ACCT 4116 Final Exam
Approval from the IRS of 501(c)(3) status exempts an organization from which of the following ?
Federal income taxes
Which of the following is an example of an asset limited as to use?
Funds from a sale of bonds that are required by covenant to be used to build a new hospital .
Under the IRC, public charities are allowed to conduct direct lobbying activity. What, if any, limit is placed on such lobbying ?
If a public charity makes a 501 (h) election , there is a limit of up to $ 1,000,000 a year based on the size of the NFP's exempt program costs .
Jane's Planes is an organization that provides air transportation for critically ill children . A friend of Jane's Planes, Richard Bucks, donated a plane to be used for whatever purpose the organization chooses . In addition, he donated a substantial amount of investments that were to be used strictly to generate income to help fund the organization's expenses . These donations would be included in the organization's net assets as
Plane- without donor restrictions Investments- with donor restrictions
The museum of natural history is deciding whether to record its recent purchase of rare artifacts as an asset on its financial statements. Which of the following criteria must exist for the purchase of rare artifacts to be classified as a collection and thus provide the museum of natural history the option to not record the purchase of rare artifacts as an asset on the financial statements?
All of these criteria must exist
Which of the following organizations would be considered a nongovernmental not-for -profit organization ?
An organization classified by the IRS as a not-for- profit organization that employs individuals with disabilities in a workshop where the workers make custom stationery out of recycled goods . The organization receives cash and in- kind contributions as well as the proceeds from the sale of the stationery . The organization's board is composed of local businessmen and women
Which of the following would not be considered a responsibility of an NFP audit committee?
Assisting with the organization's fund-raising efforts .
On December 31, Ecology Center , a nongovernmental not- for- profit organization , received an unconditional pledge of $125,000 to be received in three years . The Ecology Center is confident that it will collect the entire $125,000 . The Ecology Center uses the present value technique when measuring fair value . How should the Ecology Center record the pledge ?
Both a net contribution receivable and a contribution with donor restrictions is recorded for the present value of $125,000.
Save Our Beaches, an NFP organization , prepared and distributed a trifold flyer to individuals and families at White Sands Beach, a popular beach for both residents and tourists . The flyer provided information about beach pollution and invited the public to participate in the organization's semiannual beach cleanup . In addition , one segment of the flyer solicited contributions to the organization to help fund its activities . The cost of the flyer and its distribution would most likely be considered
Both fund-raising and program cost
Wendy and Bob decided to form a charitable organization, I Love Rock N Rollers, to provide funding to assist former rock and roll group members who have become homeless. They are planning to hold a music festival to raise money. The festival will offer food and beverages and the sale of memorabilia related to the event. Before they go any further, Wendy and Bob need to
Prepare articles of incorporation and bylaws and file them with the state, obtain an EIN from the IRS , apply for permission to solicit charitable contributions, and apply for 501(c)(3) status from the IRS .
Which of the following is a true statement about tuition revenue in a college or university?
Tuition waivers received as part of compensation should be recorded as an expense by both private and public colleges and universities .
An NFP hospital has determined that a portion of patient charges are implicit price concessions . The implicit price concessions would be recorded as
a contra revenue account reducing patient revenue .
Which of the following entities would consider portions of the AICPA Audit and Accounting Guide: Health Care Entities category b authoritative guidance ?
A business-type government hospital
The controller for Harris Regional Hospital, a government hospital, estimates that the uncollectible patient accounts have increased by $3,315,000. The increase in uncollectible patient accounts would be recorded as
A contra revenue reducing patient revenue .
In a local NFP elementary school's statement of cash flows, a contribution restricted for use on a new building project would be reported as
A financing activity
Last year Zelnick College showed a positive revenue over expenses number for the first time in several years . The college is funded with contributions , grants , two government appropriations (state and local), and tuition and fees . Zelnick College is most likely what type of college?
A public university engaged primarily in business - type activities .
Which of the following is a performance measure of an outcome?
A state survey of employers showed that 70 percent of employers ranked Beasley State University's graduates as " very well prepared to enter the workforce.
According to GAAP, all not-for-profit organizations are required to prepare only the following statements:
A statement of activities a balance sheet and a statement of cash flows using accrual accounting.
When a tax-exempt organization dissolves, the managers must ensure that:
All of the above
Which of the following is true regarding charity services?
Charity service is not recognized as an expense or a revenue.
Orlando Perez, president of a local information systems company , volunteered his time to help develop software for Best Friends, a local no kill pet shelter. The software will allow the organization to track intake, placement , and statistics of animals in its three locations. Without Mr. Perez's assistance , Best Friends would have needed to hire someone to develop this software. Best Friends should record the value of Mr. Perez's time as
Contribution revenue and a program expense
A university expended $2,475,000 on a new parking facility. The transaction was reported as an investing activity on its direct method statement of cash flows . What type of university prepared the statement of cash flows?
Either a for profit university or a private university .
Which of the following is not a step in the tuition revenue recognition process for private colleges and universities ?
Estimate the amount of donor contributions that will be received in the current period.
Which of the following would be most useful for evaluating the financial profitability of a not- for-profit health care organization ?
Excess margin
Which of the following statements is incorrect concerning the financial reports of colleges and universities ?
Intangible assets are reported as a classification within capital assets by private entities.
The tool the IRS most likely will use when key officers in a tax - exempt entity receive excess economic benefits from transactions with the not-for- profit organization is:
Intermediate sanctions
Colleges and Universities look to which standard-setting body for GAAP?
It depends on whether the entity is public, private, or for-profit
Artists Unlimited was formed to support the local art community Which of the following activities would be considered unrelated business income?
Monthly rental fees for office space used by two small legal firms. The rental fees are used to make mortgage and interest payments on Artists Unlimited's building .
Gresham College is a local private college. When reviewing the college's financial reports , you would expect to see which of the following categories on its statement of financial position?
Net assets with donor restrictions and net assets without donor restrictions.
A wealthy donor promised $1 million to the local art museum to expand the size of its building, contingent on the museum obtaining a grant from the State Endowment for the Arts of at least $500,000 . Upon completing a signed agreement with the donor , the museum should :
Not make a journal entry until the conditions of the agreement have been met.
Wellness Psychiatric Clinic received a large contribution from the family of a former patient. The contribution came with a request that the funds be used or invested to support any activities that the clinic felt would be best. On this not-for-profit clinic's statement of cash flows, this contribution would be reported in which section ?
Operating activities
Fees received by a hospital for a healthy heart" workshop offered to patients should be reported as:
Other revenue
A not-for-profit organization that is exempt from federal income taxes under IRC section 501(c)(3) , exists to make grants to public charities, and receives its support from a small number of individuals or corporations and investment income rather than from the public at large is called a:
Private foundation
You are considering contributing to a local charity whose primary function is to provide after-school care for underprivileged children. However, you saw in the paper that the president of the organization just bought a house that is located in a very expensive gated community , and you are concerned that more money is going to the president's salary than to the actual after-school care. Before you donate, you want to feel comfortable that this is not the case. Which of the following is a financial measurement that might help you in determining the amount of resources going to after- school care ?
Program expense efficiency
Many not-for-profit organizations attempt to classify fund-raising expenses as program services expenses by making the activities look educational in nature or advocating for the mission of the organization . For such expenses to be reported as program services expenses , they must meet which of the following three criteria:
Purpose audience content
Which of the follow is not an example of a state and /or local government regulation an NFP organization might be subject to?
Requirement to prepare and file a Form 990 with the IRS.
How would a university account for funds received from an external donor that are to be retained and invested , with the related earnings restricted to the purchase of library books?
Restricted nonexpendable net position in a public university.
The Maryville Cultural Center recently conducted a successful talent show in which local talent performed for a nominal prize. The talent show is an ongoing major event and is central to the center's mission. The event raised $4,800 in gross revenue. Expenses related to the event included $1,000 to rent an auditorium, $1,200 to advertise the event, $500 for trophies and other awards for the winner and the runners up, and $100 for printing and mailing tickets. The center believes there was no monetary value received by donors ( attendees ). To report this event in its statement of activities, the center will report
Special event revenue of $4,800, special event expense of $1,500, and fund -raising expense of $1,300.
Which of the following statements is prepared by both a private and public college or university?
Statement of cash flows
A not-for- profit hospital would present all of the following financial statements except a
Statement of revenues , expenses , and changes in net position .
Lifeworks is a nongovernmental not for-profit organization that recently received a large gift from a donor in the amount of $ 5,000,000 in cash. The donor wishes to leave a legacy and therefore specified that Lifeworks cannot spend the $5,000,000 but can invest the $5,000,000 and use any earnings from the investments to support the organization . In the first year, $400,000 was earned and designated by the board to be spent for general operations , but has not yet been spent. How would the $5,000,000 gift and the $400,000 in earnings impact the net assets of Lifeworks ?
The $5,000,000 increases the net assets with donor restrictions and the $400,000 increases the net assets without donor restrictions.
Volunteers contributed services to the symphony that had a fair value of $ 50,000 . The services provided by the volunteers did not require specialized skills. Under what condition should the symphony recognize the fair value of the contributed services received?
The contributed services will be recognized if they create or enhance a nonfinancial asset.
We Shelter, a nongovernmental not for-profit organization, received a generous pledge of $1,000,000. Under which of the following donor stipulations will the pledge not be recognized in the current financial statements ?
The donor stipulates that We Shelter must use the pledge to increase the existing facility to accommodate an additional 500 animals , and the donor is released from the pledge obligation if the stipulation is not met.
A particular organization functions as an intermediary between donors and other beneficiary organizations. The intermediary organization must report contribution revenue from donors if
The organization has variance power
An organization was formed solely to support the creation of a high-speed rail system between two major metropolitan areas. The organization will be offering voter education seminars to be sure that the public is educated about the benefits of the rail system before the proposal is presented to the legislature . Under what circumstances would the organization be able to maintain charitable tax-exempt status?
The organization would not be eligible for charitable tax exempt status .
Many endowment management policies establish a spending rate for the college or university's endowment funds . A spending rate is best defined as
The portion of the total return that can currently be used to carry out the endowment purpose.
Which of the following is a true statement regarding a performance indicator ?
The purpose of reporting a performance indicator is to make it easier to compare the results of operations of not for-profit health care organizations to those of for profit health care organizations .
Why are health care organizations motivated to track the actual costs of services?
Third -party payors contract with the organization to reimburse a set amount , and the organization risks a loss if costs are greater than the amount reimbursed .
The Patient Protection and Affordable Care Act, passed in 2010,
Tied physician pay in part to the quality of care provided.