Not for Profit Accounting Final Exam

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10. Which of the following accounts reports the largest liability on the federal government's balance sheet as of September 30, 2016? a. Federal debt securities held by the public and accrued interest b. Accounts payable c. Environmental and disposal liabilities d Federal employee and veteran benefits payable e. Social security payable

12. What does a credit balance in the account "Allotments - realized resources" show? a. The agency's cash balance with the Treasury. b. The amount available to a department for allotment to an agency c. The amount of goods or services ordered by an agency but not received. d. The amount of resources available to an agency for obligation or commitment.

1. Which of the following is reported as an expense by nonprofit hospitals? a. Charity care b. Bad debts c. Contractual adjustments d. Volunteer and employee discounts

35. If a federal agency were to take a trial balance of the budgetary accounts at any point in time, what would the right side of the trial balance show? a. The cumulative results of the agency's appropriations b. The status of the agency's budgetary resources c. The agency's fund balance with Treasury d. The total amount appropriated to the agency

2. What is the federal counterpart of the state and local government "encumbrance"? a. Obligation b. Allotment c. Outlay d.Apportionment

38. Which of the following is a plausible explanation for the difference between the net change in fund balances of governmental funds (fund-level statement of revenues, expenditures, and changes in fund balances) and the change in net position of governmental activities (government-wide statement of activities)? a. Some expenses reported in the statement of activities do not require the use of current financial resources and are not reported as expenditures in the fund-level statements b. Amounts reported as expenditures in the statement of activities are reported as capital assets in the fund-level statements c. Debt proceeds provide current financial resources in the statement of activities, but are reported as long-term liabilities in the fund-level statements d. Depreciation of general fixed assets is not reported as an expense in the statement of activities, but it is reported as an expense in the fund-level statements

5. Which of the following is the correct sequence of activities within the federal budgetary accounting cycle? a. Appropriation, apportionment, allotment, obligation b. Obligation, allotment, apportionment, appropriation c. Allotment, obligation, appropriation, apportionment d. Apportionment, allotment, obligation, appropriation

24. Just before the close of its fiscal year, a city government issues $2 million of bonds to finance the acquisition of capital assets. However, no part of the debt is repaid by year-end and no part of the debt is used to purchase capital assets. What adjusting entry is needed to prepare the city's government-wide financial statements from its fund-level financial statements? a. No adjusting entry is needed b. Available for capital assets 2,000,000 Bonds payable 2,000,000 c. Net investment in capital assets 2,000,000 Bonds payable 2,000,000 d. Other financing source—proceeds from bond issue 2,000,000 Bonds payable 2,000,000

24. When do federal agencies make an entry to record a debit to "Fund Balance with the Treasury"? a. When the Treasury tells the agency the Federal government has sufficient cash to pay bills b. Each time the department of which the agency is a part allots funds to the agency c. When the Office of Management and Budget apportions funds to the department of which the agency is a part d. When the Congress makes and the President approves an appropriation

1. A group of citizens donate their time to construct a building to provide shelter for the homeless, to be run by a nonprofit entity. In this situation, what is the applicable accounting rule for recognizing the fair value of the services on the face of the financial statements? a. Donations that take a form other than cash should not be recognized b. The fair value of contributed services should not be recognized unless the services require specialized skills, are provided by individuals who have those skills, and which the entity would need to be purchased if not donated c. Contributed services should be recognized at the fair value of the assets they create d. Donations should be recognized on the face of financial statements only for cash, securities, and other tangible assets; all other donations should be described in the notes

1. A group of fine dining restaurants in town get together and agree to provide their leftover, unprepared fresh food to the City Hospital for use in its food service operations. The City Hospital estimates that the fair value of the food received during the year was $22,000. How should City Hospital report the donated food? a. As revenue equal to the fair value of the food when it is received ($22,000 over the course of the year) b. The fair value of the donated food should be disclosed in the Hospital's notes to financial statements c. As revenue equal to the amount it estimates the restaurants paid for the food d. None of the above

1. A group of retired registered nurses decide to volunteer their services to a nonprofit hospital. They perform a variety of tasks, including: (a) filling in for regular nurses when they are out sick; (b) helping out in food preparation; and (c) selling in the hospital gift shop. For which of the three tasks must donated revenues and expenses be recognized? a. Only task (a) b. Only tasks (a) and (b) c. All three tasks d. None of the three tasks

1. A nonprofit arts organization receives a $40,000 gift from a donor who specifies that the gift must be used only to take disabled persons to the theater. How should the entity report the $40,000 gift in the net asset section of its statement of financial position? a. As net assets with donor restrictions b. As net assets with contractual restrictions c. As net assets without donor restrictions d. As net assets available for spending

1. A nonprofit hospital purchased stock for $11,000 in March but by December 31, its fair value had dropped to $8,000. Assuming the hospital didn't sell the stock at December 31, how should the unrealized loss be reported in the nonprofit hospital's operating statement? a. It should report the loss below Excess of revenues over expenses b. It should report the loss as a direct addition to net assets c. It should report the loss before Excess of revenues over expenses d. It should not report the loss. The stock should be reported at cost.

1. A nonprofit hospital receives a $150,000 donation that must be used for a specific research project. The hospital anticipates that it will undertake the project next year. How should the hospital report the donation? a. As contribution revenue—support with donor restrictions, a time restriction b. As contribution revenue—support without donor restrictions c. As assets limited as to use d. As permanently restricted support

1. Differences between a nonprofit hospital's established rates and amounts negotiated with third-party payers are referred to as: a. Explicit concessions b. Unrecovered costs c. Charity care d. Implicit concessions

1. How do nonprofit hospitals calculate "patient service revenue," on their operating statements? a. Based on each contract's transaction price—the estimated amount of consideration a nonprofit hospital believes to be probable of receipt. b. Gross billings at established rates; less explicit and implicit price concessions c. Gross billings at established rates; less estimated bad debts (uncollectible amounts) d. Based on each contract's transaction price—the estimated amount of estimated bad debt

1. In nonprofit accounting, under what circumstances does a reclassification occur? a. Net assets with donor restrictions are released from time or purpose restrictions b. Net assets without donor restrictions are reclassified net assets with donor restrictions c. Resources of the current unrestricted fund are transferred to the land, building and equipment fund. d. When the nonprofit wants to use the money, without regard to restrictions

1. Nonprofits are required to prepare their cash flows statement using three categories of cash receipts and cash payments. What are these three categories? a. Operating, investing, and financing activities b. Operating, with donor restrictions, and without donor restrictions c. Operating, investing, and capital and noncapital financing activities d. Operating, restricted, and board-designated

1. One big category of nonprofit entities is voluntary health and welfare organizations (VHWOs). These nonprofits receive their resources primarily from: a. Donations from the general public b. Governmental agencies c. Charges for services they provide d. All of the above

1. The Aurora Fund received equipment having a cost of $65,000 and a fair value of $50,000 as a gift. The donor states that the Fund should decide how to best use the gift. How should the gift be reported in the Aurora Fund's financial statements? a. As an asset measured at fair value and as revenues without donor restrictions b. As an asset measured at fair value and as revenues with donor restrictions c. As a footnote only, because gifts of equipment are not be reported on the face of financial statements d. As an asset at the amount the donor paid for it and as revenue without donor restrictions

1. The Beowulf Fund has extensive investments resulting from contributions that are restricted in perpetuity. Given that the Fund must disclose the data used (inputs) to measure the fair value of its investments using the FASB's three-level fair value hierarchy, in what level should the fund report its investments in equity securities that it obtained from the December 31st Wall Street Journal? a. As Level 1, consisting of equity securities traded in active markets b. As Level 2, consisting of inputs other than quoted market prices c. As Level 3, consisting of unobservable inputs d. None of the above; investments in equity securities are excluded from this required disclosure

1. The Turtle Island Singers receive three gifts during the year 2018: (a) $3,000, which may be used for any purpose at any time; (b) $5,000, which must be used for a special concert given in a nursing home; and (c) $1,000, which may be used for any purpose, but only in the year 2019. When it receives the gifts, how should the entity classify them: a. $3,000 as contribution revenue—support without donor restrictions and $6,000 as contribution revenue—support with donor restrictions b. $4,000 as contribution revenue—support without donor restrictions and $5,000 as contribution revenue—support with donor restrictions c. $8,000 as contribution revenue—support without donor restrictions and $1,000 as contribution revenue—support with donor restrictions d. $9,000 as contribution revenue—support without donor restrictions

1. The required reporting for bad debts (amounts not likely to be collected) varies between governmental and nonprofit hospitals in the following way: a. Bad debts are reported as an adjustment of revenue, not as an expense, by governmental hospitals; nonprofits report bad debt expense in limited circumstances b. Nonprofit hospitals do not calculate bad debts c. Nonprofit hospitals report bad debt expense but only once it has been 12 months since it provided the services d. Governmental hospitals report bad debts as charity care, which is only disclosed in the notes to financial statements

1. To what extent should fund or fund type data be displayed on the face of government-wide financial statements? a. Information should be displayed for the government as a whole, but individual funds or fund types should not be displayed. b. Information should be displayed by fund type, with a total for the government as a whole. c. Information should be displayed by major fund, with a total for the government as a whole. d. Information should be displayed by major fund, except for fiduciary funds.

1. Under which of the following circumstances would a nonprofit's net assets be presented as net assets with donor restrictions? a. Donors impose stipulations on the use of resources that expire with the passage of time or that can be fulfilled by actions of the organization b. The entity's board of directors stipulates that resources must be held intact in perpetuity, but that the income from the gift may be used for any purpose desired by the organization's trustees c. The entity's board of directors requires that unrestricted resources be set aside for a specific purpose d. The bank lending money to the nonprofit requires a percentage of maximum debt service to be set aside in a sinking fund

1. Which of the following characteristics of a brochure prepared by a nonprofit is not relevant to whether the cost of the brochure can be allocated between program and fundraising functions? a. Page count b. Content c. Purpose d. Audience

1. Which of the following statements is generally true about the basis of accounting used by governmental and nonprofit hospitals? a. Both use the full accrual basis of accounting b. Both use the modified accrual basis of accounting c. Governmental hospitals use the modified accrual basis of accounting and nonprofit hospitals use the full accrual basis of accounting d. Both use the full accrual basis of accounting; but governmental hospitals also prepare a second modified accrual basis operating statement

10. A city government levies property taxes that are recorded directly into a Debt Service Fund, rather than the General Fund. How should those property taxes be reported in the government-wide statement of activities? a. As property tax revenue in the general revenues section b. As a direct reduction of interest expenses in the functional expense section c. As an element of program revenue, which reduce gross interest expenses d. As a negative expense, which is then allocated to all functions or programs

14. Where are fiduciary type funds reported in the government-wide statements? a. Fiduciary type funds are excluded from the from the government-wide statements. b. Fiduciary type funds are blended with the governmental type funds and included in the governmental activities column. c. In a separate column before the discretely presented component units. d. In a separate column after the discretely presented component units.

19. Jace Township's General Fund reports a balance due from another fund. This item and the corresponding interfund liability will appear in Jace Township's government-wide statement of net position (and then eliminated) only if the debtor fund is a. An enterprise fund b. A capital projects fund c. An internal service fund d. A permanent fund

26. An agency of the federal government issues a purchase order for $68,000 for the purchase of materials. The agency uses commitment accounting and originally believed that the materials would cost $65,000. What budgetary journal entry should the agency make when it issues the purchase order? a. Commitments 65,000 Allotments—realized resources 3,000 Undelivered orders—obligations, unpaid 68,000 b. Commitments 68,000 Undelivered orders—obligations, unpaid 68,000 c. Allotments—realized resources 68,000 Undelivered orders—obligations, unpaid 68,000 d. Allotments—realized resources 65,000 Commitments 3,000 Undelivered orders—obligations, paid 68,000

27. When a federal agency receives operating supplies that have been ordered previously, what kind of entry (or entries) is (or are) required? a. Both a budgetary and a proprietary entry b. Only a proprietary entry c. Only a budgetary entry d. Neither a budgetary nor a proprietary entry

37. Tinsel Town has only two funds, the General Fund (GF), and a Capital Projects Fund (CPF). Summarized operating statements for each of the funds for fiscal 2019 are as follows: GF CPF Total Revenues $100 $ -- $100 Expenditures 89 62 151 Bond proceeds -- 70 70 Increase in fund balance 11 8 19 Beginning fund balance 52 0 52 Ending fund balance 63 8 71 Assume that all the expenditures in the Capital Projects Fund were capital outlays and that all the expenditures in the General Fund were for operations. Also, assume that revenues in the General Fund would be the same under the modified accrual and accrual basis of accounting. The total net position balance for Tinsel Town's governmental activities in the government-wide financial statements at the end of fiscal 2019 is: a. $63 b. $43 c. $68 d. $75

1. A nonprofit entity receives a donation of 100 shares of securities listed on the American Stock Exchange. As a general rule, when it prepares its statement of financial position at year-end, the entity must report the securities at: a. Their fair value at time of donation b. Their fair value at date of the statement of financial position c. The lower of their fair value at date of donation or their fair value at date of the statement of financial position d. The lower of the cost to the donor or the fair value at date of the statement of financial position.

1. A nonprofit entity that conducts numerous programs receives investments as a donation. The donor, in a letter accompanying the donation, states that the principal of the donation must be maintained intact permanently, and that the income from the investment must be used to finance research in kidney disease. If the entity receives income of $8,000 from these investments, how should be income be reported? a. As an increase in net assets without donor restrictions b. As an increase in net assets with donor restrictions c. As an increase the initial contributed amount d. As an increase in any of the net asset classifications directed by the entity's trustees

1. A nonprofit hospital had gross patient billings of $50 million, explicit price adjustments of $20 million, and charity care of $5 million. How much is the hospital's patient service revenue? a. $50 million b. $25 million c. $30 million d. $45 million

1. A nonprofit hospital purchased an equity security for $150,000 on September 2018. When it prepared its 2018 financial statements, the security had a fair value of $145,000. It sold the security for $160,000 in 2019. How would the sale of the security in 2019 be reported by the nonprofit hospital in its 2019 statement of operations? a. No effect b. As a realized gain of $10,000 included in excess of revenues over expenses and as an increase in net unrealized gains and losses on investments of $5,000 after excess of revenues over expenses. c. As a realized gain of $15,000 d. An increase of $160,000

1. A nonprofit hospital, the Ruth Clark Hospital established a fundraising Foundation at the beginning of its calendar year. By the end of the year, the Foundation had raised $750,000 in cash—$600,000 of which was restricted by donors to acquire a new building and $150,000 of which was unrestricted. How should the Ruth Clark Hospital report its interest in the Hospital Foundation and the contributions it received at the end of the first year? a. As Cash of $750,000, Gains without donor restrictions of $150,000, and Gains with donor restrictions of $750,000 b. As Interest in Hospital Foundation of $750,000, Gains without donor restrictions—change in interest in net assets of Hospital Foundation of $150,000, and Gains with donor restrictions—change in net assets of Hospital foundation restricted to capital acquisitions of $600,000 c. It should not report the contributions; the Hospital Foundation is a separate entity d. As Cash of $750,000, Net assets without donor restrictions of $150,000, and Net assets with donor restrictions of $600,000

1. FASB revenue recognition requirements require nonprofits to apply five steps to each type of exchange contract to determine when to recognize revenue. The first 4 steps are (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, and (4) allocate the transaction price to the performance obligations in the contract. What is the 5th step? a. Recognize revenue when it is probable that the customer will pay for the goods or services b. Recognize revenue when (or as) the entity satisfies the related performance obligation c. Recognize revenue when the customer pays the bill d. Recognize revenue when the nonprofit prepares an invoice for the service

1. In the statement of operations of a nonprofit hospital, which of the following is not a factor in determining Excess of revenues over expenses? a. Patient service revenue b. Change in unrealized gains and losses on investments c. Investment income d. Bad debt expense

1. In which fund category are governmental hospitals generally reported? a. Governmental funds b. Enterprise funds c. Fiduciary funds d. Restricted funds

1. Matt Shaw buys 100 shares of common stock for $8,000 in January. The value of the stock fluctuates in a narrow range (averaging $8,700) throughout the year. In November, when it has a value of $9,500, he donates it to a nonprofit entity. On December 31, the stock has a fair value of $8,200. At what amount should the nonprofit entity value the stock on its December 31 statement of financial position? a. $8,000 b. $8,200 c. $8,700 d. $9,500

1. Nonprofit entities establish endowments when a donor contributes assets and makes certain specifications, including what? a. The types of securities in which the contributed assets must be invested b. How earnings and gains from investing those assets must be used. c. That the nonprofit's board of trustees should decide how to use the contributed assets d. That the nonprofit can keep the contributed assets until they become underwater

1. Nonprofits must report expenses by program, which is any activity directly related to the organization's purpose. Which of the following is true about nonprofit programs? a. Most nonprofits have programs for fundraising b. Most nonprofits are involved in several programs c. Only donor-restricted contributions can be used for program expenses d. Programs expenses may never include management and general activity expenses.

1. Shults Labs donates an item of prescription medications worth $100,000 to a local nonprofit hospital. How should the hospital report the donation in its financial statements? a. Report contribution revenue (or gain) and an expense of $100,000 b. Report contribution revenue (or gain) and an asset (inventory) of $100,000 c. Report an asset and an other revenue (or gain) at the manufacturer's direct cost to produce the equipment, which is estimated at $70,000 d. Report nothing on the face of the financial statements, but describe the donation in the notes to the statements.

1. The Chessie Fund received $100,000 in cash in 2018 with the stipulation that it be used to acquire a building that can be used to provide elderly housing. The Fund estimates that it will not have enough money to buy the building it has in mind until sometime in 2020. How should the gift be reported in the Fund's financial statements in 2018? a. As cash and as contribution revenue—support without donor restrictions b. As cash and as contribution revenue—support with donor restrictions c. As a footnote only, until a building that meets the donor's specifications can be purchased d. As cash and deferred revenue until a building that meets the donor's specifications can be purchased

1. The FASB requires nonprofits to provide information about the availability of its financial assets to meet cash needs for general expenditures within one year of the statement of financial position date. What information is required to be presented or disclosed? a. The unused balances of all lines of credit available to the nonprofit b. The nonprofit's financial assets available within one year of the financial position date for general expenditure c. The amount of pledges receivable that the nonprofits expects will be available to pay for general expenditures of the current year d. The portion of long-term debt that is due to be paid in the current period

1. The FASB requires nonprofits to report net assets in which categories? a. Current and noncurrent b. Net assets without donor restrictions and net assets with donor restrictions c. Net assets in endowment funds and net assets with board designations d. Net assets with donor restrictions and net assets with non-donor contractual restrictions

1. The National Kidney Foundation decides to present the required detail about its expenses as an additional operating statement—a statement of functional expenses. What will this statement present? a. All expenses by function b. All expenses by nature and function c. All mission expenses with investment expenses presented separately d. All management and general activity expenses, fundraising activity expenses, and in some nonprofits, membership development activity expenses

1. The Trent Baisley Bird Watching Club charges membership dues to finance its activities. These dues are $300 per year but the only direct benefit to the club members is a monthly newsletter listing regional citings and bird-watching tips. The newsletter has a fair value of $85 per year. What portion of the $300 member dues should be reported as an exchange transaction and what portion should be reported as contribution revenue? a. The entire $300 should be reported as contribution revenue—support without donor restrictions b. $215 should be reported as contribution revenue—support without donor restrictions; the rest should be reported as magazine subscription revenue—an exchange transaction c. The entire $300 should be reported as an exchange transaction—membership dues d. The Club should report $215 as contribution revenue—support with donor restrictions; the rest should be reported as magazine subscription revenue—an exchange transaction

1. The Victoria Fund, a child welfare fund, received $50,000 in cash in 2018. The donor requires the gift be held in perpetuity and that the income from investing this money may be used for its program of promoting adoption of young girls. How should the gift be reported in the Victoria Fund's financial statements? a. As cash and as contribution revenue—support without donor restrictions b. As cash and as contribution revenue—support with donor restrictions c. As a footnote only, until the time restriction is met d. As either a or b, provided the nonprofit does so consistently

1. Under what circumstances do nonprofit hospitals sometimes present a fifth financial statement? a. When they need to report on budget versus actual financial results b. To report expenses by function and when they have not done so in their statement of operations c. To show details of charity care d. To report on the cash basis of accounting

1. When a nonprofit entity's net assets are presented as net assets with donor restrictions, who has imposed the restrictions? a. The entity's board of trustees b. Donors c. The bondholders d. Government regulators

1. Which of the following financial statements is not required to be prepared by nonprofit organizations? a. Statement of financial position b. Statement of donations and contributions received c. Statement of cash flows d. Statement of activities

1. Which three categories of net position are reported by governmental hospitals? a. Restricted, committed, and unassigned b. Net investment in capital assets, restricted, and unrestricted c. Temporarily restricted, permanently restricted, and unrestricted d. Permanently restricted, current, and noncurrent

11. During its calendar year 2019, a city issued $800,000 of bonds to acquire various items of capital equipment. By the end of 2020, the city had spent all the bond proceeds to purchase capital assets. Accumulated depreciation on the assets was $120,000, and $150,000 of the bonds had been paid off. How much should the city report in its government-wide statement of net position as net investment in capital assets? a. $0 b. $30,000 c. $630,000 d. $650,000

11. Which of the following is not accounted for in a Federal agency's net cost of operations? a. Depreciation of equipment acquired in a previous year b. Requisitions for supplies needed but not ordered c. Supplies used during the year d. Accrual of an expense that has not been funded

17. Federal agencies that participate in defined benefit pension plans for their federal employees should recognize an expense: a. When the benefits are due and payable on the modified accrual basis of accounting. b. Equal to the service cost for their employees for the accounting period less the amount contributed to the plan by the employees. c. When cash is paid to retirees. d. Equal to the actuarial present value of benefits earned by the employees during the current period and a portion expected to be earned by employees in the future until their retirement date.

17. The General Fund has a Due from Capital Projects Fund of $48,000 and a Due from Water Enterprise Fund of $100,000. The Capital Projects Fund has a Due to General Fund of $48,000, and the Water Enterprise Fund has a Due to General Fund of $100,000. What will be the amount of internal balances reported in the government-wide statement of net position? a. Internal balances of $148,000 b. Internal balances of $100,000 c. Internal balances of $48,000 d. No internal balances are reported.

19. Which of the following statements is false? a. Depreciation is recorded as an expense in an agency's proprietary accounts. b. Vacation leave cannot be accrued at year-end unless the agency has sufficient appropriated funds to pay for it. c. The account Undelivered orders - obligations, unpaid remains open at year-end until it is paid in the following year. d. If the agency receives an invoice in an amount greater than the amount of the purchase order and agrees that invoice amount is correct, an adjustment is needed to the account "Allotments - realized resources."

20. The General Fund has a transfer out to a Debt Service Fund of $32,000 and a transfer in from an Electric Utility Enterprise Fund of $48,000. The Debt Service Fund has a transfer in from the General Fund of $32,000, and the Electric Utility Enterprise Fund has a transfer out to the General Fund of $48,000. What will be the amount of transfers reported in the government-wide statement of activities? a. Transfers of $80,000 b. Transfers of $48,000 c. Transfers of $32,000 d. No transfers are reported.

20. Which of the following actions will reduce the balance in the budgetary account "Allotments—realized resources"? a. Administering department makes a quarterly allotment to the agency. b. Agency, which uses commitment accounting, makes a commitment to acquire materials. c. Agency sends disbursement schedule to Treasury requesting payment of invoice. d. Agency makes year-end accrual for unappropriated, but accrued vacation pay.

21. Which one of the following actions requires both budgetary accounting and proprietary accounting entries in an agency's accounts? a. Agency records obligation based on a contract for supplies. b. Agency records year-end accrual for funded salaries. c. Agency requests Treasury to pay invoice for supplies. d. Agency uses supplies previously recorded as supplies inventory.

25. On January 1, 2020, a city had outstanding general obligation bonds payable of $900,000. During 2020, the city used a Debt Service Fund to repay $100,000 of bonds that were outstanding at the start of the year. Based on the fund preclosing trial balances, what adjustments must the city make to prepare the government-wide financial statements on December 31, 2020? a. No adjusting entry is needed b. Net position 900,000 Bonds payable 900,000 Bonds payable 100,000 Expenditures—bond principal 100,000 c. Net position 800,000 Bonds payable 800,000 d. Other financing source—proceeds from bond issue 800,000 Bonds payable 800,000

28. A federal agency that uses commitment accounting makes a commitment for supplies in the amount of $40,000. When it places the purchase order, however, the cost of the supplies is only $38,000. How is the $2,000 difference accounted for in the budgetary accounts? a. No budgetary entry is needed at this point in the budgetary accounting cycle. b. Commitments is debited for $40,000, Allotments - realized resources is credited for $2,000, and Undelivered orders - obligations, unpaid is credited for $38,000. c. Commitments is debited for $38,000 and Undelivered orders - obligations, unpaid is credited for $38,000. d. Allotments - realized resources is debited for $2,000 and Commitments is credited for $2,000.

30. When should property tax revenues be recognized in government-wide financial statements? a. In the period for which the taxes are levied (net of estimated refunds and uncollectibles), provided they are measurable and available b. In the period for which the taxes are levied (net of estimated refunds and uncollectibles), even if the enforceable legal claim arises or due date for payment is in a different period c. In the period they are collected in cash, together with an accrual for uncollected taxes d. In the period when an enforceable legal claim arises or when the resources are received, whichever occurs first.

31. An agency makes a disbursement request to Treasury for salary checks in the amount of $40,000. What budgetary journal entry should the agency make? a. Apportionments 40,000 Allotments—realized resources 40,000 b. Allotments—realized resources 40,000 Delivered orders—obligations, unpaid 40,000 c. Allotments—realized resources 40,000 Commitments 40,000 d. Program costs—salaries 40,000 Expended appropriations 40,000

31. Pursuant to law, a state agrees to reimburse a county 50 percent of the costs incurred by the county to maintain county roads, provided the county incurs no more than $800,000 in allowable costs. Allowable costs include accrued but unpaid salaries, but do not include encumbrances. For its calendar year 2019, the county's records show the following for its road maintenance program: cash disbursements - $780,000; accrued salaries payable -$15,000; encumbrances - $10,000. How much intergovernmental revenue should the county recognize in its government-wide financial statements? a. $795,000 b. $397,500 c. $400,000 d. $390,000

32. A small village (which keeps its records on a calendar-year basis) issued $1 million of bonds on April 1, 2019. The first payment of principal was due April 1, 2020, but interest at 6 percent per annum on the outstanding debt was due on October 1, 2019 and April 1, 2020. How much interest expenditure (expense) should the village recognize in its governmental fund and government-wide financial statements for the calendar year 2019? Fund Government-wide Statements Statements a. $30,000 $30,000 b. $30,000 $45,000 c. $30,000 $60,000 d. $45,000 $45,000

34. A government issued $4 million of general obligation bonds on November 1, 2019, to build a fire house. The first debt service payment ($200,000 principal plus 6 percent interest per annum on outstanding debt) is due November 1, 2020. To prepare government-wide financial statements at December 31, 2019, what journal entry is needed regarding debt service? a. No journal entry is needed b. Interest expense 40,000 Interest payable 40,000 c. Interest expense 40,000 Bond principal expense 33,333 Debt service payable 73,333 d. Interest expense 240,000 Interest payable 240,000

4. What is the name of the entity that recommends accounting standards for the federal government? a. The Governmental Accounting Standards Board b. The Federal Accounting Standards Advisory Board c. The Financial Accounting Standards Board d.The American Institute of Certified Public Accountants

6. What basis of accounting is used in the statement of net costs prepared by a federal agency? a. The budgetary basis b. The accrual basis c. The cash basis d. The modified accrual basis

8. In accordance with a bond agreement, assets are being accumulated in a sinking fund to pay bonds due in 20 years. The assets are reported as Investments. How should they be classified in the net position section of the statement of net position? a. As invested in capital assets, net of related debt b. As restricted for debt service c. As reserved for debt service d. As unrestricted

16. The federal government recognizes a liability under the Medicaid program when: a. The federal government collects payroll taxes. b. A liability is normally recognized on the accrual basis of accounting for an exchange transaction. c. Unpaid amounts exist at the reporting date. d. Cash is disbursed to pay benefits.

1. A donor had previously donated $2,000 to a nonprofit entity, stipulating that the gift must be used to finance the annual Fall Harvest festival. The festival is held and the gift is used for the stipulated purpose. Which of the following best describes the effect of the journal entries needed to record the expense resulting from use of the gift? a. An expense is reported in the net assets with donor restrictions column of the statement of activities. b. An expense is reported in the net assets without donor restrictions column of the statement of activities. c. A journal entry is made to reclassify $2,000 of net assets with donor restrictions to net assets without donor restrictions because the purpose for which the contribution was made has been fulfilled. An additional entry records the expense in the net assets without donor restrictions column of the statement of activities. d. The expense is netted against support with donor restrictions.

1. A governmental hospital has about 30 outstanding medical malpractice claims when it prepares its 2018 financial statements. It does not carry third-party insurance. The total amount claimed on these claims is $2,000,000. Historically, most of these claims are settled out-of-court for about 20 percent of the amount claimed. Some of claims were filed before 2018 and some were filed in 2018. It takes an average of three years to settle them. What is the appropriate method of handling this situation on the financial statements? a. Do not report anything either on the face or in the notes to the statements b. Do not report anything on the face of the statements; but in the notes, state that claims were received, insurance is not carried, and it takes about three years to settle claims; say nothing about the amount of the claims or the potential loss c. Develop a best estimate of the probable loss (about $400,000), based on past experience, and report a liability for that amount on the balance sheet d. Report a liability of $2,000,000 on the balance sheet; and state in the notes that the liability may be lower if the hospital is successful in defending itself

2. Which measurement focus should be used in government-wide financial statements? a. The same measurement focus as that used in accounting for each fund type b. The current financial resources measurement focus c. The economic resources measurement focus d. The economic resources measurement focus for governmental fund types and the current financial resource measurement focus for proprietary and fiduciary fund types

1. A governmental hospital receives notice of a $100,000 grant (a nonexchange transaction) from the federal government to conduct breast cancer research. The grant contains an eligibility requirement; that is, the hospital must incur costs and submit quarterly reports of allowable costs incurred. The reports are subject to audit. When should the hospital recognize revenues under the grant? a. Upon receiving notice of the grant b. Each quarter, when it submits quarterly reports c. As it incurs allowable costs d. After the all cost reports have been audited

1. A hospital entered into a retrospective billing arrangement with a third-party payer. The arrangement required the hospital to bill using interim rates equal to 75% of its established rates. The hospital provided services to patients covered by this arrangement that were equal to $4.8 million at the hospital's established rates. Before issuing its financial statements for the year, the hospital analyzed its costs and estimated that the amount it charged to the third-party payer was $300,000 too high. For this third party, how much was the total contractual adjustment for the year? a. $300,000 b. $1,200,000 c. $1,500,000 d. $1,700,000

1. A large portion of our study of nonprofits has focused on reporting contributions and donor-imposed restrictions on net assets. However, nonprofits also engage in "exchange transactions." Which of the following is the best description of an exchange transaction? a. A substantial payment made so that two seats in a newly constructed theatre would bear the donor's (patron's) name b. College tuition paid by local Better Business Bureau for a qualifying student c. College tuition paid by a student's parents who borrowed the money on a home equity loan d. A state grant to a college to cover operating expenses.

1. A nonprofit hospital had gross patient billings at established rates of $115 million in 2018. The hospital was subject to contractual price adjustments of $45 million and $5 million of its 2018 services were determined to be charity care. The hospital also has a policy of providing care before determining whether the patient meets charity care thresholds. In 2018, the hospital provided $8 million of services to people not expected to be able to pay at established rates. The hospital reduced these billings by 50%. How much is the hospital's 2018 patient service revenue? a. $70 million b. $65 million c. $61 million d. $45 million

1. A nonprofit hospital receives a $25,000 donation that must be used for a special training program for nurses. When the donated resources are used for the intended purpose, in which net asset classification should the hospital report the expense? a. Assets limited as to use b. Net assets with donor restrictions c. Net assets without donor restrictions d. Program expenses

1. A nonprofit organization receives $3,400,000 of pledges in its annual telethon, all of which may be used for any of the services the nonprofit provides. When should the organization recognize contribution revenue? a. When cash is received b. When the pledges are received c. When the pledges are received, less an appropriate allowance for uncollectible pledges d. When the pledges are received, provided the entity classifies the pledges as contribution revenue without donor restrictions

1. A nonprofit university uses fund accounting. The university's governing board decides to set aside $500,000 in a separate fund called the Student Performance Quasi-Endowment Fund, the income of which will be used to finance a long-term study on the career paths of the university's graduates. In which net asset classification of the university's statement of financial position would the net assets in this fund be reported? a. Net assets without donor restrictions b. Net assets with board designations c. Net assets without donor restrictions—board-designated for research d. Endowment funds

1. All hospitals are required to report detailed information in the notes to financial statements about the charity care they provide. Required information includes: a. Dollar amount of charity care provided calculated using the hospital's established billing rates b. Dollar amount of charity care provided calculated using the hospital's Medicaid rate c. Dollar amount of charity care provided based on the hospital's direct and indirect costs of providing that care d. Dollar amount less any resources the hospital received to subsidize charity care, including gifts (contributions) and grants.

1. Catlett County Hospital, a governmental hospital, has its financial statement audit done by a local CPA firm. In 2018, the CPA firm announced that it would no longer charge for the audit. How is the County Hospital required to report the donated audit in 2019, assuming that it would have been billed $20,000 for the audit and that the cost incurred by the CPA firm is estimated at $11,000? a. Report contributed service revenue of $20,000 and audit expense of $11,000 b. Report contributed service revenue of $0 and audit expense of $0 c. Report contributed service of $20,000 and audit expense of $20,000 d. Report contributed service revenue of $11,000 and audit expense of $11,000

1. How are all hospitals paid when they enter into capitation agreements? a. Based on predetermined rates for individual procedures performed by the hospital b. Based on interim rates for individual procedures performed by the hospital, subject to retrospective adjustment after submission of actual costs c. Based on agreed-upon premiums per member per month, for agreeing to provide care d. Based on the total costs incurred by the hospital for actual care rendered to members of a particular group

1. In response to a fundraising campaign, an electric utility provides free electricity to a nonprofit entity. How should the nonprofit entity report this gift in its statement of activities? a. It should not be reported in the statement b. It should not be reported on the face of the statement, but should be disclosed in the notes c. It should be reported at its fair value as a revenue and as an expense d. The entity may choose either to not report it or to report it at fair value as a revenue and as an expense

1. On March 1, 2018, a nonprofit organization received a donation of securities worth $4,500. When it prepared its financial statements at December 31, 2018, the securities had a fair value of $5,200. When it sold the securities on June 30, 2019, it received $4,600. The entity's accounting procedures call for reporting all unrealized and realized gains and losses in a single account. How should it record its gains and losses in 2018 and 2019? a. No change in 2018; a gain of $100 in 2019 b. A gain of $100 in 2018; no change in 2019 c. A gain of $700 in 2018; a loss of $600 in 2019 d. No change in 2018; a loss of $600 in 2019

1. Ruth Richter gives a nonprofit entity $25,000 in cash. She tells the entity that it may use the gift for a particular research project but only after it receives at least $20,000 cash from other donors to help complete the project. If the entity fails to raise the additional $20,000, it must return Ruth's gift. What account should the entity credit when it receives Ruth's gift but none of her conditions are substantially met? a. As contribution revenue—support without donor restrictions b. As contribution revenue—support with donor restrictions c. Refundable advance (deferred revenue) d. Allowance for uncollectible contributions

1. Say No To Meth, a nonprofit entity devoted to informing the public about the hazards of methamphetamine, sends out brochures to a large number of doctors, urging that the brochures be placed in the doctors' waiting rooms. The four-page brochure contains a description of the addictive and destructive nature of the drug, but half of the last page contains an appeal for funds, in relatively large type. How should the entity report the $30,000 expense of preparing, printing, and distributing the brochure in its statement of activities? a. The entire $30,000 must be reported as a fundraising expense b. The entire $30,000 must be reported as a program expense c. The $30,000 should be allocated between fundraising and program expenses, using appropriate cost accounting techniques d. The $30,000 should be reported under the caption "Program and fundraising expenses"

1. Showing the amount and nature of donor-imposed restrictions on the statement of net assets helps financial statement users to assess a nonprofit organization's: a. Corporate responsibility b. Budgetary compliance c. Financial flexibility d. Liquidity

1. Steve Watson, a local certified public accountant (CPA), donates a significant amount of his spare time to Beth's Gallery, a nonprofit museum. He donates 50 hours to audit the books and 80 hours selling products at the museum store. He charges his regular clients $200 an hour as a CPA. How should the Gallery report Mr. Watson's donation of time? a. Report $26,000 (130 hours @ $200) as contribution revenue and expense b. Report $0 as contribution revenue and expense, and describe Mr. Watson's services to the museum in a note to the statements c. Report $10,000 (50 hours @ $200) as contribution revenue and expense; also, disclose in a note to the statements the fair value of selling services provided by Watson and others d. Report $10,000 (50 hours @ $200) plus the fair value of the selling services provided by Watson and others

1. The Board of Trustees of Building Lives, Inc., a nonprofit entity that provides support services for homeless men, votes to set aside $100,000 toward purchasing a fitness center for their clients at some time in the future. How should Building Lives report these assets? a. As board-designated funds, a component of net assets with donor restrictions b. As restricted assets c. As board-designated funds, a component of net assets without donor restrictions d. As noncurrent assets

1. The Bob Buckham Senior Center, a nonprofit entity, serves a hot meal to senior citizens every Friday evening. All the food is donated by a local supermarket. All the food preparation and serving is done by local volunteers. If the Center had to pay for the food, it would need to spend $10,000 a year. If it had to pay for the food preparation and service, it would need to spend $12,000 a year. How should it report these contributions in its financial statements? Food Food preparation and service a. Disclose in the notes Disclose in the notes b. Disclose in the notes Report $12,000 revenue and expense c. Report $10,000 revenue and expens Disclose in the notes d. Report $10,000 revenue and expense Report $12,000 revenue and expense

1. What categories of net assets are required to be presented in a nonprofit entity's balance sheet? a. Three—net assets without donor restrictions, net assets with donor restrictions, and net assets with board designations b. Two—net assets released from restrictions and net assets with restrictions c. Two—net assets without donor restrictions and net assets with donor restrictions d. Three—restricted, unrestricted, and net investment in capital assets.

1. Which of the following is a major difference between a nonprofit hospital's statement of operations and statement of changes in net assets? a. Contributions are not reported in the statement of operations, but are reported in the statement of changes in net assets. b. Net assets released from restrictions are not reported in the statement of operations, but are reported in the statement of changes in net assets. c. The statement of operations does not cover changes in both unrestricted and restricted net assets, but the statement of changes in net assets does cover changes in both unrestricted and restricted net assets. d. The statement of operations is not prepared on the cash basis of accounting, but the statement of changes in net assets is prepared on the cash basis of accounting.

1. Which of the following is not a characteristic of a nonprofit, as defined by the Financial Accounting Standards Board (FASB)? a. Nonprofits receive significant contributions from resource providers who do not expect to receive benefits in return b. Nonprofits do not have defined ownership interests, such as stock that can be sold on a securities exchange c. Nonprofits can sometimes issue tax-exempt debt d. Nonprofits operated for a purpose other than to make a profit

15. How are liabilities arising from exchange transactions recognized in the federal government's financial statements? a. When an amount becomes due and payable. b. When the liability matures. c. On the accrual basis when the exchange occurs. d. On the modified accrual basis for all liabilities except Social Security and Medicare.

16. An Internal Service Fund (ISF) provided services to two agencies financed by the General Fund—the Tax Department (which it billed $200,000) and the Comptroller's Office (which it billed $100,000). In the fund financial statements, the ISF reported a loss of $30,000. How should this information be reported in the government-wide statement of activities? a. Under "business-type activities," in a separate line captioned ISF, revenues of $300,000, expenses of $330,000, and net expenses of ($30,000) should be reported b. Under "governmental-type activities," in a separate line captioned ISF, revenues of $300,000, expenses of $330,000, and net expenses of ($30,000) should be reported c. ISF activities should not be reported, but expenses reported for the Tax Department and the Comptroller's Office should be increased by $20,000 and $10,000, respectively d. ISF activities should not be reported, but expenses reported for the Tax Department and the Comptroller's Office should be reduced by $20,000 and $10,000, respectively

22. The Congress makes and the president approves a $400,000 appropriation for an agency. What budgetary journal entry should the agency make? a. Apportionments 400,000 Allotments—realized resources 400,000 b. Fund balance with Treasury 400,000 Unexpended appropriations—appropriations received 400,000 c. Other appropriations realized 400,000 Unappropriated authority 400,000 d. Unappropriated authority 400,000 Other appropriations realized 400,000

25. At what point in the budgetary cycle does a federal agency record a decrease (a debit) to the account "Allotments - realized resources"? a. When the Office of Management and Budget makes an apportionment. b. When the Department makes a quarterly allotment to the agency. c. When the agency uses commitment accounting and makes a commitment for supplies. d. When the agency uses supplies from its inventory.

26. What is the general rule for reporting capital assets in the governmental activities column of the government-wide statement of net position? a. Capital assets are not reported in that column b. Both proprietary fund and general capital assets are reported in that column c. All general capital assets should be reported in that column d. All general capital assets, except infrastructure assets, should be reported in that column.

29. A county that did not previously have a property tax levies a property tax for $900,000 on January 1, 2020 for the budget year January 1 to December 31, 2020. The county collected $875,000 during 2020, $20,000 during January 1 through February 28, 2021, and the remaining $5,000 in June 2021. What adjustment is needed to the data reported in the governmental fund financial statements to prepare the government-wide statements? a. No adjusting entry is needed b. Net position 5,000 Revenues—property taxes 5,000 c. Deferred revenues—property taxes 5,000 Revenues—property taxes 5,000 d. Net position 25,000 Revenues—property taxes 25,000

30. A federal agency received allotments of $95,000. It does not use commitment accounting. It placed three orders totaling $70,000, received all the supplies ordered, and approved invoices totaling $73,000 for the three orders. It then consumed $55,000 of those supplies. It then placed another order for $12,000, but the agency has not yet received delivery. How much of the agency's allotment is available for additional obligation? a. $13,000 b. $33,000 c. $10,000 d. $40,000

33. A city experienced several auto damage claims during its year ended December 31, 2019. The total amount claimed was $600,000. No cash was paid out in 2019. However, claims totaling $200,000 were settled by December 31, 2019. These claims were settled for $80,000 and were scheduled for payment on January 15, 2020. City attorneys felt that it was highly probable that the remaining $400,000 of claims would be settled during 2020 for about $160,000. How much should the city recognize as claims expenses in its government-wide financial statements for 2019? a. $0 b. $80,000 c. $240,000 d. $480,000

35. The City of Bogue provides other postemployment benefits (OPEB) to its full-time general government employees. Which of the following should the City report as its OPEB liability in its government-wide statement of net position? a. The contribution it made to the OPEB plan during the year. b. The unpaid portion of medical benefits it expects to pay retirees for events that happened during the year. c. The net OPEB liability or the total OPEB liability depending on whether the government has set aside funds in a qualifying OPEB trust. d. Nothing. The liability should only be reported in the governmental fund balance sheet.

36. The Social Security Board of Trustees projects that total Trust Fund revenues (including investment income) will continue to exceed program costs through 2021, but that Social Security will need to start redeeming its investments in Treasury securities in 2022. In which year, does the Social Security Board of Trustees estimated that its investments will be depleted? a. 2023 b. 2030 c. 2034 d. 2040

39. Which of the following is a typical reconciling item between the governmental fund-level financial statements and the government-wide financial statements? a. Reporting the amount of cash on hand for governmental activities b. Reporting revenues on the accrual basis, rather than the modified accrual basis, for business-type activities c. Reporting depreciation expense, rather than capital outlay expenditures, for governmental activities d. Reporting the net effect of transfers between the general fund and debt service fund

4. On the government-wide statement of net position, assets and liabilities may be reported: a. In a classified format b. In order of relative liquidity c. In either order of relative liquidity or a classified format d. In separate columns

41. On January 1, 2019, a county's government-wide financial statements shows general capital assets of $2,400,000. For the year ended December 31, 2019, the county's fund financial statement shows an amount of $125,000 next to the caption "Expenditures—capital outlay." To prepare its 2019 government-wide financial statements, the preparer makes a worksheet that uses the 2019 governmental fund-level financial statements as the starting point. As a result, the worksheet does not show any capital assets at the beginning of the year. What adjusting entry is needed to report the required information about capital assets on the government-wide statements? a. Capital assets 2,525,000 Expenditures - capital outlay 2,525,000 b. Capital assets 125,000 Expenditures - capital outlay 125,000 c. Capital assets 2,525,000 Net position 2,400,000 Expenditures - capital outlay 125,000 d. Capital assets 2,400,000 Expenditures - capital outlay 125,000 Net position 2,525,000

43. If a government uses the "modified approach" in accounting for its infrastructure assets, which of the following items properly will not appear in its government-wide statement of activities? a. Depreciation expense for any capital assets b. Interest expense for bonds issued to finance any capital assets c. Depreciation expense for infrastructure capital assets d. Interest expense for bonds issued to finance infrastructure capital assets

5. How should component units be displayed in government-wide financial statements? a. Component units should not be reported in government-wide financial statements. b. All component units should be included either in the column for governmental activities or in the column for business-type activities. c. Component units should be blended where appropriate; discretely presented component units should be reported in a separate column in government-wide financial statements. d. All component units should be included with other business-type activities.

7. How should bonds payable be reported on government-wide financial statements? a. Bonds payable should be reported as an offset to capital assets in the assets section of the statement of net position b. Bonds payable should not be reported on the government-wide financial statements c. Bonds payable should be separated between amounts due to be paid in one year and amounts due to be paid in more than one year d. Bonds payable should be reported in the net position section of the statement of net position

9. A city health department charges fees for copies of birth certificates provided to its citizens. How should those fees be reported in the government-wide statement of activities? a. As a separate item of revenue in the revenue section b. As a direct reduction of the expenses of the health department c. As an element of program revenues, which reduce gross expenses of the health department d. As a special item

9. The GAO has not expressed an auditor's opinion on the consolidated financial statements for the federal government as a whole. Which of the following is not a reason that GAO has given for not expressing an opinion? a. Serious financial management problems at the Department of Defense that have prevented its financial statements from being auditable. b. The federal government's inability to adequately account for and reconcile intragovernmental activity and balances between federal entities. c. A lack of internal controls across many departments and agencies of the federal government. d. The federal government's ineffective process for preparing the consolidated financial statements.

1. A hospital had capitation agreements with several health maintenance organizations to provide services. The hospital received $12 million of capitation fees for the year. The hospital also calculated that: (a) its costs to provide these services were $11.8 million; and (b) the value of these services at established billing rates were $16 million. How should the hospital report this information on the face of its financial statements? a. Report $200,000 as a separate item of revenue, labeled net premium revenue. b. Add $16 million to patient service revenue, and deduct $4 million in a separate item labeled Adjustment for capitation premiums c. Report Premium revenue of $12 million as a separate item of revenue, and report cost of serving HMO patients of $11.8 million as a separate item of expense d. Report premium revenue of $12 million as a separate item of revenue, if significant.

1. A hospital invested $780,000 in equity securities in March 2018. When it prepared its financial statements at year-end, the securities had a fair value of $802,000. How should the hospital report the securities in its balance sheet at year end? a. Report the securities at cost ($780,000). b. Report the securities at cost ($780,000) and show the fair value ($802,000) parenthetically next to the caption "Investments" c. Report the securities at cost ($780,000) and show the fair value ($802,000) in the notes to the financial statements. d. Report the securities at the fair value ($802,000)

1. A hospital that carries no malpractice insurance has several outstanding malpractice claims, including one for $1.5 million. Hospital attorneys believe this claim can be settled in the range of $200,000 to $340,000, but negotiations have not reached the point where they can estimate where within that range they can reach agreement. How should the hospital handle this claim in its financial statements? a. Report nothing on the face of the statements; in the notes, state that there are claims against the hospital, and that historically it wins some cases and loses others. b. Report an expense and a liability of $270,000, the mid-point of the range. c. Report an expense and a liability of $340,000, the upper end of the range. d. Report an expense and a liability of $200,000, the lower end of the range, and disclose the potential for additional loss in the notes to the statements.

1. A nonprofit entity conducts a special fundraising campaign at the end of fiscal year 2018, and specifies that it will use the money for its 2019 general operations. It receives pledges totaling $200,000. Based on past experience, the entity expects to receive $150,000 in cash. How should the entity report these events? a. Recognize the entire amount pledged as contribution revenue—support without donor restrictions in 2018 b. Recognize the amount pledged (net of a $50,000 allowance for estimated uncollectibles) as contribution revenue—support without donor restrictions in 2018 c. Recognize the amount pledged (net of a $50,000 allowance for estimated uncollectibles) as contribution revenue—support without donor restrictions in 2018; and report the 2019 expenses as changes in support with donor restrictions in 2019 d. Recognize the amount pledged (net of a $50,000 allowance for estimated uncollectibles) as contribution revenue—support with donor restrictions in 2018; and reclassify the net assets as unrestricted at the beginning of 2019

1. A nonprofit hospital had gross patient billings of $43 million, contractual adjustments of $8 million and charity care of $1,500,000 for 2018. In addition, the hospital also revised its estimate of bad debts for all 2018 accounts by $1,000,000. How much patient service revenue should the hospital report in 2018. a. $43 million b. $35 million c. $33.5 million d. $32.5 million

1. A nonprofit hospital provided charity care. The value of the hospital's service for the year, at its normal billing rates, was $4 million. How should the hospital report the charity care services in its financial statements? a. Include the $4 million as part of patient service revenue and report an operating expense (labeled Charity care) of $4 million. b. In the revenue section of the operating statement, include the $4 million as part of patient service revenue, but also show a deduction (labeled Charity care) for $4 million. c. Report nothing for charity care, neither on the face of the operating statement nor in the notes d. Report nothing on the face of the operating statement for charity care. In the notes, describe the charity care policy, and disclose the level of charity care provided based on the direct and indirect cost of providing the care.

1. A nonprofit museum holds a valuable collection of art works. On reviewing the museum's financial statements, a new trustee notices that the statement of financial position contains no line item for inventory of art works. He is told by the accountant that the museum has never taken an inventory because "it would cost too much." What are the accounting requirements regarding capitalization of the art works? a. All collections of art works must be capitalized, regardless of the circumstances b. Collections of art works are not required to be capitalized under any circumstances c. If collections of art works meet certain criteria (such as being protected and preserved), they must be capitalized d. If collections of art works meet certain criteria (such as being protected and preserved), the museum has an option either to capitalize or not capitalize them

1. A nonprofit museum owns a building and a large collection of art works. Both the building and the art works are capitalized on the entity's statement of financial position. What is the general rule regarding depreciation of the building and the art works? a. The building must be depreciated, but the art works cannot be depreciated b. Both the building and the art works must be depreciated c. Neither the building nor the art works can be depreciated d. The building must be depreciated, but depreciation need not be recognized on works of art if their estimated useful lives are estimated to be extraordinarily long

1. A nonprofit organization enters into an agreement with a local bank to provide it with a letter of credit for a building project. The bank requires the organization to put aside 10% of pledges collected for the building project in a separate account as a good faith deposit for the line of credit. At year-end, the organization has $255,000 in this separate account. How should the $255,000 of net assets be classified? a. As net assets with donor restrictions b. As net assets without donor restrictions—board designated c. As net assets available for spending d. As net assets without donor restrictions because the restriction is from a creditor relationship

1. A nonprofit organization receives a pledge from a donor in fiscal 2018. The terms of the pledge are such that the organization will receive a large cash contribution in fiscal 2022. At what value should the pledge be reported in the organization's 2018 statement of financial position? a. Fair value b. Compound value c. Marginal value d. Discounted present value

1. A nonprofit university uses fund accounting for internal purposes. It maintains a Plant Fund to account financial resources to be used for capital asset acquisitions as well as land, building, and equipment it uses in its operations. In its external financial reporting, how should the university classify the net assets that it reports in its Plant Fund? a. All net assets should be classified as net assets without donor restrictions b. All net assets should be classified as net assets with donor restrictions c. All net assets should be classified as net assets held for capital purposes d. Net assets arising from resources set aside by the governing board should be classified as net assets without donor restrictions; net assets arising from contributions restricted to capital asset acquisitions should be classified as net assets with donor restrictions

1. At the statement of financial position date, a nonprofit has an investment in equity securities, the fair value of which is greater than the amount at which the investment was initially recorded. What adjustment, if any, is needed? a. No adjustment is needed. b. The increase should be recorded as a gain in net assets without donor restrictions. c. The increase should be recorded as a gain in net assets with donor restrictions. d. The increase should be recorded as an unrealized gain in the same net asset class in which the investment is reported.

1. Dave Hall did some estate planning recently and decided to establish a trust for his favorite museum, the National Baseball Hall of Fame. He put $6 million into a revocable charitable remainder trust whereby all income from the trust would go to his children until the youngest reaches age 35. At that time, the remaining trust assets would be contributed to the Hall of Fame. An actuary for the trust estimated, based on the current ages of Hall's children, that $3.2 million could be contributed to the Hall of Fame. How should the Hall of Fame report this arrangement when it learns of the trust? a. It should record nothing now. It should record the fair value of the assets only when it receives them. b. It should record $3.2 million as contributions receivable and as contribution revenue with restrictions c. It should disclose the anticipated $3.2 million contribution in the notes to its financial statements d. It should record $3.2 million as contributions receivable and as a refundable advance

1. Donor restrictions play an important role in how assets should be classified in a nonprofit's statement of financial position. What additional information may a nonprofit provide about the liquidity of its assets and liabilities? a. Classifying assets as current and noncurrent in the same way that companies do b. Sequencing assets based on their nearness to cash and liabilities based on their nearness to use of cash c. Disclosing information about liquidity, maturity, and restrictions on use in the notes to financial statements d. All of the above

1. GAAP require nonprofits to report their expenses by nature and function in one location. What may nonprofits use as "one location"? a. A schedule in the notes to the financial statements b. The face of their statement of activities c. A separate financial statement called a statement of functional expenses d. All of the above

1. In the federal government, which organizations make appropriations and which make apportionments? a. The Congress makes appropriations, and department heads apportion the appropriations to individual agencies or divisions within the department. b. The Congress makes appropriations, and the Treasury Department appropriates to individual departments the total amount apportioned by the Congress. c. The President makes appropriations, and department heads periodically apportion parts of the appropriations to agencies in the department. d. The Congress makes appropriations, and the Office of Management and Budget periodically apportions parts of the appropriations to departments.

1. In the statement of operations of a nonprofit hospital, which of the following increases in net assets should not appear as part of Excess of revenues over expenses? a. Patient service revenue b. Net assets released from restrictions used for operations c. Investment income d. Net assets released from restrictions used for purchase of equipment

1. Regardless of ownership, most hospitals' revenues come from third-party payers. These third parties include: a. Public (governmental) payers, such as Medicare and Medicaid b. Private insurance companies c. Health maintenance organizations (HMOs) d. All of the above

1. The Geneva Fund received $50,000 in cash in 2018. The donor requires the gift be used in 2018. How should the gift be reported in the Geneva Fund's 2018 financial statements? a. As cash and as contribution revenue—support without donor restrictions b. As cash and as contribution revenue—support with donor restrictions c. As a footnote only, until the time restriction is met d. As either a or b, provided the nonprofit does so consistently

1. The Sutton Hoo Foundation holds $32,000,000 fair value in debt and equity securities as a result of a permanently restricted contribution it received in a previous year. During 2018, the Foundation has a net gain of $2 million and $880,000 of interest and dividend income on those investments. If the donor specified that investment income from the contribution should be used support historical research for the years 300-1100 AD, how should the Foundation, whose focus is on European history from 100 to 1800 AD, classify this income? a. It should report investment income—support with donor restrictions. b. It should report investment income—support without donor restrictions c. It should add the investment income to the investments in restricted contribution. d. It should report both the gain and the investment income as support with donor restrictions.

1. The difference between a nonprofit's hospital's established billing rate and the amount paid by a third-party payer is referred to as: a. A Medicaid allowance b. A capitation agreement c. A charity allowance d. As an explicit or implicit concession depending on circumstances

1. Which of the following is true regarding the Financial Accounting Standards Board requirements for a nonprofit entity's accounting and financial reporting? a. Both fund accounting and reporting by net asset classification are required b. Neither fund accounting nor reporting by net asset classification are required c. Fund accounting is required, but reporting by net asset classification is not required d. Fund accounting is not permitted, but reporting by net asset classification is required

1. Which of the following organizations establish accounting and financial reporting requirements for nonprofit entities? a. The Federal Accounting Standards Advisory Board b. The Governmental Accounting Standards Board c. The American Institute of CPAs d. The Financial Accounting Standards Board

1. Which of the following statements about the form and content of a governmental hospital's statement of revenues, expenses, and changes in net position is false? a. Nonoperating revenues and expenses are shown separately from operating revenues and expenses b. Capital contributions and endowment contributions are shown separately from operating revenues c. The statement covers both unrestricted and restricted funds d. The provision for bad debts is reported as an operating expense

12. In 2019, Monks Town received a State grant of $300,000 that can only be used to hire additional police officers. How should this revenue be reported in the Town's government-wide statement of activities? a. As a general revenue b. As a program-specific capital grant c. As a charge for services d. As a program-specific operating grant

14. How are heritage assets reported in the federal government's balance sheet? a. As part of General PP&E without being netted for accumulated depreciation b. On a separate line entitled Heritage Assets and Stewardship Land c. As part of General PP&E, net of accumulated depreciation d. Not reported in the federal government's balance sheet

15. How should Internal Service Fund (ISF) activities be reported in the government-wide statement of activities? a. ISF activities should be reported in a separate column b. ISF activities should be included in the column headed "business-type activities" c. ISF activities should be included in the column headed "governmental-type activities" d. ISF activities (revenues and expenses) should be eliminated and interfund profits or losses should be eliminated by decreasing or increasing the costs of the activities that were billed

21. On July 1, 2019, a city used tax resources of $70,000 to acquire three police cars. The police cars were expected to have a useful life of three years, after which the salvage value would be $10,000. The city policy is to depreciate capital assets using the straight-line method. Describe the adjustment or adjustments needed to prepare government-wide financial statements from the city's calendar year 2019 fund-level financial statements. a. No adjustments are needed b. Record capital assets, and record six months' depreciation ($10,000) c. Record capital assets, reduce capital outlay expenditures, and record depreciation ($20,000) d. Record capital assets, reduce capital outlay expenditures, and record depreciation ($10,000)

22. On July 1, 2019, a city used tax resources of $70,000 to acquire three police cars. The police cars were expected to have a useful life of three years, after which the salvage value would be $10,000. The city policy is to depreciate capital assets using the straight-line method. Identify the adjustment entries, if any, necessary to prepare government-wide financial statements from the city's calendar year 2019 fund-level statements. a. No journal entries are needed b. Capital assets—equipment 70,000 Expenditures—capital outlay 70,000 Depreciation expense—equipment 11,667 Accumulated depreciation—equipment 11,667 c. Capital assets—equipment 60,000 Expenditures—capital outlay 60,000 Depreciation expense—equipment 10,000 Accumulated depreciation—equipment 10,000 d. Capital assets—equipment 70,000 Expenditures—capital outlay 70,000 Depreciation expense—equipment 10,000 Accumulated depreciation—equipment 10,000

27. Merchants remit $800,000 to a county government in calendar year 2019 for sales taxes collected in 2019. In January, 2020, they send the county an additional $25,000 applicable to the year 2019. Based on past experience, the county expects to receive an additional $15,000 in late 2020, but applicable to 2019. How much should the county recognize as sales tax revenues when it prepares its fund and government-wide financial statements for 2019? Fund Government-wide Statements Statements a. $800,000 $800,000 b. $800,000 $840,000 c. $825,000 $825,000 d. $825,000 $840,000

32. An agency makes a disbursement request to Treasury for salary checks in the amount of $40,000. What proprietary journal entry should the agency make? a. Program costs—salaries 40,000 Expended appropriations 40,000 b. Allotments—realized resources 40,000 Delivered orders—obligations, unpaid 40,000 c. Allotments—realized resources 40,000 Commitments 40,000 d. Program costs—salaries 40,000 Disbursement in transit 40,000

34. An agency acquires equipment costing $300,000 on the first day of its fiscal year. The equipment has a five-year estimated useful life. What proprietary journal entry should the agency make? a. Program costs—depreciation 120,000 Accumulated depreciation 120,000 b. Depreciation expense 60,000 Accumulated depreciation 60,000 c. Expenditures—depreciation 60,000 Accumulated depreciation 60,000 d. Program costs—deprecation 60,000 Accumulated depreciation 60,000 e. None of the above

42. Which of the following is the most accurate statement regarding the depreciation of general capital assets in the governmental activities column of the statement of activities? a. All general capital assets must be depreciated. b. General capital assets are not required to be depreciated. c. General capital assets should be depreciated, but financial statement preparers may choose not to depreciate land. d. General capital assets should be depreciated, except for land and infrastructure assets that are reported using the "modified approach."

45. What are the reporting requirements for documenting the management and preservation of infrastructure assets when the "modified approach" is used? a. Management must attest in the MD&A to the fact that is has an asset management system and that its assets are being preserved at an established condition level. b. There is no reporting requirement regarding the "modified approach," but the independent auditor must take appropriate audit steps regarding that issue when attesting to the financial statements. c. A statement must be included in the notes to the financial statements to the effect that the infrastructure assets are being preserved. d. Documentation must be presented in required supplementary information documenting that the infrastructure assets are being preserved.

8. Which of the following is not considered a fund from dedicated collections? a. Trust fund b. Public enterprise revolving fund c. Special fund d. General fund

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