1C Non-Profit Entities

Question 1

Classes of Net Assets

Answer 1

1. Net Assets with donor restrictions

2. Net Assets without donor restrictions

Question 2

Nature of non-profit expenses

Answer 2

i.e. Salaries, Rent and Utilities, Printing and Supplies, Depreciation, etc.

Question 3

Function of non-profit expenses

Answer 3

i.e. Program 1, Program 2, Management and General, Fundraising, etc.

Question 4

Indirect reconciliation is not required when using direct method cash flow statement

Answer 4

True

Question 5

1. Statement of Financial Position

2. Statement of Activities

Answer 5

1. comparable to balance sheet

2. comparable to income statement

Question 6

Purpose of the statement of financial position

Answer 6

show the net asset classification with regard to donor restrictions.

Question 7

Statement of financial position example

Answer 7

Assets:
Cash
AR, less allowance
State appropriations
Investments

Liabilities and Net Assets:
AP
Deferred Revenue

Net Assets
Without donor restriction
With donor restriction

Question 8

Potential errors on statement of financial position or statement of activities

Answer 8

1. Errors in recording contributions - asset misclassification between donor restricted and not donor restricted.
2. Contributed services - incorrect measurement of contributed services. Should be recognized using the estimates of their value
3. Misclassification of net assets or failure to properly reclassify temporarily restricted net assets from donor restricted to not donor restricted.

Question 9

Purpose of the statement of activities

Answer 9

To show revenue and expenses of not for profit entity to determine the change in net assets.

Question 10

Purpose of NP Cash flows statement

Answer 10

present inflow and outflow of receipts and payments and identifying how it relates to operating, investing and financing activities.

Question 11

Calculate net asset balances

Answer 11

Net assets with donor restriction + net assets without donor restriction.

Contribution revenue will be closed to net assets.

Question 12

Net asset journal entries

Answer 12

Contribution:
Cash (contribution receivable, inventory)
Contributions - donor restricted
Contributions - not donor restricted

Contributed services:
Repair and Maintenance expense
Revenue from contributed services

Reclassification:
Contributions - donor restricted
contributions - not donor restricted.

Question 13

ASU 2016-14 Required disclosures

Answer 13

1. Amounts and purposes of governing board decisions
2. Composition of net assets with donor restrictions
3. Qualitative information regarding liquid assets
4. Qualitative information about availability of financial assets.
5. Amounts of expenses by nature and function
6. Methods to allocate costs between programs
7. Underwater endowment funds, including original amount and amount of deficiency.