CPA FAR - NFP

Question 1

What is the equivalent of the Statement of Financial Position?

Answer 1

The Balance Sheet

Question 2

What is the equivalent of the Statement of Activities?

Answer 2

The Income Statement and Statement of Retained Earnings

Question 3

What are Net Assets equivalent to on the Statement of Financial Position?

Answer 3

Equity

Question 4

What are self-imposed restrictions on money by the Board of Directors classified as?

Answer 4

Net assets without donor restrictions

Question 5

How do you reclassify donor-imposed restrictions when the conditions are met within the same reporting period?

Answer 5

You don’t, you can ultimately record the entire thing as without donor restrictions.

Question 6

What are program services?

Answer 6

Program services (expenses) are the activities for which the organization is chartered.

Ex:
Universities –> Education and research
Hospitals –> Patient care and education
Union –> Labor negotiations and training
Day Care –> Child care

Question 7

What are support services?

Answer 7

Support services include everything not classified as a program service.

Ex:
Fundraising
Management and general (admin expenses)
Membership development

Question 8

When do you recognize revenue (contributions) at a NFP?

Answer 8

You recognize revenue/contributions when the following are met:

1. Unconditional
2. Asset transferred (collection is certain)
3. Title must pass
4. Voluntary (no obligation to donate)
5. Nonreciprocal (donor gets nothing)

Question 9

How do you record an unconditional pledge?

Answer 9

You record an unconditional pledge at fair value when the pledge is made.

Question 10

How do you record a conditional pledge?

Answer 10

You do not recognize a conditional pledge until the conditions have been substantially met.

Question 11

How do you record a good faith deposit on a conditional pledge?

Answer 11

Dr. Cash
Cr. Refundable Advance (this is a liability)

Question 12

What is the difference between a condition and donor restriction?

Answer 12

Donor restrictions are satisfied by the NFP by use of the donated resources consistent with restrictions.

Conditions are satisfied by the resolution of barriers used to condition the contribution by the donor.

Until the condition is met, we don’t worry about with it is or is not restricted.

Question 13

What is a split-interest agreement?

Answer 13

A split-interest agreement represents donor contributions of trusts and other arrangements under which the NFP receives benefits that are shared with other beneficiaries.

Question 14

How should split-interest agreements be recorded?

Answer 14

Split-interest agreements should be recorded at fair value at the date of acquisition.

Question 15

Are split-interest agreements with or without donor restrictions?

Answer 15

Split-interest agreements are with donor restrictions.

Question 16

How should donated services be recorded?

Answer 16

Donated services should be recorded as a contribution and expense at fair value if the following criteria are met:

(SOME)
1. Specialized skill
2. Otherwise needed by the organization
3. Measurable
4. Easily (at fair value)

Dr. Expense or Asset
Cr. Contributions without donor restrictions

Question 17

How do you calculate Gross Revenue from Tuition and Fees?

Answer 17

Gross Revenue from Tuition and Fees = Assessed Student Tuition and Fees - Cancelled Classes

Question 18

How do you calculate Patient Service Revenue?

Answer 18

Patient Service Revenue = Gross Patient Service Revenue - Charitable Services

Question 19

What is the journal entry for a recipient of an NFP recipient where they are not financially interrelated and without variance power?

Answer 19

Dr. Asset (at fair value)
Cr. Refundable Advance Liability

Question 20

When would an NFP be a recipient entity?

Answer 20

An NFP would be a recipient entity when it accepts assets from a resource provider and agrees to use the assets on behalf of or transfer the assets to a specified beneficiary.

Question 21

How do you determine if organizations are financially interrelated?

Answer 21

An organization is financially interrelated if the following are met:

1. One organization has the ability to influence the operating and financial decisions of the other; and
2. One organization has an ongoing economic interest in the net assets of the other.

Question 22

What is the journal entry for a recipient of a NFP recipient where they are not financially interrelated but with variance power?

Answer 22

Dr. Asset (at fair value)
Cr. Contribution

Question 23

How do you determine if an organization has variance power?

Answer 23

An organization has variance power if they have the authority to redirect assets to another beneficiary.

Question 24

What is the journal entry for a recipient of a NFP recipient where they are financially interrelated and with or without variance power?

Answer 24

Dr. Asset (at fair value)
Cr. Contribution

Question 25

What is the journal entry of the beneficiary NFP when they are not financially interrelated and have no variance power?

Answer 25

Dr. Receivable
Cr. Contribution

Question 26

What is the journal entry of a beneficiary NFP when they are financially interrelated and have no variance power?

Answer 26

Dr. Interest in Recipient Net Assets
Cr. Change in Interest in Recipient Net Assets