Gains and losses, in other than the first year, from pooled investments are distributed to
participating funds based on:
144. Which of the following expenses would be considered a program service expense for the local
cancer society?
145. A CPA donates her services to prepare the annual financial report for a voluntary health and
welfare organization. The services should be recorded as:
A. revenues-unrestricted.
B. accounting expenses.
C. a footnote disclosure in the financial report.
D. both a and b are correct.
146.Voluntary health and welfare organizations prepare a Statement of Activities which display program
and supporting service costs. Program expenses for a cancer society would include:
147.A voluntary health and welfare organization produces a statement of functional expenses. What is
the purpose of this statement?
148. Which basis of accounting should a voluntary health and welfare organization use?
149. Which one of the following is a voluntary health and welfare organization?
150. On a statement of functional expenses for a voluntary health and welfare organization, how are
expenses classified?
151. Which of the following is not a question individuals ask of not-for-profit organizations in
considering whether to make a contribution?
A. Will donated funds be used effectively by the organization to accomplish its purpose?
B. Will the donated funds be wasted?
C. How much should this organization receive?
D. Is this organization profitable?
E. Is contributing to this charity a wise allocation of resources?
152. Which account would be credited in recording a gift of medicine to a nursing home from an outside
party?
154. TJ does volunteer work for a local not-for-profit organization as a community service. She replaces
without charge an administrator who would have otherwise been paid P31,000. Which of the following
statements is true?
155. The JJ family lost its home in a fire. On December 25, 20x8, a philanthropist sent money to the AB
Society, a not-for-profit organization, specifically to purchase furniture for the JJ family. During January
20x9, AB purchased furniture for the JJ family. How should AB report the receipt of the money in its
20x8 financial statements?
A. As an unrestricted contribution.
B. As a temporarily restricted contribution.
C. As a permanently restricted contribution.
D. As a liability.
The salaries are paid in Year Two and the conference room furniture is purchased in Year One.
157. How much should be shown as increases as Temporarily Restricted Net Assets in Year One?
A. P2,000
B. P7,000
C. P12,000
D. P15,000
E. P17,000
158. How much should be reclassified on the Statement of Activities in Year Two from the Temporarily
Restricted column to the Unrestricted column?
A. P2,000
B. P5,000
C. P7,000
D. P10,000
E. P12,000
Use the following information for questions 159 to 160:
Golden Path, a labor union, had the following receipts and expenses for the year ended December
31,20x4:
Receipts:
Nonexpendable gift restricted by donor for loan purposes for 10 years 50,000
Expenses:
Fund-raising 150,000
The union's constitution provides that 12 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.
159. In Golden Paths statement of activities for the year ended December 31, 20x4, what amount
should be reported under the classification of revenue from unrestricted funds?
A. P980,000
B. P1,100,000
C. P1,210,000
D. P1,020,000
160. In Golden Paths statement of activities for the year ended December 31, 20x4, what amount
should be reported under the classification of program service?
A. P720,000
B. P910,000
C. P440,000
D. P760,000
161. In Golden Paths statement of activities for the year ended December 31, 20x4, what amount
should be reported under the classification of supporting service?
A. P150,000
B. P720,000
C. P440,000
D. P290,000
162. In Golden Paths statement of activities for the year ended December 31, 20x4, what amount
should be reported under the classification of temporarily and permanently restricted net assets?
163. To send a mailing, a private not-for-profit charity spend P100,000. The mailing solicits donations and
provides educational and other information about the charity. Which of the following is true?
164. A not-for-profit organization receives two gifts. One is P80,000 and is restricted for paying salaries of
teachers who help children learn to read. The other is P110,000, which is restricted for purchasing
playground equipment. The organization spends both amounts properly at the end of this year. The
organization records no depreciation this period, and has elected to view the equipment as having a time
restriction. On the statement of activities, what is reported for unrestricted net assets?
165. On 5/5/x5, a donor contributed an equity security having P500,000 fair value. The donor stipulated
that (a) the NPO may sell the equity security at any time and make other suitable investments, (b) the
P500,000 endowment must remain intact in perpetuity, and (c) the income and gains may be spent only
on diabetes research (no mention is made regarding the treatment of losses). The equity security had a
fair value of P530,000 at 12/31/x5. (No dividends were receive in 20x5.) Which of the following
categories of net assets is impacted at 12/31/x5?
166. On 5/5/x5, a donor contributed an equity security having P500,000 fair value. The donor stipulated
that (a) the NPO may sell the equity security at any time and make other suitable investments, (b) the
P500,000 endowment must remain intact in perpetuity, and (c) the income and gains may be spent only
on diabetes research (no mention is made regarding the treatment of losses). The equity security had a
fair value of P530,000 at 12/31/x5 and P480,000 at 12/31/x6. (No dividends were received in either
year.) In early 20x6, a portion of the equity security was sold for P30,000 cash. The NPO spent P22,000
cash on diabetes research in 20x6. What is the change in the various categories of net assets for 20x6 as
a result of the decline in the equity securities market value in 20x6?
167. On 5/5/x5, a donor contributed an equity security having P500,000 fair value. The donor stipulated
that (a) the NPO may sell the equity security at any time and make other suitable investments, (b) the
P500,000 endowment must remain intact in perpetuity, and (c) the income and gains may be spent only
on diabetes research (no mention is made regarding the treatment of losses). (No dividends were
received in any year.) In early 20x6, a portion of the equity security was sold for P30,000 cash. The NPO
spent P22,000 cash on diabetes research in 20x6. The equity security had a fair value of P530,000 at
12/31/x5, P480,000 at 12/31/x6, and P555,000 at 12/31/x7. What is the change in the various categories
of net assets for 2007 as a result of the increase in the equity securitys market value in 20x7?
168. On January 2, 20x2, a nonprofit botanical society received a gift of an exhaustible fixed asset with
an estimated useful life of 10 years and no salvage value. The donors cost of this asset was P20,000, and
its fair value at the date of the gift was P30,000. What amount of depreciation of this asset should the
society recognize in its 20x2 financial statements?
A. P3,000
B. P2,500
C. P2,000
D. P-0-
169. In 20x1, a nonprofit trade association enrolled five new member companies, each of which was
obligated to pay nonrefundable initiation fees of P1,000. These fees were receivable by association in
20x1. Three if the new members paid the initiation fees in 20x1, and the other received by the
association from all members. It can be reasonably expected that future dues will cover all costs of
organizations 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. P5,000
B. P3,000
C. P500
D. P-0-
170. Roberts Foundation received a nonexpendable endowment of P500,000 in 20x3 from Multi
Enterpises. 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 P50,000 on sales of fund investments and received total interest and dividends of P40,000 on fund
securities. The amount of these capital gains, interest, and dividends available for expenditures by
Roberts Unrestricted current fund is:
A. P-0-
B. P40,000
C. P50,000
D. P90,000
171. In July 20x2, Ross donated P200,000 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 was remitted to Ross. In the churchs June 30,20x3, annual financial
statements:
A. P200,000 should be reported as temporarily restricted net assets in the balance sheet.
B. P184,000 should be reported as revenue in the activity statement.
C. P216,000 should be reported as revenue in the activity statement.
D. Both a and c.
172. The following expenditures were among those incurred by a nonprofit botanical society during
20x4:
What amount should be classified as fund-raising costs in the societys activity statement?
A. P-0-
B. P5,000
C. P35,000
D. P40,000
173. Trees Forever, a community foundation, incurred P5,000 in expenses during 20x3 putting on its
annual fund-raising talent show. In the statement of activities of Trees Forever, the P5,000 should be
reported as:
174. In 20x3, the board of trustees of Burr Foundation designated P100,000 from its current funds for a
college scholarships. Also in 20x3, the foundation received a bequest of P200,000 from an estate of a
benefactor who specified that the bequest was to be used for hiring teachers to tutor handicapped
students. What amount should be accounted for as temporarily restricted funds?
A. P-0-
B. P100,000
C. P200,000
D. P300,000
175. Which entry would be the correct entry to record pledges of P100,000 to a fundraiser? The
fundraiser estimates that 5% of the funds will be uncollectible.
A. Debit Pledges Receivable P100,000, credit unrestricted net assets- contributions P100,000
B. Debit Cash P100,000, credit unrestricted net assets- contributions P100,000
C. Debit Pledges Receivable P100,000, credit unrestricted net assets- contributions P95,000,
credit allowance for uncollectible pledges P5,000
D. Debit Pledges Receivable P95,000, debit allowance for uncollectible pledges P5,000, credit
unrestricted net assets- contributions P100,000
E. Debit cash P95,000, debit allowance for uncollectible pledges P5,000, credit unrestricted net
assets- contributions P100,000
176. Which entry would be the correct entry to record that a not-for-profit organization collected
P80,000 of amounts pledged and wrote off P3,000 of amounts pledged as amounts uncollectible?
A. Cash xxx
Revenue- Unrestricted Contribution xxx
B. Cash xxx
Revenue- Temporarily Restricted Contribution xxx
C. Cash xxx
Revenue- Endowment Fund xxx
D.Cash xxx
Revenue- Permanently Restricted xxx
178. A major corporation makes a donation of P10,000,000 to the local art museum foundation for the
construction of a new art museum provided the community can match the P10,000,000 with other
donations. This is an example of a(n):
A. Unconditional Pledge
B. Unrestricted Contribution
C. Conditional Pledge
D. Endowment
General Principles
Completion Statements
Financial Statements
18. Private nonprofit organizations (NPOs) must issue financial statements that focus on the
nonprofit organization as a(n) __________________________.
19. Private nonprofit organizations must clarify their net assets (equity) based on (a) whether ____
exist and (b) the type of _______________________.
20. Private nonprofit organizations must show in their statement of financial position amounts for
the NPOs ___________________________, and ____________________________.
21. Private nonprofit organizations must show three classes of net assets (equity) in their statement
of financial position: (a) ___________________________, (b) ___________________________,
and (c) ___________________________.
22. The unrestricted net asset category in the statement of financial position could be subdivided
between (a) ______________________ net assets and (b) __________________________ net
assets.
23. Revenues, gains, and other support must be reported by __________________________ in the
statement of activities.
24. All expenses are shown in the __________________________ category in the statement of
activities.
25. Expirations of restrictions are reported __________________________ in the statement of
activities.
26. Voluntary health and welfare organizations must also report expenses by _____ classification in
a separate financial statement using a(n) ___________________________ format.
27. In general, revenues and expenses are reported at their _________________________
amounts.
28. The statements of activities may be in __________________________ format or in
__________________________ format.
29. For each category of net assets, the statement of activities must shown for the nonprofit
organization as a whole the amount of ___________________________.
30. The statement of cash flows may be prepared using the __________________________ method
(the preferred method) or the __________________________ method.
31. ___________________________ the use of fund accounting for internal record-keeping
purposes.
32. The definition of contributions does not include conditional promises to give.
33. The definition of contributions includes both reciprocal and nonreciprocal transfers.
34. An unconditional promise to give must be in writing to qualify as a recognizable contribution.
35. Unconditional promises to give are recognized in the financial statements when received--not
when collected.
36. A communication that is unclear as to whether it constitutes an unconditional promise to give is
deemed an unconditional promise if it is legally enforceable.
37. Conditional promises to give are considered unconditional if the probability that the specified
future event will occur is remote.
38. Assets that have been received and that can be retained and used only if a conditional future
events occurs are classified in the asset section as Refundable Advances.
39. Contributions that create endowments are always reported in the statement of activities
never as direct adjustment to equity.
40. Contributions are recognized when received, with limited exceptions.
41. Contributions received are measured at the fair value.
42. Contributions received must be measured at the present value of estimated future cash flows.
43. The interest element in a present-value measurement is subsequently recognized as
contribution income not interest income.
44. Comtributed services are recognized only if they create or enhance nonfinancial assets.
45. The fair value of contributed services received but not recognized in the financial statements
must be disclosed.
46. Repairs made to a building and a volunteer basis by a plumber would not be recognized in the
financial statements.
47. Contributed services are valued using the minimum wage.
48. Contributed services that create or enhance a nonfinancial asset must be recorded at the fair
value of the asset created or enhanced.
49. Collection items need not be capitalized under certain circumstances.
50. Collection items may be capitalized retroactively, prospectively, or selectively.
51. Contributions that create endowments are classified as increasing permanently restricted net
assets.
52. Contributions that create term endowments are classified as increasing permanently restricted
net assets.
53. Income earned on endowments (other than term endowments) is reported as increasing
permanently restricted net assets.
54. Contributions that create term endowments are classified as increasing temporarily restricted
net assets.
55. Contributions with future payment dates beyond one year are not recognized in the financial
statements.
56. Contributions with future payment dates usually would be classified as increasing temporarily
restricted net assets.
57. Contributions of capital assets are classified as increasing unrestricted net assets when the
assets are placed in service.
58. Contributions of capital assets are classified as increasing unrestricted net assets when the
assets are placed in service only in the absence of donor-imposed restrictions.
59. An implied time restriction on contributed capital assets is assumed to exist in the absence of
donor-imposed restrictions.
60. A nonprofit organization must establish an accounting policy as to whether implied time
restrictions exist on contributed capital assets only if no donor-imposed restrictions exist.
61. A purpose restriction is deemed to have expired when an expense has been incurred for that
purpose.
Financial Statements
62. Private nonprofit organizations must present financial statements that focus on the nonprofit
organization as a whole.
63. N/A
64. The statement of financial position must show the total assets, total liabilities, and total net
assets (equity).
65. The statement of financial position must show the total amounts for each classification of net
assets.
66. The statement of financial position may be in either the classified format (current/noncurrent
categories ) or the unclassified format.
67. Board restricted net assets must be shown separately in the statement of financial position.
68. An intermediate measure of operations cannot be shown in the statement of activities.
69. The layered format is allowed in the statement of activities.
70. Expirations of restrictions must be reported separately in the statement of activities.
71. All expenses are reported in the unrestricted category-even expenses incurred in satisfying
donor-imposed restrictions.
72. Only voluntary health and welfare organizations must show expenses by function in the
statement of activities.
73. Revenues from special events that are ongoing and major activities are reported net of reported
expenses.
74. Fund accounting for internal record-keeping purposes is specifically discouraged.
89. Which of the following is a condition that, if satisfied, requires that the recogniition of
contributed collection items?
A. The collection must be held for public exhibition, education or research in
furtherance of public service rather than for financial gain
B. The collection must be protected, kept encumbered, cared for, and preserved.