Q: Which equation correctly represents the total net assets reported on a nonprofit's statement of financial position?

$$\text{Total Net Assets} = \text{Net Assets with Donor Restrictions} + \text{Net Assets without Donor Restrictions}$$

Question 1

Which of the following is NOT a characteristic of nonprofit organizations as defined by GAAP?

Accepted Answer

They have owners who can sell or transfer shares for profit.

Question 2

Which financial statement is required for nonprofit organizations and provides information about assets, liabilities, and net assets?

Accepted Answer

Statement of financial position

Question 3

A donor gives $50,000 to a nonprofit with the stipulation that the funds must be invested in perpetuity and only the earnings may be used for scholarships. How should this be classified?

Accepted Answer

Net assets with donor restrictions—permanent restriction (endowment)

Question 4

Which of the following best describes the measurement focus and basis of accounting for nonprofit organizations?

Accepted Answer

Economic resources measurement focus and full accrual basis

Question 5

A nonprofit receives an unconditional pledge of $10,000, expected to be collected in two years. The appropriate journal entry includes:

Accepted Answer

Debit Contributions Receivable at present value; Credit Contribution Revenue—Support with inherent time restriction at present value

Question 6

Which of the following is TRUE regarding the reporting of contributed services in nonprofit financial statements?

Accepted Answer

Only services that create or enhance nonfinancial assets or require specialized skills are recognized.

Question 7

A nonprofit receives a $$100,000 gift with 5$$,000 for current use, $$10,000 for use next year, and 85$$,000 to be maintained in perpetuity. What is the correct journal entry for the $10,000 portion?

Accepted Answer

Credit Contribution Revenue—Support with time restriction $10,000

Question 8

Which equation correctly represents the total net assets reported on a nonprofit's statement of financial position?

Accepted Answer

$$	ext{Total Net Assets} = 	ext{Net Assets with Donor Restrictions} + 	ext{Net Assets without Donor Restrictions}$$

Question 9

Which of the following is NOT a required element in the statement of financial position for a nonprofit?

Accepted Answer

Statement of retained earnings

Question 10

A nonprofit receives a conditional promise to give $$1 million if it raises 1 $$million from other donors. How should this be reported?

Accepted Answer

Do not recognize revenue or receivable until the condition is substantially met.

Question 11

Which of the following is a TRUE statement about board-designated net assets?

Accepted Answer

They are reported separately but still as net assets without donor restrictions.

Question 12

Which formula is used to calculate the present value of an unconditional promise to give due in future years?

Accepted Answer

$$	ext{Present Value} = \frac{	ext{Future Value}}{(1 + r)^n}$$

Question 13

Which of the following is an example of a voluntary health and welfare organization (VHWO)?

Accepted Answer

American Cancer Society

Question 14

How are expenses financed from donor-restricted resources reported in the statement of activities?

Accepted Answer

As decreases in net assets without donor restrictions, with a journal entry to reclassify net assets

Question 15

Which of the following is NOT a category in the statement of cash flows for nonprofits?

Accepted Answer

Fundraising activities

Question 16

A nonprofit receives donated artwork for its collection, which meets all three conditions for collection items. What are the two acceptable accounting treatments?

Accepted Answer

Capitalize the item and recognize revenue, or do not capitalize and do not recognize revenue

Question 17

Which of the following is TRUE regarding investment income for nonprofits?

Accepted Answer

Investment income is recognized as earned and increases net assets without donor restrictions unless restricted by donor.

Question 18

Which of the following is a required disclosure for liquidity in nonprofit financial statements?

Accepted Answer

Information about the availability of financial assets to meet cash needs for general expenditures within one year of the balance sheet date.

Question 19

Which IRS form must most tax-exempt nonprofit organizations file annually to report financial information?

Accepted Answer

Form 990

(13) Accounting for Nonprofit Organizations: Financial Reporting, Contributions, and Regulatory Issues

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