Multiple-Choice Questions on Other Not-for-Profit Organizations [AICPA Adapted]
Select the correct answer for each of the following questions.
On January 2, 20X2, a not-for-profit botanical society received a gift of an exhaustible fixed asset with an estimated useful life of 10 years and no salvage value. The donor’s cost of this asset was $20,000, and its fair market value at the date of the gift was $30,000. What amount of depreciation of this asset should the society recognize in its 20X2 financial statements?
a.$3,000.
b.$2,500.
c.$2,000.
d.$0.
2. In 20X1, a not-for-profit trade association enrolled five new member companies, each of which was obligated to pay nonrefundable initiation fees of $1,000. These fees were receivable by the association in 20X1. Three of the new members paid the initiation fees in 20X1, and the other two new members paid their initiation fees in 20X2. Annual dues (excluding initiation fees) received by the association from all members have always covered the organization’s costs of services provided to its members. It can be reasonably expected that future dues will cover all costs of the organization’s future services to members. Average membership duration is 10 years because of mergers, attrition, and economic factors. What amount of initiation fees from these five new members should the association recognize as revenue in 20X1?
a.$5,000.
b.$3,000.
c.$500.
d.$0.
3. Roberts Foundation received a nonexpendable endowment of $500,000 in 20X3 from Multi Enterprises. The endowment assets were invested in publicly traded securities. Multi did not specify how gains and losses from dispositions of endowment assets were to be treated. No restrictions were placed on the use of dividends received and interest earned on fund resources. In 20X4, Roberts realized gains of $50,000 on sales of fund investments and received total interest and dividends of $40,000 on fund securities. The amount of these capital gains, interest, and dividends available for expenditure by Roberts’s unrestricted current fund is
a.$0.
b.$40,000.
c.$50,000.
d.$90,000.
4. In July 20X2, Ross donated $200,000 cash to a church with the stipulation that the revenue generated from this gift be paid to him during his lifetime. The conditions of this donation are that after Ross dies, the principal may be used by the church for any purpose voted on by the church elders. The church received interest of $16,000 on the $200,000 for the year ended June 30, 20X3, and the interest was remitted to Ross. In the church’s June 30, 20X3, annual financial statements:
a.$200,000 should be reported as temporarily restricted net assets in the balance sheet.
b.$184,000 should be reported as revenue in the activity statement.
c.$216,000 should be reported as revenue in the activity statement.
d.Both a and c.
5. The following expenditures were among those incurred by a not-for-profit botanical society during 20X4:
Printing of annual report | $15,000 |
Unsolicited merchandise sent to encourage contributions | 35,000 |
What amount should be classified as fund-raising costs in the society’s activity statement?
a.$0.
b.$5,000.
c.$35,000.
d.$40,000.
6. Trees Forever, a community foundation, incurred $5,000 in expenses during 20X3 putting on its annual fund-raising talent show. In the statement of activities of Trees Forever, the $5,000 should be reported as
a.A contra asset account.
b.A contra revenue account.
c.A reduction of fund-raising costs.
d.Part of fund-raising costs.
7. In 20X3, the board of trustees of Burr Foundation designated $100,000 from its current funds for college scholarships. Also in 20X3, the foundation received a bequest of $200,000 from an estate of a benefactor who specified that the bequest was to be used for hiring teachers to tutor students with disabilities. What amount should be accounted for as temporarily restricted funds?
a.$0.
b.$100,000.
c.$200,000.
d.$300,000.
Note: The following information is for questions 8 through 10:
United Together, a labor union, had the following receipts and expenses for the year ended December 31, 20X2:
Receipts: |
|
Per capita dues | $680,000 |
Initiation fees | 90,000 |
Sales of organizational supplies | 60,000 |
Nonexpendable gift restricted by donor for loan purposes for 10 years | 30,000 |
Nonexpendable gift restricted by donor for loan purposes in perpetuity | 25,000 |
Expenses: |
|
Labor negotiations | 500,000 |
Fund-raising | 100,000 |
Membership development | 50,000 |
Administrative and general | 200,000 |
The union’s constitution provides that 10 percent of the per capita dues be designated for the strike insurance fund to be distributed for strike relief at the discretion of the union’s executive board.
8. In United Together’s statement of activities for the year ended December 31, 20X2, what amount should be reported under the classification of revenue from unrestricted funds?
a.$740,000.
b.$762,000.
c.$770,000.
d.$830,000.
9. In United Together’s statement of activities for the year ended December 31, 20X2, what amount should be reported under the classification of program services?
a.$500,000.
b.$550,000.
c.$600,000.
d.$850,000.
10. In United Together’s statement of activities for the year ended December 31, 20X2, what amounts should be reported under the classifications of temporarily and permanently restricted net assets?
a.$0 and $55,000, respectively.
b.$55,000 and $0, respectively.
c.$30,000 and $25,000, respectively.
d.$25,000 and $30,000, respectively.
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