Accounting Final Ch19

Question 1

Special entities are not-for-profit organizations that are

a. government owned.
b. privately owned.
c. publicly owned.
d. either government owned or privately owned.

Answer 1

d. either government owned or privately owned.

Question 2

A municipality’s capital projects fund is similar to a university’s

a. renewals and replacements fund.
b. retirement of indebtedness fund.
c. investment in plant fund.
d. none of these.

Answer 2

a. renewals and replacements fund.

Question 3

Board designated funds should be accounted for as

a. restricted funds.
b. specific purpose funds.
c. unrestricted funds.
d. none of these.

Answer 3

c. unrestricted funds.

Question 4

For a university, the receipt of assets for operating activities that have external restrictions as to the purposes for which they can be used is recorded by crediting

a. Fund Balance-Restricted.
b. Contribution Revenue.
c. Deferred Revenue.
d. Net Assets Released.

Answer 4

b. Contribution Revenue.

Question 5

Which of the following statements related to pledges is incorrect?

a. Pledges are signed commitments to contribute specific amounts of money on a future date or in installments.
b. Pledges are recorded as revenues when a promise to give is nonrevocable and unconditional.
c. Pledges are generally enforceable contracts.
d. All of these are correct.

Answer 5

c. Pledges are generally enforceable contracts.

Question 6

When the donor has specified a particular date or event after which the principal of the Endowment Fund may be expended, the Endowment Fund is referred to as a(n)

a. pure endowment fund.
b. term endowment fund.
c. quasi endowment fund.
d. expendable endowment fund.

Answer 6

b. term endowment fund.

Question 7

The basic financial statements for all NNOs include a

1. Balance sheet
2. Statement of activities
3. Statement of cash flows
   a. 1 and 3
   b. 2 and 3
   c. 1 and 2
   d. 1, 2, and 3

Answer 7

d. 1, 2, and 3

Question 8

Revenues and expenses of hospitals are recorded in the accounts of the

a. Endowment Fund.
b. General Fund.
c. Plant Replacement Fund.
d. Specific Purpose Fund.

Answer 8

b. General Fund.

Question 9

Investments are reported by NNOs at

a. cost.
b. fair value.
c. the lower of cost or fair value.
d. the higher of cost or fair value.

Answer 9

b. fair value.

Question 10

Resources of an unrestricted fund that are designated by the governing board for endowment purposes are accounted for in the unrestricted fund by all NNOs except

a. voluntary health and welfare organizations.
b. hospitals.
c. colleges and universities.
d. other NNOs.

Answer 10

c. colleges and universities.

Question 11

In accounting for loan funds, revenue is recorded when the

a. contribution is received.
b. loan is made to students.
c. loan is repaid by students.
d. students graduate.

Answer 11

a. contribution is received.

Question 12

All of the following are a plant fund in colleges and universities except

a. unexpended plant fund.
b. funds for renewals and replacements.
c. investment in plant.
d. plant replacement and expansion fund.

Answer 12

d. plant replacement and expansion fund.

Question 13

Most property, plant and equipment transactions of hospitals are accounted for in the

a. fund for renewals and replacements.
b. general fund.
c. plant replacement and expansion fund.
d. unexpended plant fund.

Answer 13

b. general fund.

Question 14

All NNOs have current restricted funds and unrestricted funds except

a. colleges and universities
b. hospitals
c. VHWOs
d. ONNOs

Answer 14

b. hospitals

Question 15

Tuition waivers for which there is no intention of collection from the student should be classified by a college as:

Revenue	    Expenditures

a. No	        No
b. No	       Yes
c. Yes	       Yes
d. Yes	       No

Answer 15

c. Yes Yes

Question 16

Which of the following is used for current expenditures by a college?

Unrestricted	           Restricted
Current Funds	Current Funds a.	No	                                 No b.	No	                                Yes c.	Yes	                                 Yes d.	Yes                                 	No

Answer 16

c. Yes Yes

Question 17

Under Southdale Hospital’s established rate structure, the hospital would have earned patient service revenue of $7,000,000 for the year ended December 31, 2014. However, Southdale did not expect to collect this amount because of charity allowances of $1,000,000 and discounts of $500,000 to third party payers. In May 2014, Southdale purchased bandages from Ace Supply Co. at a cost of $5,000. However, Ace notified Southdale that the invoice was being cancelled and that the bandages were being donated to Southdale.
For the year ended December 31, 2014, how much should Southdale record as patient service revenue?
a. $7,000,000
b. $6,500,000
c. $6,000,000
d. $5,500,000

Answer 17

a. $7,000,000

Question 18

Under Southdale Hospital’s established rate structure, the hospital would have earned patient service revenue of $7,000,000 for the year ended December 31, 2014. However, Southdale did not expect to collect this amount because of charity allowances of $1,000,000 and discounts of $500,000 to third party payers. In May 2014, Southdale purchased bandages from Ace Supply Co. at a cost of $5,000. However, Ace notified Southdale that the invoice was being cancelled and that the bandages were being donated to Southdale.
For the year ended December 31, 2014, Southdale should record the donation of bandages as:
a. a $5,000 reduction in operating expenses.
b. nonoperating revenue of $5,000.
c. other operating revenue of $5,000.
d. a memorandum entry only.

Answer 18

c. other operating revenue of $5,000.

Question 19

The following funds were among those on Cole University’s books at April 30, 2014:
Funds to be used for acquisition of additional properties
for university purposes (unexpended at 4/30/14) $2,500,000
Funds set aside for debt service charges and for the
retirement of indebtedness on university properties 5,000,000
How much of the above-mentioned funds should be included in plant funds?
a. $0
b. $2,500,000
c. $5,000,000
d. $7,500,000

Answer 19

d. $7,500,000

Question 20

Which basis of accounting should a voluntary health and welfare organization use?

a. Cash basis for all funds
b. Modified accrual basis for all funds
c. Accrual basis for all funds
d. Accrual basis for some funds and modified accrual basis for other funds

Answer 20

c. Accrual basis for all funds

Question 21

Which one of the following statements is not required for NNOs?

a. statement of financial position
b. statement of cash flows
c. statement of changes in net assets
d. statement of activities

Answer 21

c. statement of changes in net assets

Question 22

Admissions, counseling and registration are considered to be:

a. educational and general services.
b. auxiliary enterprises.
c. student services.
d. institutional support.

Answer 22

c. student services.

Question 23

A good reason for NNOs to adopt fund accounting even though FASB standards do not require it is because:

a. the capital assets are significant.
b. the donated services are significant.
c. the program services are involved with more than one type of revenue.
d. restrictions are placed by donors in many cases.

Answer 23

c. the program services are involved with more than one type of revenue.

Question 24

Which of the following groups of not-for-profit entities must use fund accounting to be in conformity with GAAP?

Governmental 	Nongovernmental

a. Yes Yes
b. Yes No
c. No Yes
d. No No

Answer 24

b. Yes No

Question 25

GASB No. 35 allows public colleges and universities to:

a. apply guidance designed for special-purpose governments.
b. use FASB standards to permit consistent reporting.
c. optionally follow FASB standards.
d. none of the above is correct.

Answer 25

a. apply guidance designed for special-purpose governments.

Question 26

For the fall semester of 2014, Irving College assessed its students $5,000,000 for tuition and fees. The net amount realized was only $4,700,000 because of the following revenue reductions:
Refunds occasioned by class cancellations and student withdrawals $ 80,000
Tuition remissions granted to faculty members’ families 20,000
Scholarships and fellowships 200,000

How much should Irving College report for the period for unrestricted current funds revenues from tuition and fees?

a. $5,000,000
b. $4,900,000
c. $4,780,000
d. $4,700,000

Answer 26

b. $4,900,000

Question 27

During the years ending June 30, 2013, and June 30, 2014, Jefferson University conducted a cancer research project financed by a $3,000,000 gift from an alumnus. This entire amount was pledged by the donor on July 10, 2009, although he paid only $800,000 at that date. The gift was restricted to the financing of this particular research project. During the two-year research period, Jefferson related gift receipts and research expenditures were as follows:

Year Ended June 30
2013	2014 Gift receipts	1,100,000	1,200,000 Cancer research restricted expenditures	1,400,000	1,600,000

How much gift revenue should Jefferson University report in the temporarily restricted column of its statement of activities for the year ended June 30, 2014?

a. $3,000,000
b. $1,600,000
c. $1,200,000
d. $0

Answer 27

b. $1,600,000

Question 28

Bell Foundation, a voluntary health and welfare organization, supported by contributions from the general public, included the following costs in its statement of functional expenses for the year ended December 31, 2014.

		Fund raising	$1,000,000
		Administrative	600,000
		Research	200,000

Bell’s functional expenses for 2014 program services included

a. $200,000.
b. $600,000.
c. $1,000,000.
d. $1,800,000.

Answer 28

a. $200,000.

Question 29

Military Family Center is a voluntary welfare organization funded by contributions from the general public. During 2013 unrestricted pledges of $800,000 were received, half of which were payable in 2013 with the other half payable in 2014 for use in 2014. It was estimated that 10% of these pledges would be uncollectible. How much should National report as net contribution revenue for 2013 with respect to the pledges?

a. $800,000
b. $720,000
c. $360,000
d. $0

Answer 29

b. $720,000

Question 30

Cindy Duncan is a social worker on the staff of Military Family Center, a voluntary welfare organization. She earns $42,000 annually for a normal workload of 2,000 hours. During 2014 she contributed an additional 800 hours of her time to Military Family Center at no extra charge. How much should Military Family Center record in 2014 as contributed service expense?

a. $0
b. $1,680
c. $8,400
d. $16,800

Answer 30

d. $16,800