Question 1

Unrestricted current funds of a private university designated by the governing board for a specific future purpose should be reported as part of:
A) unrestricted net assets.
B) temporarily restricted net assets.
C) board-restricted net assets.
D) term endowments.

Accepted Answer

The answer of Unrestricted current funds of a private university...

Question 2

A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. Contributions received from donors for research to be conducted by the hospital should be accounted for in the:
A) specific purpose fund.
B) time-restricted fund.
C) general fund.
D) restricted current fund.

Accepted Answer

Contributions received from donors for a specific research purpose are usually restricted to that purpose and should be accounted for in a specific purpose fund. This ensures that the funds are used only for the intended purpose and are not commingled with the hospital's general funds. The other fund options (B, C, and D) are not appropriate in this situation as they do not specifically address funds received for research purposes.

Question 3

For the year ended June 30, 20X9, a private college received contributions from alumni which were restricted for faculty research stipends to be awarded during the next fiscal year. For the year ended June 30, 20X9, these contributions should be disclosed on the statement of activities of the private college as an increase in:
A) the fund balance of the restricted current fund.
B) temporarily restricted net assets.
C) deferred revenues.
D) temporarily restricted fund balance.

Accepted Answer

The contributions from alumni are restricted for faculty research stipends that will be awarded during the next fiscal year. Therefore, these contributions should be disclosed on the statement of activities of the private college as an increase in temporarily restricted net assets. This is because the restriction will be fulfilled within the next fiscal year, and until then, the funds are temporarily restricted.

Question 4

A private college received an offer from a CPA who is an alumnus to teach a one-semester advanced accounting course at no cost. ASC 958 prescribes that this contribution of service:
A) need only be disclosed in the footnotes to the financial statements.
B) be recorded as an asset with an equivalent amount recorded in the unrestricted fund balance.
C) be recorded as a revenue with an equivalent amount recorded as an expenditure.
D) need not be recorded if the service is for a period less than one academic year.

Accepted Answer

ASC 958 requires that contributed services be recognized as revenue and an expense (or asset, if the service creates or enhances a nonfinancial asset) if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Teaching an advanced accounting course requires specialized skills and would typically be a service the college would have to purchase if not donated, thus it should be recorded as revenue with an equivalent amount recorded as an expense.

Question 5

The restricted funds of a not-for-profit hospital are often termed "______" funds because they must hold the restricted assets and transfer expendable resources to the general fund for expenditure.
A) specific
B) controlled
C) limited
D) holding

Accepted Answer

The answer of The restricted funds of a not-for-profit hospital...

Question 6

Note: This is a Kaplan CPA Review Question
The statement of financial position for a private not-for-profit college should show separate dollar amounts for
A) Unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.
B) All accounts in its equity section.
C) Unrestricted net assets only.
D) Unrestricted net assets and temporarily restricted net assets.

Accepted Answer

Private not-for-profit colleges must report net assets in three categories: unrestricted, temporarily restricted, and permanently restricted, to reflect donor-imposed restrictions.

Question 7

Bridger Hospital, which is operated by a religious organization, provides charity care for the indigent living in the region served by the hospital. How should Bridger report the amount of its charity care on its financial statements?
A) In the notes to the financial statements only.
B) As unrestricted revenues on the statement of operations.
C) As net patient service revenue and as an expense, equal to the net patient service revenue, on the statement of operations.
D) As temporarily restricted revenue on the statement of operations.

Accepted Answer

The answer of Bridger Hospital, which is operated by a...

Question 8

Unrestricted gifts and endowment income of a private university are reported as
A) increases in the unrestricted current fund balance on the statement of changes in fund balances.
B) unrestricted revenues on the statement of current funds revenues, expenditures, and other changes.
C) unrestricted revenues on the statement of activities.
D) increases in the unrestricted current fund balance on the statement of activities.

Accepted Answer

Unrestricted gifts and endowment income are considered unrestricted revenues, which are reported on the statement of activities for a private university. They are not reported on the statement of changes in fund balances, as that statement only shows changes in fund balances, not revenues. Similarly, they are not reported on the statement of current fund revenues, expenditures, and other changes, which only shows the budget and actual amounts for the current year's activities. Therefore, the correct answer is option C.

Question 9

A private, not-for-profit university should prepare which of the following financial statements?
I. statement of financial position.
II. statement of activities.
III. statement of changes in fund balances.
IV. statement of cash flows.
V. statement of changes in financial position.
A) I, II, and III.
B) II, III, and IV.
C) I, II, and IV.
D) II, III, and V.

Accepted Answer

A private, not-for-profit university should prepare a statement of financial position, a statement of activities, and a statement of cash flows. These statements provide a comprehensive view of the financial health and activities of the institution.

Question 10

A private, not-for-profit hospital received contributions of $50,000 from donors on June 15, 20X9. The donors stipulated that their contributions be used to purchase equipment for the hospital. As of June 30, 20X9, the end of the hospital's fiscal year, $12,000 of the contributions had been spent on equipment acquisitions. In the hospital's general fund, what account would be credited to recognize the release of the restrictions on the temporarily restricted contributions used to acquire equipment?
A) Revenue released from equipment acquisition restriction
B) Other financing sources
C) Net assets released from equipment acquisition restriction
D) Unrestricted net assets released from equipment acquisition restriction

Accepted Answer

The hospital should credit the account for "Net assets released from equipment acquisition restriction" to recognize the release of the restriction. This reflects that the contribution was originally received as temporarily restricted, but has now been spent in accordance with the donors' wishes and can be classified as unrestricted net assets. Choice A is incorrect because it implies a revenue recognition, which is not appropriate as the contribution was not received for general operations. Choice B is incorrect because it is too broad and doesn't specifically indicate the nature of the transaction. Choice D is incorrect because it mentions "unrestricted" which is not correct since the donation was still restricted but the restrictions had been lifted so it is net assets released.

Question 11

Good Care Hospital, which is operated by a religious organization, received contributions of $1,000,000 from donors who stipulated that the cash be used to construct an addition to the hospital. As of the balance sheet date, none of the contributions had been expended for construction. On the hospital's balance sheet, the cash contributions would be disclosed in which of the following classes of net assets?
A) Temporarily restricted net assets
B) Donor restricted net assets
C) Assets whose use is limited
D) Permanently restricted net assets

Accepted Answer

The cash contributions have been given with the explicit restriction that they be used for the construction of the hospital addition. Therefore, until the funds are actually used for that purpose, they are considered to be temporarily restricted net assets. This means that while the hospital can use the funds to earn income, it cannot use them for any other purpose until the restriction has been fulfilled. Once the construction is complete, the funds will be reclassified as permanently restricted net assets.

Question 12

Note: This is a Kaplan CPA Review Question
Clay University, a not-for-profit university, earned $300,000 from bookstore revenue and spent $100,000 for faculty research in 20X1. The $100,000 for faculty research came from a $150,000 research grant received in the previous year. What is the effect of these events on unrestricted net assets in 20X1?
A) Increase $450,000
B) Increase $400,000
C) Increase $300,000
D) Increase $200,000

Accepted Answer

The bookstore revenue of $300,000 increases unrestricted net assets. The $100,000 spent on faculty research does not affect unrestricted net assets in 20X1 because it was funded by a restricted grant received in the previous year.

Question 13

The governing board of Samaritan Hospital, which is operated by a religious organization, designated $500,000 of cash for future expansion of the hospital. On the hospital's balance sheet, the cash designated for future plant expansion would be disclosed in which of the following classes of net assets?
A) Temporarily restricted net assets
B) Unrestricted net assets
C) Plant replacement and expansion
D) Board designated net assets

Accepted Answer

The answer of The governing board of Samaritan Hospital, which...

Question 14

In accordance with ASC 958, contributions from donors which are to be permanently invested should be disclosed on the statement of activities of a private university as an increase in:
A) Permanently restricted net assets.
B) Permanently restricted fund balance.
C) Endowment fund balance.
D) Deferred revenues.

Accepted Answer

Permanently restricted net assets refers to resources that are subject to donor-imposed restrictions requiring them to be maintained permanently. Contributions from donors that are to be permanently invested fall under this category and should be disclosed on the statement of activities as an increase in permanently restricted net assets. Choices B, C, and D are not appropriate because they refer to specific funds or liabilities rather than the broader category of net assets.

Question 15

A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. The hospital's revenues from nursing programs and gift shops should be accounted for in the:
A) specific purpose fund.
B) restricted current fund.
C) general fund.
D) time-restricted fund.

Accepted Answer

The general fund is used to account for the hospital's unrestricted revenues and expenses, making it the appropriate option for accounting for the revenues from nursing programs and gift shops. Donor-restricted funds, such as specific purpose and time-restricted funds, are used to account for revenues that have been specifically designated for a particular purpose by donors, which does not apply to the given revenues from nursing programs and gift shops. The restricted current fund is used for budgetary control purposes, which is not relevant to accounting for revenues.

Question 16

Net assets restricted as to time or purpose should be classified as:
I. temporarily restricted.
II. permanently restricted.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Accepted Answer

Net assets restricted as to time or purpose should be classified as temporarily restricted. Permanently restricted net assets arise from contributions with donor-imposed stipulations that they be maintained permanently, and are restricted in perpetuity.

Question 17

A not-for-profit private college in Virginia created a separate foundation responsible for obtaining financial support from alumni and others. Foundation assets are used for the benefit of the college. Donations made to the foundation and subsequently transferred to the college should be:
A) recognized as revenues by the foundation when received, and as revenues of the college when transferred.
B) recognized as revenues by the foundation when received and as expenses by the foundation when transferred.
C) recognized both as a change in its interest in the foundation and as revenues by the college when the donation is received by the foundation.
D) recognized as an increase in net assets of the foundation and as revenues of the college when the donation is received by the college.

Accepted Answer

The answer of A not-for-profit private college in Virginia created...

Question 18

A private, not-for-profit hospital received a cash contribution of $100,000 from Samantha Hicks on November 14, 20X8. Ms. Hicks specified the money be used to acquire equipment. On December 31, 20X8, the hospital had not expended any of Ms. Hicks' contribution. On the statement of changes in net assets for the year ended December 31, 20X8, the hospital should report the contribution as a $100,000 increase in
A) temporarily restricted net assets.
B) unrestricted net assets.
C) fund balance.
D) deferred revenue.

Accepted Answer

Since the donor specified that the money be used for equipment, the contribution is considered temporarily restricted until the hospital acquires the equipment. Therefore, the contribution should be reported as a $100,000 increase in temporarily restricted net assets on the statement of changes in net assets for the year ended December 31, 20X8.

Question 19

Note: This is a Kaplan CPA Review Question
In 20X1, Ellen College, a private not-for-profit institution, received a $100,000 grant for faculty research. The grant money was not spent until 20X2. For 20X1, Ellen College should report the contribution as:
A) Temporarily restricted asset.
B) Unrestricted revenue.
C) Other operating revenue.
D) Other non-operating revenue.

Accepted Answer

In 20X1, the grant is considered a temporarily restricted asset because it is intended for a specific purpose (faculty research) and has not yet been spent.

Question 20

On the statement of operations prepared for a private, not-for-profit hospital, patient service revenue earned during the year is reported net of amounts for which of the following items?
I. Contractual adjustments
II. Bad debts expense
A) I only
B) II only
C) I and II
D) Neither I nor II

Accepted Answer

Patient service revenue earned during the year is reported net of contractual adjustments, which reflect the difference between the amounts the hospital charges for services and the lower amounts it receives from third-party payers, such as insurance companies. In contrast, bad debts expense is a separate expense item that reflects the amount of patient service revenue that is unlikely to be collected due to the inability or unwillingness of patients to pay. Therefore, it is not reported as a reduction of revenue.

Quiz 19: Not-For-Profit Entities

Unrestricted current funds of a private university designated by the governing board for a specific future purpose should be reported as part of:

A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. Contributions received from donors for research to be conducted by the hospital should be accounted for in the:

A private college received an offer from a CPA who is an alumnus to teach a one-semester advanced accounting course at no cost. ASC 958 prescribes that this contribution of service:

The restricted funds of a not-for-profit hospital are often termed "______" funds because they must hold the restricted assets and transfer expendable resources to the general fund for expenditure.

Note: This is a Kaplan CPA Review Question The statement of financial position for a private not-for-profit college should show separate dollar amounts for

Bridger Hospital, which is operated by a religious organization, provides charity care for the indigent living in the region served by the hospital. How should Bridger report the amount of its charity care on its financial statements?

Unrestricted gifts and endowment income of a private university are reported as

A private, not-for-profit university should prepare which of the following financial statements? I. statement of financial position. II. statement of activities. III. statement of changes in fund balances. IV. statement of cash flows. V. statement of changes in financial position.

In accordance with ASC 958, contributions from donors which are to be permanently invested should be disclosed on the statement of activities of a private university as an increase in:

A private, not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds. The hospital's revenues from nursing programs and gift shops should be accounted for in the:

Net assets restricted as to time or purpose should be classified as: I. temporarily restricted. II. permanently restricted.

A not-for-profit private college in Virginia created a separate foundation responsible for obtaining financial support from alumni and others. Foundation assets are used for the benefit of the college. Donations made to the foundation and subsequently transferred to the college should be:

Note: This is a Kaplan CPA Review Question In 20X1, Ellen College, a private not-for-profit institution, received a $100,000 grant for faculty research. The grant money was not spent until 20X2. For 20X1, Ellen College should report the contribution as:

On the statement of operations prepared for a private, not-for-profit hospital, patient service revenue earned during the year is reported net of amounts for which of the following items? I. Contractual adjustments II. Bad debts expense