FAR 19

Question 1

A not-for-profit voluntary health and welfare entity should report a contribution for the construction of a new building as cash flows from which of the following in the statement of cash flows?

Answer 1

Financing activities

Question 2

Cash flows received from investment income restricted by donor stipulation to the same purposes also are reported as

Answer 2

financing activities, not as operating activities.

Question 3

In analyzing a company’s financial statements, which financial statement would a potential investor primarily use to assess the company’s liquidity and financial flexibility?

Answer 3

Balance sheet

Question 4

What is the primary purpose of the statement of activities of a nongovernmental not-for-profit organization?

Answer 4

To report the change in net assets for the period

Question 5

IF a lawsuit is “Probable”…

Answer 5

accrue for it.

Question 6

F a lawsuit is “Reasonably possible”…

Answer 6

Disclose it. No accrual.

Question 7

What are investing activities?

Answer 7

category includes all transactions related to the making or collecting of loans and the acquiring and disposing of debt; equity instruments (of other entities); property, plant, and equipment; or a business unit.

Question 8

“More likely than not” means..

Answer 8

50% or more chance

Question 9

Milton Co. pledged some of its accounts receivable to Good Neighbor Financing Corporation in return for a loan. What does that mean?

Answer 9

Under a pledge, an account receivable is used as collateral for a loan. Milton continues to collect the receivables and applies the collection to the loan balance.

Question 10

The contributions that donors intend to be used to finance the next year’s operations

Answer 10

are temporarily restricted support.

Question 11

Promises that donors intend to be used to finance current-year operations are reported as

Answer 11

Unrestricted support after deducting the uncollectible portion of the receivables.

Question 12

How should a nongovernmental, not-for-profit entity report donor-restricted cash contributions for long-term purposes in its statement of cash flows?

Answer 12

Financing activity inflow

Question 13

How do you calculate a deferred income tax liability?

Answer 13

Deferred income tax liability = Temporary differences x Tax rate

Question 14

What are GAAP and Tax temporary differneces?

Answer 14

Installment sales, warranty expense, and depreciation under different methods.

Question 15

During the current year, Ace Co. amortized a bond discount. Ace prepares its statement of cash flows using the indirect method. In which section of the statement should Ace report the amortization of the bond discount?

Answer 15

Operating

Question 16

Alpha Hospital, a large not-for-profit entity, has adopted an accounting policy that does not imply a time restriction on gifts of long-lived assets. An accounting firm prepared Alpha’s annual financial statements without charge to Alpha. Indicate the manner in which this transaction affects Alpha’s financial statements.

Answer 16

The donation of a professional service, which the hospital would otherwise have to pay out cash for, is reportable as a donation and would increase unrestricted revenues, gains, and other support. It would also increase expense.

Question 17

The minimum requirements for general purpose external financial statements are

Answer 17

government-wide and fund financial statements, notes to the financial statements, management’s discussion and analysis and other required supplementary information.

Question 18

When is revenue recognized on the modified accrual basis?

Answer 18

revenues should be recognized when all applicable eligibility requirements are met and the resources are available