ACCTG 421 GOVERNMENT ACCOUNTING

NONPROFIT ORGANIZATIONS
b. Annuity fund payments vary in amount
Multiple Choice (IAA)
and life income payments are fixed in
amount.
1. Nonprofit organizations include all of the
c. Both annuity fund payments and life
following, except
income payments are fixed in amount.
d. Both annuity fund payments and life
a. Professional associations
income payments vary in amount.
b. Schools, colleges and universities
c. Hospitals
8. The statement of financial position of a
d. Government-owned and controlled
private non-profit organization shall report the
corporations
net assets according to which of the following
classifications?
2. This fund include all the assets of a non-profit
organization that are available for use as
a. Unrestricted and permanently restricted
authorized by the governing board and are
b. Temporarily restricted and permanently
not restricted for specific purposes.
restricted
c. Unrestricted and temporarily restricted
a. Unrestricted fund
d. Unrestricted, temporarily restricted
b. Restricted fund
and restricted
c. Permanent endowment fund
d. Term endowment
9. Unrestricted net assets are typically the
assets in
3. The principal must be maintained indefinitely
in revenue producing investments and only
a. General fund
the revenue from the investments may be
b. Restricted fund
expended.
c. Permanent endowment fund
d. Loan fund, term endowment fund, annuity
a. Permanent endowment fund
fund, life income fund and plant fund
b. Term endowment fund
c. Quasi-endowment fund
10. Management and general expenses, fund
d. Annuity fund
raising and membership development
activities of a non-profit organization are
4. It is a fund for which the principal may be
classified in the statement of activities as
expended after the passage of a certain
period or the occurrence of an event specified
a. Program services
by the donor.
b. Support services
c. Both program services and support
a. Regular endowment
services
b. Term endowment
d. Neither program services nor support
c. Quasi-endowment
services
d. Both regular and term endowment
Multiple choice (AICPA Adapted)
5. The type of endowment fund that may be
established by the board of trustees of a
11. A non-profit college received during the
nonprofiit university is
current year a certain amount from a donor
with the stipulation that the contribution be
a. Permanent endowment fund
used to support faculty training during the
b. Term endowment fund
next fiscal year. In the early part of next year,
c. Quasi-endowment fund
the administrators of the college awarded
d. Trustee endowment fund
research grant equal to the contribution in
accordance with the instruction of the donor.
6. This fund is established for assets contributed
For the current year ended, the college shall
to a non-profit organization with the
report the contribution as
stipulation that the organization shall pay
specified fixed amount periodically to a
a. Temporarily restricted revenue in the
designated beneficiary for a specified period
statement of activities
of time.
b. Unrestricted revenue in the statement of
activities
a. Annuity fund
c. Temporarily restricted deferred revenue in
b. Life income fund
the statement of activities
c. Agency fund
d. An increase in the fund balance in the
d. Loan fund
statement of financial position
7. With respect to a non-profit organizations
payments to beneficiaries of annuity fund and
life income fund
a. Annuity fund payments are fixed in
amount and life income payments
vary in amount.

12. A voluntary health and welfare organization

received a contribution from a donor in the
current year. The donor did not specify any
use restriction but the donor specified that
the donation should be used in the next year.
The governing board of the organization spent
the contribution in the next year for fund
raising expenses. For the current year ended,

the organization shall report the contribution

in the
a. Statement of financial position as
deferred revenue
b. Statement of activities as unrestricted
revenue
c. Statement of financial position as
increase in fund balance
d. Statement of activities as
temporarily restricted
13. A nonprofit hospital received a cash donation
from a generous benefactor in the later part
of the current year. The donor requested that
the donation be used to acquire equipment
for the hospital. The hospital used the
donation to acquire equipment in early part of
next year. For the current year ended, the
hospital shall report the cash donation in the
a. Statement of activities as unrestricted
revenue
b. Statement of financial position as
temporarily restricted revenue
c. Statement of financial position as
unrestricted deferred revenue
d. Statement of activities as
temporarily restricted revenue
14. Save the planet Earth, a nonprofit research
organization received a cash contribution
from a generous donor. The donor stipulated
that the donation be used to purchase new
computers for the research staff of the
organization. The contribution was received in
the current year, and the computers were
acquired in the next year. For the current
year, the cash contribution shall be reported
by the organization in the
a. Statement of activities as unrestricted
revenue
b. Statement of activities as deferred
revenue
c. Statement of activities as
temporarily restricted revenue
d. Statement of financial position as
deferred revenue
15. A prominent art collector donated an art
collection to a private nonprofit museum with
the stipulation that the art collection be
shown to the public, that it should be
preserved and not be sold. On the date of
donation, what was the effect of the donation
on the museums financial statements?
a. Temporarily restricted net assets
increased
b. Unrestricted net assets increased
c. Permanently restricted net assets
increased
d. No effect on net assets
16. A nonprofit college received a building with no
donor stipulation as to its use. The college
does not have an accounting policy implying a
time restriction on the donated building. What
type of net assets should be increased when
the building is received?
a. Unrestricted

b. Temporarily restricted
c. Permanently restricted
d. Temporarily restricted and permanently
restricted
17. Which of the following would result in an
increase in unrestricted net assets for the
current year?
I.

A private nonprofit hospital earned interest

on investments that were boarddesignated.

II.

A private nonprofit organization received

unconditional promises to give which will
not be received until January of next year.
The donors placed no restrictions on the
donations.
a.
b.
c.
d.

I only
II only
Both I and II
Neither I nor II

18. For a private nonprofit organization, when is a

donor of conditional promise to give
considered unconditional?
a. Only when the condition is substantially
met.
b. When the possibility that the
condition will not be met is remote.
c. When the conditional promise is made.
d. When the cash or other asset promised is
received.
19. United Hope, a private not-for-profit voluntary
health and welfare organization, received the
following contribution during the current year:
I.

From donors who stipulated that the

money should not be spent until next year.

II.

From donors who stipulated that the

contributions should be used for the
acquisition of equipment, none of which
was acquired in the current year.
a.
b.
c.
d.

I only
Both I and II
II only
Neither I nor II

20. Rosary Gardens, a private not-for-profit

organization, established a quasi-endowment
during the current year. At year-end, the
assets in the quasi-endowment shall be
included in which of the following
classifications?
a.
b.
c.
d.

Temporarily restricted net assets

Unrestricted net assets
Permanently restricted net assets
Either temporarily or permanently
restricted net assets, depending on the
expected term of the quasi-endowment.

21. An alumnus donated securities to a nonprofit

college and stipulated that the principal be
held in perpetuity and revenue be used for
faculty travel. Dividends received from the
securities shall be recognized as revenue in
a. Endowment fund
b. Quasi-endowment fund

c. Restricted current fund

d. Unrestricted current fund
22. For a nonprofit organization, net assets which
can be expended in accordance with the
wishes of the governing board shall be
reported as
a.
b.
c.
d.

Unrestricted
Temporarily restricted
Permanently restricted
Appropriated

d. Both I and II
26. Which of the following conditions is required
for the recognition of contributed services?
I.

The contributed serves create or enhance

nonfinancial assets.

II.

The contributed services require

specialized skills, are provided by
individuals possessing those skills, and
would typically need to be purchased if
not provided by donation.

23. Philippine Museum has both regular and term

endowment. In the museums statement of
financial position, how should the net assets
of each type of endowment be reported?
a. Term endowment as temporarily
restricted and regular endowment as
permanently restricted.
b. Term endowment as permanently
restricted and regular endowment as
temporarily restricted.
c. Both term and regular endowments as
permanently restricted.
d. Both term and regular endowments as
temporarily restricted.
24. During the current year, a nonprofit private
college received a promise from a donor to
provide 80% of the funds needed to construct
a new building if the college could get the
remaining 20% of the funds from other donors
by the middle of next year. At the current-year
end, the governing board of the college had
received donations from other donors for
approximately 15% of the cost of the new
building and believed that the probability of
not getting the remaining 5% was remote.
How would the college report the promise of
the donor for the current year?
a. Increase in permanently restricted net
assets.
b. Not reported.
c. Increase in deferred support in the
statement of financial position.
d. Increase in temporarily restricted net
assets in the statement of activities.
25. Which of the following transactions or events
would cause an increase in unrestricted net
assets for the current year?
I.

II.

A private not-for-profit voluntary health and

welfare organization spent a restricted
donation that was received in the prior
year. In accordance with the donors
wishes, the donation was spent on public
health education during the current year.
During the current year, a private not-forprofit college earned dividends and interest
on term endowments. Donors placed no
restrictions on the earnings of term
endowments. The governing board of the
college intends to use this investment
income to fund undergraduate scholarships
for next year.
a. II only
b. I only
c. Neither I nor II

a.
b.
c.
d.

II only
Either I or II
I only
Neither I nor II

27. During the current year, a foundation received

the following contributed services:
I.

A reputable law firm contributed services

which involve advice related to the
foundations regular endowments.

II.

Senior citizens participated in a telethon

to raise money for a new building.

Which of these contributed services shall be

included in unrestricted revenue for the
current year?
a.
b.
c.
d.

I only
II only
Both I and II
Neither I nor II

28. A nonprofit private elementary school

occupies the school building rent-free as
permitted by the building owner. The
existence of rent-free facilities is recognized in
the schools Unrestricted Fund as
a. Financial aid expense and other operating
support
b. Rent expense and an increase in fund
balance
c. Rent expense and contribution
revenue
d. An item requiring disclosure in the note to
financial statements
29. A storm broke the glass windows in the
building of a religious organization. A member
of the organization replaced the windows at
no charge. In the statement of activities of the
religious organization, the breakage and
replacement of the windows shall
a. Not be reported
b. Be reported by note disclosure only
c. Be reported as an increase n
expenses and contribution revenue
d. Be reported as an increase in net assets
and contribution revenue
30. During the current year, a service entity
repaired the heating system in the building
occupied by a nonprofit organization. An
invoice for a certain amount was received by
the nonprofit organization for the service
charge but at year-end, the service entity
notified the nonprofit organization that the
repairs are being donated without charge.

How should the nonprofit organization report

these contributed services during the current
year?
a. Only in the notes to financial statements.
b. No disclosure is required.
c. As an increase in expenses and
increase in unrestricted revenue in
the statement of activities.
d. As an increase in temporarily restricted
net assets in the statement of activities.

b. A shelter for the homeless

c. A private foundation
d. A public golf course
37. How should a nonprofit organization report
depreciation in the statement of activities?
a. It should not b included.
b. It should be included as a decrease
in unrestricted net assets.
c. It should be included as an increase in
temporarily restricted net assets.
d. It should be reclassified from unrestricted
net assets to temporarily restricted net
assets.

31. A fraternal organization shall prepare a

statement of financial position and which of
the following financial statements?
I.
II.
III.

Statement of activities
Statement of changes in fund balance
Statement of cash flows
a.
b.
c.
d.

I, II and III
III only
II and III
I and III

38. An entity is a nongovernmental not-for-profit

organization involved in research. The
statement of functional expenses should
classify which of the following as support
services?
a. Salaries of staff researchers involved in
research.
b. Salaries of fund-raisers for fund used
in research.
c. Cost of equipment involved in research.
d. Cost of laboratory supplies used in
research.

32. A statement of functional expenses is required

for which of the following nonprofit
organization?
a. College
b. Hospital
c. Voluntary health and welfare
organization
d. Performing arts organization
33. Which of the following private nonprofit
entities is required to report expenses both by
function and by natural classification?
a. Hospital
b. University
c. Voluntary health and welfare
organization
d. Performing arts organization
34. Which classification is required for reporting of
expenses by nonprofit organization?
a. Natural classification in the statement of
activities or notes to FS.
b. Functional classification in the
statement of activities or notes to
FS.
c. Functional classification in the statement
of activities in a matrix format in a
separate statement.
d. Functional classification in the statement
of activities and natural classification in
the notes to FS.
35. If private not-for-profit health care entities do
not use the expense classification in the
operating statement, such entities must
provide it in the notes.
a.
b.
c.
d.

Natural
Character
Functional
Object

36. Which of the following is required to prepare a

statement of functional expenses?
a. An art museum

39. In the statement of activities for nonprofit

performing arts center, expenses shall be
deducted from
I.
II.
III.

Unrestricted revenue
Temporarily restricted revenue
Permanently restricted revenue
a.
b.
c.
d.

I, II and III
Both I and II
I only
II only

40. What is an arrangement where a donor makes

an initial gift to a trust or directly to the notfor-profit organization in which the not-forprofit organization has a beneficial interest
but is not the sole beneficiary?
a.
b.
c.
d.

Donor-imposed condition
Donor-imposed restriction
Share-the-wealth agreement
Split-interest agreement

41. Which of the following is prepared by private

nonprofit hospital but not prepared by other
nonprofit organization?
a.
b.
c.
d.

Statement of financial position

Statement of cash flows
Statement of changed in net assets
Notes to financial statements

42. Which of the following statements of a private

nonprofit hospital reports the changes in
unrestricted, temporarily restricted and
permanently restricted net assets for a
period?
I.
II.
III.

Statement of financial position

Statement of operations
Statement of changes in net assets
a. I and II only

b. I and III only

c. II and III only
d. III only
43. The contractual adjustment account of a
nonprofit hospital is
a.
b.
c.
d.

An expense account
A revenue offset account
A loss account
An asset account

44. For a private health organization, which of the

following is included in patient service
revenue?
a.
b.
c.
d.

Contractual adjustment
Charity care
Restricted contribution
Unrestricted contribution

45. How is charity care accounted for in the

financial statements of a nonprofit health care
organization?
a.
b.
c.
d.

As patient service revenue

As bad debt expense
As a separate component of revenue
Not included in the financial
statements

46. Depending on the extent of discretion that the

nonprofit recipient has over the use or
subsequent disposition of the assets, gifts in
kind may be treated as
a. Agency transaction only
b. Contribution only
c. Either agency transaction or
contribution
d. Neither agency transaction or
contribution
47. When a nonprofit organization receives an
asset for which it has little or no discretion
over the use of the asset, the organization
should report the asset as
a.
b.
c.
d.

Contribution
Agency transaction
Conditional transfer
Either contribution or agency transaction

48. How are non-refundable advance fees

representing payments for future services
accounted for by nonprofit continuing care
retirement communities?
a.
b.
c.
d.

As revenue
As a liability
As other financing source
In a trust fund

49. A family lost a home in a recent fire. At the

current year-end, a philanthropist sent money
to a nonprofit benevolent organization to
purchase furniture for the family. In early part
of next year, the organization purchased the
furniture for the family. How should the
receipt of money be reported in the current
year?
a. As an unrestricted contribution
b. As a temporarily restricted contribution

c. As a permanently restricted contribution

d. As a liability
50. A successful alumnus of a private university
has recently donated a certain amount to the
university for the purpose of funding a center
for the study of sports ethics. This donation
is conditional upon the university raising an
amount matching the donation within twelve
months. The university administrators
estimate that they have a 50% chance of
raising the additional money. How should this
donation be accounted for?
a.
b.
c.
d.

As a temporarily restricted support

As an unrestricted support
As refundable advance
As memorandum entry reported in the
notes

51. A nongovernmental nonprofit organization is

preparing the year-end financial statements.
Which of the following statements is required?
a.
b.
c.
d.

Statement of changes in financial position

Statement of cash flows
Statement of changes in fund balance
Statement of revenue, expenses and
changes in fund balance

52. The statement of cash flows for a nonprofit

organization shall report cash flows according
to which of the following classifications?
I.
II.
III.
a.
b.
c.
d.

Operating activities
Investing activities
Financial activities
I, II and III
II and III
I only
I and III

53. A nonprofit university had the following cash

inflows during the current year:
I.
II.
III.

From tuition fees

From a donor who stipulated that the
money be invested indefinitely
From a donor who stipulated that the
money be spent in accordance with
the wishes of the universitys
governing board.

In the statement of cash flows for the current

year, what cash inflows shall be reported as
operating activities?
a.
b.
c.
d.

I, II and III
I only
I and II only
I and III only

54. A nonprofit foundation had the following cash

contributions and expenditures in the current
year:
I.
II.
III.

Unrestricted cash contribution

Cash contribution restricted by the
donor for the acquisition of equipment
Cash expenditure for an equipment
from the restricted cash contribution

What cash flows should be reported in the

statement of cash flows under investing
activities?
a.
b.
c.
d.

I, II and III
I only
II and III only
III only

55. During the current year, a nonprofit

organization received the following donorrestricted contribution and investment
income.
I.
II.

a.
b.
c.
d.

Cash contribution to bepermanently

invested.
Cash dividend and interest to be used
for the acquisition of theatre
equipment.
I only
II only
Both I and II
Neither I nor II

56. During the current year, a nonprofit

organization received a donation of
equipment from a local computer retailer. The
equipment is expected to have a useful life of
3 years. The donor placed no restriction on
how long the computer equipment was to be
used and the nonprofit organization has an
accounting policy which does not imply a time
restriction on gift o flong-lived asset. In the
statement of activities for the current year,
the donation of computer equipment should
be reported
a. As an increase in temporarily restricted
net assets
b. Only in the notes to financial statements
c. As an increase in unrestricted net
assets
d. As either increase in temporarily restricted
or unrestricted net assets
57. In the prior year, an alumnus of a private
nonprofit high school made a contribution
with the stipulation that the donation be used
for faculty travel during the current year.
During the current year, the school spent all
the donation for faculty travel expenses. What
was the effect of the donation on unrestricted
and temporarily restricted net assets for the
current year?
a. Increase in unrestricted net assets and
decrease in temporarily restricted net
assets

b. No effect on unrestricted net assets

and decrease in temporarily restricted
net assets
c. Increase in unrestricted net assets and no
effect on temporarily restricted net assets
d. No effect on both unrestricted and
temporarily restricted net assets
58. Which of the following would result to
reclassification of net assets of a nonprofit
organization?
I.
II.
a.
b.
c.
d.

Expiration of donor-imposed condition

Expiration of donor-imposed restriction
I only
II only
Both I and II
Neither I nor II

59. At the end of the current year, the Board of

Trustees of the nonprofit museum designated
a certain amount of unrestricted net assets
for the construction of an addition to a
building. What effect does this designation
have on the unrestricted and temporarily
restricted net assets?
a. No effect on unrestricted net assets and
increase to temporarily restricted net
assets
b. Decrease in unrestricted net assets and
increase in temporarily restricted net
assets
c. Decrease in unrestricted net assets and no
effect on temporarily restricted net assets
d. No effect on both unrestricted and
temporarily restricted net assets
60. A voluntary health and welfare organization
received a cash donation in the prior year
which contained a donor-imposed restriction
which stipulated that the donation could not
be spent until the current year. The
organization spent the donation in the current
year for fund raising activities. In the current
year, the expiration of the time restriction
wold result in reporting
a. Increase in temporarily restricted net
assets
b. Reclassification which decreased
temporarily restricted net assets
c. Increase in unrestricted net assets
d. Expense which decreased temporarily
restricted net assets