31 a donor had previously donated 2 000 to a not for profit entity stipulating that 4311947

31 a donor had previously donated 2 000 to a not for profit entity stipulating that 4311947

31.A donor had previously donated $2,000 to a not-for-profit entity, stipulating that the gift must be used to finance the annual Fall Harvest festival. The festival is held and the gift is used for the stipulated purpose. Which of the following best describes the effect of the journal entries needed to record the expense resulting from use of the gift?

a.An expense is reported in the temporarily restricted column of the statement of activities.

b.An expense is reported in the temporarily restricted column of the statement of activities, temporarily restricted net assets are increased, and unrestricted net assets are decreased.

c.An expense is reported in the unrestricted column of the statement of activities.

d.An expense is reported in the unrestricted column of the statement of activities, unrestricted net assets are increased, and temporarily restricted net assets are decreased.

32.A not-for-profit organization uses fund accounting. Which of the following transactions is likely to be accounted for in a Restricted Current Fund?

a.a donation of $10,000 that may be used for any purpose designated by the trustees

b.a donation of $50,000 that must be used to purchase a new building

c.a donation of $500,000 that must be kept intact in perpetuity

d.a grant of $30,000 that must be used to operate a day-care center for one year

33.A not-for-profit university uses fund accounting. The university's governing board decides to set aside $500,000 in a separate fund called the Student Performance Quasi-Endowment Fund, the income of which will be used to finance a long-term study on the career paths of the university's graduates. In which net asset classification of the university's statement of financial position should this fund be reported?

a.Unrestricted

b.Temporarily restricted

c.Permanently restricted

d.Endowment funds

34.A not-for-profit university uses fund accounting. It maintains a Loan Fund to account for its extensive program of financial assistance to students. The Loan Funds are derived from many sources, including both donations and amounts set aside by the university's governing board. When it prepares its statement of financial position, how should the university classify the net assets of the Loan Fund?

a.All net assets should be classified as temporarily restricted.

b.All net assets should be classified as permanently restricted.

c.Net assets should be classified as either temporarily or permanently restricted, depending on the restrictions imposed by the governing board and the donors.

d.Net assets set aside by the governing board should be classified as unrestricted, and net assets from donations should be classified as temporarily or permanently restricted, depending on the nature of the donor-imposed restrictions.

35.Say No To Meth, a not-for-profit entity devoted to informing the public about the hazards of methamphetamine, sends out brochures to a large number of doctors, urging that the brochures be placed in the doctors' waiting rooms. The four-page brochure contains a description of the addictive and destructive nature of the drug, but half of the last page contains an appeal for funds, in relatively large type. How should the entity report the $30,000 expense of preparing, printing, and mailing the brochure in its statement of activities?

a.The entire $30,000 must be reported as a fund-raising expense.

b.The entire $30,000 must be reported as a program expense.

c.The $30,000 should be allocated between fund-raising and program expenses, using appropriate cost accounting techniques.

d.The $30,000 should be reported under the caption “Program and fund-raising expenses.”

36.A not-for-profit secondary school sends a 8-page brochure to the parents and alumni of the school. The brochure describes the school's programs and discusses the achievements of some of its graduates. Five pages list the names of all contributors during the previous year and the last page contains an appeal for funds. How should the organization report the expense of printing and mailing the brochure?

a.All costs should be reported as program expenses.

b.All costs should be reported as fund-raising expenses.

c.The costs should be allocated between program and fund-raising expenses, using appropriate cost accounting techniques.

d.All costs should be reported under a single caption “Program and fund-raising expenses.”

36.A not-for-profit entity that conducts numerous programs receives investments as a donation. The donor, in a letter accompanying the donation, states that the principal of the donation must be maintained intact permanently, and that the income from the investment must be used to finance research in kidney disease. If the entity receives income of $8,000 from these investments, how should be income be reported?

a.as an increase in unrestricted net assets

b.as an increase in temporarily restricted net assets

c.as an increase in permanently restricted net assets

d.as an increase in any of the net asset classifications directed by the entity's trustees

37.A not-for-profit entity receives equipment having a fair value of $50,000 as a gift. How should the gift be reported in the entity's financial statements?

a.as an asset and as an increase in permanently restricted net assets

b.as an asset and as an increase in unrestricted net assets

c.as a footnote only, because gifts of equipment are not be reported on the face of financial statements

d.as an asset and as an increase in temporarily restricted net assets

38.Which of the following is true regarding the Financial Accounting Standards Board requirements for a not-for-profit entity's accounting and financial reporting?

a.Both fund accounting and reporting by net asset classification are required.

b.Neither fund accounting nor reporting by net asset classification are required.

c.Fund accounting is required, but reporting by net asset classification is not required.

d.Fund accounting is not required, but reporting by net asset classification is required.

39.Which of the following is an example of a mandatory transfer in college and university accounting?

a.a transfer to a Plant Fund to set aside amounts that will be used to pay debt service in accordance with a clause in a bond agreement

b.a transfer to a Plant Fund based on a decision by the Board of Trustees to build a new school of engineering

c.a transfer to a Plant Fund based on a decision by management to build new box seats in the football stadium for major donors

d.a reclassification from temporarily restricted to unrestricted net assets

40.Which of the following best describes standards for reporting expenses by function (such as instruction and research) or by natural classification (such as salaries and supplies) in the statement of activities prepared by colleges and universities?

a.all expenses must be reported by function on the face of the statement.

b.all expenses must be reported by natural classification on the face of the statement.

c.they may report by either method on the face of the statements; if they report by natural classification on the face, they must report functional expenses in the notes.

d.colleges and universities may report by either method on the face of the statement.

41.The National Kidney Foundation, a voluntary health and welfare organization, is required by GAAP to present an additional operating statement—a statement of functional expenses.  What will this statement present?

a.All expenses by function

b.All expenses by function and then by natural or object classification

c.All expenses by function then by funding source, including unrestricted and temporarily restricted.

d.All expenses by natural or object classification

42.Socialite Lisa King establishes a $4 million irrevocable charitable remainder trust providing a beneficial interest to the Clinton Metropolitan Opera.  A percentage of the fair value of the trust’s assets go to her husband during his lifetime.  The Opera will receive the remaining assets at her husband’s death.  Mrs. King also specifies that the only the revenue from investing the assets may be used to support the Opera’s programs. The Opera estimates that the present value of the estimated future benefits it will receive from the trust is $1.5 million.  How should the Opera report this arrangement when it learns of the trust?

a.It should record nothing now.  It should record the fair value of the assets only after Mr. King dies

b.It should record a $4 million receivable, $1.5 million in permanently restricted support, and $2.5 million long-term payable to Mr. King.

c.It should disclose the anticipated $1.5 million contribution in the notes to its financial statements.

d.It should record $1.5 million as contributions receivable and as permanently restricted support

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