V246 Exam 2 Questions with Verified Solutions Graded A+
The accounting concept of "Net Assets" in the context of private not-for-profit organizations in
similar to which concept in the context of accounting for business entities? - Answers owners
equity
In the context of private business entities financial reporting is focused on profitability. What is
the primary focus of financial reporting in the case of public organizations? - Answers
accountability to the public
When business entities prepare and issue financial statements GAAP rules require that they use
the accrual basis accounting. What basis of accounting is required when private not-for-profit
organizations prepare and issue financial statements? - Answers accrual basis
When cash and other valuable resources are contributed to a not-for-profit organization there
are two ways to categorize it. What are these two types of contributions generally called? -
Answers private and public
What organization has the responsibility for setting the accounting and financial reporting
standards that apply to not-for-profit organizations? - Answers Financial Accounting Standards
Board (FASB)
In the context of accounting for not-for-profit organizations what purpose does a
reclassification entry serve? - Answers To convert a donor restricted net asset to an
unrestricted net asset because the restriction has lapsed
In the case of a private not-for-profit organization the statement of activities requires total
revenues and expenses for the period to be divided into two categories. What are these two
categories called? - Answers Net Assets Without Donor Restrictions and Net Assets With Donor
Restrictions
At the end of 2019 the local opera, a private not-for-profit organization, received a pledge for a
$1,000,000 cash contribution to be made if it is able to increase their number of season ticket
holders from 1,000 to 2,000 before the end of 2022. The opera's board of directors unanimously
approved a plan to begin aggressively recruiting new season ticket holders before the end of
2019.
By the end of 2020 the opera had increased the number of season ticket holders to 1,700 and
had 100% confidence that it would exceed 2,000 season ticket holders by the end of 2021. How
much contribution revenue should the Opera recognize in 2020 as a result of this pledge? -
Answers $0, because the actual goal of 2,000 season ticket holders was not met by the end of
2020.
In 2020 Bloomington House had an outstanding fundraising year. They received an unrestricted
contribution of $2,000,000 from the estate of a veteran. In the last meeting of 2020
, Bloomington House's board of directors unanimously approved a plan to place the $2,000,000
estate gift into a fund that is designated for the purchase of a new building to provide services
from.
How should this resource be presented in Bloomington House's 2020 Statement of Activities? -
Answers Net Asset Without Donor Restriction
Barkley House is a private not-for-profit organization that serves as a rescue shelter for dogs. In
May of 2020 they received a bequest of Apple Computer common stock from the estate of a
local dog lover. The stock was worth $60,000 on the date that Barkley received the stock. At the
end of 2020 Barkley still owned the stock which was then worth $100,000. How would the stock
be listed on Barkley's statement of financial position on December 31, 2020? - Answers At fair
market value = $100,000
Non-cash contributions to a private not-for-profit are recorded at fair market value at the date of
receipt. (T/F) - Answers True;
All contributions are to be recorded at fair market value at the date of receipt.
Uptown Church received a donation of marketable equity securities from a church member. In
reviewing the financial press, it is determined that the securities had appreciated during the year.
At what amount should Uptown report its marketable equity securities in the year-end balance
sheet? - Answers Market value at the balance sheet date.
FASB Statement 124, Accounting for Certain Investments of Not-for-Profit Organizations: -
Answers requires that investments in debt securities be carried at fair value.
Care Foundation is a voluntary health and welfare organization funded by contributions from the
general public. Care sold equipment for $25,000 which cost $40,000 and had a book value of
$30,000 at the time of sale. In recording the sale, Care should: - Answers record a loss of $5000
The Robbins Foundation is a voluntary health and welfare organization funded by contributions
from the general public. Robbins Foundation sold equipment for $30,000 which cost $70,000
and had a book value of $45,000 at the time of sale. In recording the sale, the foundation should:
- Answers record a loss of $15000
Care Foundation is a voluntary health and welfare organization funded by contributions from the
general public. In its Statement of Activities, the annual provision for depreciation should: -
Answers be included as an element of expense.
Which of the following statements is NOT accurate with respect to the recording of expenses
for a not-for-profit? - Answers The FASB requires expenses to be reported by function or
program in the Statement of Activities.
The FASB requires private not-for-profit organizations to report expenses separated by without
The accounting concept of "Net Assets" in the context of private not-for-profit organizations in
similar to which concept in the context of accounting for business entities? - Answers owners
equity
In the context of private business entities financial reporting is focused on profitability. What is
the primary focus of financial reporting in the case of public organizations? - Answers
accountability to the public
When business entities prepare and issue financial statements GAAP rules require that they use
the accrual basis accounting. What basis of accounting is required when private not-for-profit
organizations prepare and issue financial statements? - Answers accrual basis
When cash and other valuable resources are contributed to a not-for-profit organization there
are two ways to categorize it. What are these two types of contributions generally called? -
Answers private and public
What organization has the responsibility for setting the accounting and financial reporting
standards that apply to not-for-profit organizations? - Answers Financial Accounting Standards
Board (FASB)
In the context of accounting for not-for-profit organizations what purpose does a
reclassification entry serve? - Answers To convert a donor restricted net asset to an
unrestricted net asset because the restriction has lapsed
In the case of a private not-for-profit organization the statement of activities requires total
revenues and expenses for the period to be divided into two categories. What are these two
categories called? - Answers Net Assets Without Donor Restrictions and Net Assets With Donor
Restrictions
At the end of 2019 the local opera, a private not-for-profit organization, received a pledge for a
$1,000,000 cash contribution to be made if it is able to increase their number of season ticket
holders from 1,000 to 2,000 before the end of 2022. The opera's board of directors unanimously
approved a plan to begin aggressively recruiting new season ticket holders before the end of
2019.
By the end of 2020 the opera had increased the number of season ticket holders to 1,700 and
had 100% confidence that it would exceed 2,000 season ticket holders by the end of 2021. How
much contribution revenue should the Opera recognize in 2020 as a result of this pledge? -
Answers $0, because the actual goal of 2,000 season ticket holders was not met by the end of
2020.
In 2020 Bloomington House had an outstanding fundraising year. They received an unrestricted
contribution of $2,000,000 from the estate of a veteran. In the last meeting of 2020
, Bloomington House's board of directors unanimously approved a plan to place the $2,000,000
estate gift into a fund that is designated for the purchase of a new building to provide services
from.
How should this resource be presented in Bloomington House's 2020 Statement of Activities? -
Answers Net Asset Without Donor Restriction
Barkley House is a private not-for-profit organization that serves as a rescue shelter for dogs. In
May of 2020 they received a bequest of Apple Computer common stock from the estate of a
local dog lover. The stock was worth $60,000 on the date that Barkley received the stock. At the
end of 2020 Barkley still owned the stock which was then worth $100,000. How would the stock
be listed on Barkley's statement of financial position on December 31, 2020? - Answers At fair
market value = $100,000
Non-cash contributions to a private not-for-profit are recorded at fair market value at the date of
receipt. (T/F) - Answers True;
All contributions are to be recorded at fair market value at the date of receipt.
Uptown Church received a donation of marketable equity securities from a church member. In
reviewing the financial press, it is determined that the securities had appreciated during the year.
At what amount should Uptown report its marketable equity securities in the year-end balance
sheet? - Answers Market value at the balance sheet date.
FASB Statement 124, Accounting for Certain Investments of Not-for-Profit Organizations: -
Answers requires that investments in debt securities be carried at fair value.
Care Foundation is a voluntary health and welfare organization funded by contributions from the
general public. Care sold equipment for $25,000 which cost $40,000 and had a book value of
$30,000 at the time of sale. In recording the sale, Care should: - Answers record a loss of $5000
The Robbins Foundation is a voluntary health and welfare organization funded by contributions
from the general public. Robbins Foundation sold equipment for $30,000 which cost $70,000
and had a book value of $45,000 at the time of sale. In recording the sale, the foundation should:
- Answers record a loss of $15000
Care Foundation is a voluntary health and welfare organization funded by contributions from the
general public. In its Statement of Activities, the annual provision for depreciation should: -
Answers be included as an element of expense.
Which of the following statements is NOT accurate with respect to the recording of expenses
for a not-for-profit? - Answers The FASB requires expenses to be reported by function or
program in the Statement of Activities.
The FASB requires private not-for-profit organizations to report expenses separated by without
