Chapter 22

MULTIPLE CHOICE THEORETICAL

1. Which of the following should be used in accounting for nonprofit organization?

a. Fund accounting and accrual accounting

b. Fund accounting but not accrual accounting
c. Accrual accounting but not fund accounting
d. Neither accrual accounting nor fund accounting

2. One characteristic of nonprofit organizations that is comparable with characteristics of

governmental entities is:

a. Stewardship of resources
b. Governance by board of directors
c. Measurement of cost expirations
d. None of the foregoing

3. A nonprofit organizations restricted fund resembles a governmental entitys:

a. Agency fund
b. Endowment fund
c. Special fund
d. Assessment fund

4. A gift to nonprofit organization that is not restricted b y the donor is credited in the unrestricted
(general) fund to:

a. Fund balance
b. Deferred Revenues
c. Contributions Revenues
d. Nonoperating Revenues
5. The current fair value of contributed material is recognized in a nonprofit organizations
unrestricted fund with a debit to Inventories and a credit to:

a. Undesignated Fund Balance

b. Payable to Restricted Fund
c. Designated Fund Balance Merchandise
d. Contributions Revenues

6. Which of the following is not a source of resources of a nonprofit organizations restricted fund?

a. Operations of the nonprofit organization

b. Contributions of individual or government entities
c. Gains on disposals of investments
d. Revenues from endowment

7. Fund-raising expenses of nonprofit organizations are presented in the statement of activity as:

Program Services Supporting

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

8. A nonprofit organization occupies a building space rent-free, as permitted by the building

owner. The existence of rent-free facilities is recognized in nonprofit organizations unrestricted
fund as:

a. Financial expense and other operating support

b. Rent expense and an increase in fund balance
c. Rent expense and contributions revenue
d. An item requiring disclosure in a note to the financial statements
9. A contractual Adjustments account of a nonprofit organizations is:

a. An expense account
b. A revenue account
c. A loss account
d. An asset account

10. The statement of financial position of a nonprofit organization displays the organizations assets,
liabilities, and:

a. Fund balance
b. Equity
c. Excess of assets over liabilities
d. Net assets

11. Contributions from doors which are to be permanently invested should be disclosed on the
statement of activity, a nonprofit organization should also prepare a:

a. Permanently restricted net assets

b. Permanently restricted fund balance
c. Endowment fund balance
d. Deferred revenues

12. In addition to a statement of financial position and a statement of activity, a nonprofit

organization should also prepare a:

a. Statement of changes in fund balances

b. Statement of changes in financial position
c. Statement of cash flows
d. Statement of current funds revenues and expenses
MULTIPLE CHOICES COMPUTATIONAL

22-1 AB universitys (a nonprofit organization) unrestricted funds comprised the following:

Assets P500,000
Liabilities (including deferred revenues of P10,000) 300,000

The fund balance of AB Universitys unrestricted fund was:

a. P190,000
b. P200,000
c. P210,000
d. P500,000

Answer: b

P500,000
(300,000)
P200,000

22-2 For the summer session of 2013, Asia University, a nonprofit organization assessed its students
P1,700,000 (net of refunds), covering tuition and fees to educational and general purposes.
However, only P1,500,000 was expected to be realized, because scholarships totaling P150,000
were granted to students and tuition remissions of P50,000 were allowed to faculty members
children attending Asia. What amount should Asia include in the unrestricted fund as revenues
from student tuition fees?

a. P1,500,000
b. P1,550,000
c. P1,650,000
d. P1,700,000

Answer: d the total tuition fees for educational and general purpose
22-3 The records of TMT Hospital, a nonprofit organization, had the following amounts on June 30,
2013:

Charity care P 80,000

Contractual adjustments 160,000
Patient service revenues (gross) 1,240,000
Provision for doubtful accounts 140,000

Net patient service revenues for TMT Hospital for the year ended June 30, 2013 amounts to:

a. P1,640,000
b. P1,100,000
c. P1,000,000
d. P1,080,000

Answer: d

P1,240,000
(160,000)
P1,080,000

22-4 During the fiscal year ended June 30, 2013, PT College, a nonprofit organization, received
unrestricted cash contribution of P500,000 and temporarily restricted cash contributions of
P300,000. All of the temporarily restricted contributions were restricted by the donors for
acquisitions. During the year, equipment costing P250,000 was acquired with the restricted
contributions. As a result of these two contributions, PT Colleges statement of cash flows for
the year ended June 30, 2013, would report an increase in net cash provided by operation:

a. P500,000
b. P800,000
c. P750,000
d. P550,000

Answer: a Unrestricted cash contribution received from donors are to be reported as increase in net
cash provided by operation.

22-5 A private, nonprofit hospital received a contribution of P200,000 from a donor on June 15, 2013.
The donor restricted his contribution to funding research activities currently being performed by
the hospital. For the year ended December 31, 2013, the hospital spent P15,000 of the
contribution on research activities. The hospital expended the remaining P5,000 on research
 activities in January of 2014. On the statement of cash flows for the year ended December 31,
2013, the events described above would increase net cash provided by:

a. Operating activities by P20,000

b. Financing activities by P20,000
c. Financing activities by P5,000
d. Operating activities by P5,000

Answer: d The remaining contribution of P5,000 on December 31, 2013.

22-6 SS University, a nonprofit organization in Cebu received P100,000 of pledges from donors on
February 15, 2013. The donors did not place either time or use restrictions on the amount
pledged. The governing board estimated that 10% of the pledges would be uncollectible. During
the remainder of 2013, cash received from the pledges amounted to P92,000. On February 15,
2013, what amount should the university credit to the account Contribution Revenues?

a. P 0
b. P100,000
c. P92,000
d. P90,000

Answer: b - Unregistered pledges from donors are treated as revenues at the time of the pledge.

22-7 Total amounts billed during the year 2013 by Rizal Hospital, a nonprofit organization consisted
of P5,000,000 for patient services, P1,000,000 for other nursing services, and P500,000 for other
professional services. The hospital estimated bad debts at 1 percent. It granted employees
discounts of P50,000 and allowances of P230,000 and P800,000 for charity cases and third-party
payers, respectively. Total operating expenses, including depreciation of P220,000, amounted to
P5,000,000. Net revenues for year 2013 amounted to:

a. P6,435,000
b. P6,385,000
c. P5,355,000
d. P5,420,000

Answer: d

Patient revenues P5,000,000

Nursing services 1,000,000

Professional services 500,000

 Total revenues P 6,500,000

Less: Staff discounts P50,000

Allowances 230,000

Third party payers 800,000 1,080,000

Net revenues P 5,420,000

Bad debts are treated in the usual manner as expense.

22-8 On July 31, 2013, Visayas College showed the following amounts to be used for:

Renewal and replacement of college properties P200,000

Retirement of indebtedness on college properties 300,000
Purchase of physical properties for college purposes
But unexpented at July 31, 2013 400,000

What total amount should be included in Visayas plant fund at July 31, 2013?

a. P900,000
b. P600,000
c. P400,000
d. P200,000

Answer: a As of July 31, 2013, all of the funds are properly includible in the Plan Funds, for a
total of P900,000.

22-9 A nonprofit hospital has the following account balances:

Revenue from newsstand P 50,000

Amounts charged to patients 800,000
Interest income 30,000
Salary expense nurses 100,000
Bad debts 10,000
Unrestricted gifts 80,000
Contractual adjustments 110,000
What is the hospitals net patient service revenue?

a. P880,000
b. P800,000
c. P690,000
d. P630,000

Answer: c

P800,000
(110,000)
P690,000