetary value received by donors (attendees). To report this event in its
statement of activities, the center will report - CORRECT ANSWER - $4,800 in special
event revenue
$1,500 in special event expenses (rent and trophies)
$1,300 in fund-raising expenses (advertising and printing)
Many not-for-profit organizations attempt to classify fund-raising expenses as program services
expenses by making the activities look educational in nature or advocating for the mission of the
organization. For such expenses to be reported as program services expenses, they must meet
which of the following three criteria: - CORRECT ANSWER - purpose, audience, content
Save Our Beaches, an NFP organization, prepared and distributed a trifold flyer to individuals
and families at White Sands Beach, a popular beach for both residents and tourists. The flyer
provided information about beach pollution and invited the public to participate in the
organization's semiannual beach cleanup. In addition, one segment of the flyer solicited
contributions to the organization to help fund its activities. The cost of the flyer and its
distribution would most likely be considered - CORRECT ANSWER - both fund-raising
and program costs
A particular organization functions as an intermediary between donors and other beneficiary
organizations. The intermediary organization must report contribution revenue from donors if -
CORRECT ANSWER - the organization has variance power
, Volunteers contributed services to the symphony that had a fair value of $50,000. The services
provided by the volunteers did not require specialized skills. Under what condition should the
symphony recognize the fair value of the contributed services received? - CORRECT
ANSWER - will be recognized if they create or enhance a non-financial asset
On December 31, Ecology Center, a nongovernment not-for-profit organization, received an
unconditional pledge of $125,000 to be received in three years. The Ecology Center is confident
that it will collect the entire $125,000. The Ecology Center uses the present value technique
when measuring fair value. How should the Ecology Center record the pledge? - CORRECT
ANSWER - net contribution receivable and contribution with donor restrictions
Lifeworks is a nongovernment not-for-profit organization that recently received a large gift from
a donor in the amount of $3,000,000 in cash. The donor wishes to leave a legacy and therefore
specified that Lifeworks cannot spend the $3,000,000 but can invest the $3,000,000 and use any
earnings from the investments to support the organization. In the first year, $100,000 was earned
but has not yet been spent. How would the $3,000,000 gift and the $100,000 in earnings impact
the net assets of Lifeworks? - CORRECT ANSWER - 3 million increases net assets with
donor restrictions
100,000 increases net assets without donor restrictions
The Shannon Community Kitchen provides hot meals to homeless and low-income individuals
and families; it is the organization's only program. It is the policy of the community kitchen to
use restricted resources for which the purpose has been met before resources without donor
restrictions. The Kitchen had the following revenue and expense transactions during the 2020
fiscal year.
1) Cash donations without donor restrictions of $25,000 were received. A local philanthropist
also contributed $3,000, which was to be used for the purchase of Thanksgiving dinner
foodstuffs.
2) A local grocery store provided fresh produce with a fair value of $100. The produce was
immediately used.
ACTUAL Exam Questions and CORRECT
Answers
The Maryville Cultural Center recently conducted a successful talent show in which local talent
performed for a nominal prize. The talent show is an ongoing major event and is central to the
center's mission. The event raised $4,800 in gross revenue. Expenses related to the event
included $1,000 to rent an auditorium, $1,200 to advertise the event, $500 for trophies and other
awards for the winner and the runners up, and $100 for printing and mailing tickets. The center
believes there was no monetary value received by donors (attendees). To report this event in its
statement of activities, the center will report - CORRECT ANSWER - $4,800 in special
event revenue
$1,500 in special event expenses (rent and trophies)
$1,300 in fund-raising expenses (advertising and printing)
Many not-for-profit organizations attempt to classify fund-raising expenses as program services
expenses by making the activities look educational in nature or advocating for the mission of the
organization. For such expenses to be reported as program services expenses, they must meet
which of the following three criteria: - CORRECT ANSWER - purpose, audience, content
Save Our Beaches, an NFP organization, prepared and distributed a trifold flyer to individuals
and families at White Sands Beach, a popular beach for both residents and tourists. The flyer
provided information about beach pollution and invited the public to participate in the
organization's semiannual beach cleanup. In addition, one segment of the flyer solicited
contributions to the organization to help fund its activities. The cost of the flyer and its
distribution would most likely be considered - CORRECT ANSWER - both fund-raising
and program costs
A particular organization functions as an intermediary between donors and other beneficiary
organizations. The intermediary organization must report contribution revenue from donors if -
CORRECT ANSWER - the organization has variance power
, Volunteers contributed services to the symphony that had a fair value of $50,000. The services
provided by the volunteers did not require specialized skills. Under what condition should the
symphony recognize the fair value of the contributed services received? - CORRECT
ANSWER - will be recognized if they create or enhance a non-financial asset
On December 31, Ecology Center, a nongovernment not-for-profit organization, received an
unconditional pledge of $125,000 to be received in three years. The Ecology Center is confident
that it will collect the entire $125,000. The Ecology Center uses the present value technique
when measuring fair value. How should the Ecology Center record the pledge? - CORRECT
ANSWER - net contribution receivable and contribution with donor restrictions
Lifeworks is a nongovernment not-for-profit organization that recently received a large gift from
a donor in the amount of $3,000,000 in cash. The donor wishes to leave a legacy and therefore
specified that Lifeworks cannot spend the $3,000,000 but can invest the $3,000,000 and use any
earnings from the investments to support the organization. In the first year, $100,000 was earned
but has not yet been spent. How would the $3,000,000 gift and the $100,000 in earnings impact
the net assets of Lifeworks? - CORRECT ANSWER - 3 million increases net assets with
donor restrictions
100,000 increases net assets without donor restrictions
The Shannon Community Kitchen provides hot meals to homeless and low-income individuals
and families; it is the organization's only program. It is the policy of the community kitchen to
use restricted resources for which the purpose has been met before resources without donor
restrictions. The Kitchen had the following revenue and expense transactions during the 2020
fiscal year.
1) Cash donations without donor restrictions of $25,000 were received. A local philanthropist
also contributed $3,000, which was to be used for the purchase of Thanksgiving dinner
foodstuffs.
2) A local grocery store provided fresh produce with a fair value of $100. The produce was
immediately used.
