Question #1 (AICPA.

110589FAR)
Fenn Museum, a nongovernmental not-for-profit organization, had the following balances in
its Statement of Functional Expenses:
Education $300,000
Fund-raising 250,000
Management and general 200,000
Research 50,000

What amount should Fenn report as expenses for support services?

A. $350,000

B. $450,000

Support services for not-for-profit organizations include the following: management,

general administration, fund-raising, and membership development. In this case,
support services total $450,000.
C. $500,000

D. $800,000

Question #2 (AICPA.110599FAR)
Nongovernmental not-for-profit organizations are required to provide which of the
following external financial statements?
A. Statement of Financial Position, Statement of Activities, Statement of Cash Flows

The three required statements are the Statement of Financial Position, Statement of
Activities, and Statement of Cash Flows. Note that a voluntary health and welfare
organization also must report a Statement of Functional Expenses.
B. Statement of Financial Position, Statement of Comprehensive Income, Statement of Cash
Flows
C. Statement of Comprehensive Income, Statement of Cash Flows, Statement of Gains and
Losses
D. Statement of Cash Flows, Statement of Comprehensive Income, Statement of Unrelated
Business Income
Question #3 (AICPA.101174FAR)
How should operating expenses for a nongovernmental not-for-profit organization be
reported?
A. Change in temporarily restricted net assets

B. Change in unrestricted net assets

According to FASB Statement No. 11, a nongovernmental not-for-profit organization

reports operating expenses only in the Changes in Unrestricted Net Assets section of
the Statement of Activities. The Changes in Temporarily Restricted Net Assets section
and Changes in Permanently Restricted Net Assets section do not include expense
items. Both of these sections can include revenues (support), gain or loss on the
investment of donor-restricted resources, and net assets released from restrictions.
C. Change in permanently restricted net assets

D. Contra account to associated revenues

Question #4 (AICPA.060609FAR)
A nongovernmental not-for-profit organization borrowed $5,000, which it used to purchase
a truck. In which section of the organization's Statement of Cash Flows should the
transaction be reported?
 A. In cash inflow and cash outflow from investing activities

B. In cash inflow and cash outflow from financing activities

C. In cash inflow from financing activities and cash outflow from investing activities

The structure of the Statement of Cash Flows for a not-for-profit organization is

identical to that of a for-profit organization: debt proceeds are reported as cash
inflows under financing activities, and purchases of capital assets are reported as cash
outflows under investing activities.
D. In cash inflow from operating activities and cash outflow from investing activities

Question #5 (AICPA.060607FAR)
Which of the following assets of a nongovernmental not-for-profit charitable organization
must be depreciated?
A. A freezer costing $150,000 for storing food for the soup kitchen

The freezer is classified as equipment and therefore must be depreciated.

B. Building costs of $500,000 for construction in progress for senior citizen housing

C. Land valued at $1 million being used as the site of the new senior citizen home

D. A bulk purchase of $20,000 of linens for its nursing home

Question #6 (AICPA.060604FAR)
A voluntary health and welfare organization received a $700,000 permanent endowment
during the year. The donor stipulated that the income and investment appreciation be used
to maintain its senior center. The endowment fund reported a net investment appreciation
of $80,000 and investment income of $50,000. The organization spent $60,000 to maintain
its senior center during the year.

What amount of change in temporarily restricted net assets should the organization report?

A. $50,000

B. $70,000

Because of the donor stipulation, both the investment income and appreciation can be
expended. Recognition of these resources increases temporarily restricted net assets
by $130,000. The expenditure of $60,000 to maintain the senior center effectively
reduces temporarily restricted net assets. The expenses themselves are paid out of
unrestricted net assets; however, $60,000 of temporarily restricted net assets are
released from restriction because of the payment, thus increasing unrestricted net
assets and decreasing temporarily restricted net assets.
C. $130,000

D. $770,000

Question #7 (AICPA.0605232FAR-AR)
A not-for-profit voluntary health and welfare organization should report a contribution for
the construction of a new building as cash flows from which of the following in the
Statement of Cash Flows?
A. Operating Activities

B. Financing Activities

The Financing Activities section includes contributions and investment revenues

restricted for long-term purposes (e.g., restrictions for acquisition of capital assets,
 endowments) and debt-related activities (debt proceeds, repayments, lease
payments, etc.).
C. Capital Financing Activities

D. Investing Activities

Question #8 (AICPA.900512FAR-P2-AR)
Birdlovers, a community foundation, incurred $5,000 in management and general expenses
during 2005.

In Birdlovers' Statement of Activities for the year ending December 31, 2005, the $5,000
should be reported as

A. A contra account offsetting revenue and support.

B. Part of program services.

C. Part of supporting services.

Expenses for not-for-profit organizations fall into two broad categories:

(1) program services and
(2) supporting services. Expenses for program services are incurred because of the
stated mission of the not-for-profit. All other expenses fall under the supporting
services classification. The $5,000 in management and general expenses should be
reported as part of supporting services.
D. A direct reduction of fund balance.

Question #9 (AICPA.0605231FAR-AR)
An unrestricted cash contribution should be reported in a nongovernmental not-for-profit
organization's Statement of Cash Flows as an inflow from
A. Operating Activities.

Unrestricted cash contributions should be included in the Operating Activities section

of the Statement of Cash Flows, along with unrestricted investment earnings, revenue
restricted for operating purposes (Program Restrictions), revenue from exchange
transactions, and operating expenditures (salaries, supplies, interest expense),
including grants to other organizations
B. Investing Activities.

C. Financing Activities.

D. Capital and Related Financing Activities.

Question #10 (AICPA.120649FAR)

Which of the following financial categories are used in a nongovernmental not-for-profit
organization's statement of financial position?
A. Net assets, income, and expenses.

B. Income, expenses, and unrestricted net assets.

C. Assets, liabilities, and net assets.

The statement of financial position for nongovernmental not-for-profit organizations

includes assets, liabilities, and net assets. "Net assets" is used rather than "retained
earnings" by not-for-profits.
D. Changes in unrestricted, temporarily restricted, and permanently restricted net assets.
 This answer is not correct because it includes income and expenses. The changes in
the three categories of net assets (this answer) appear in the Statement of Activities
rather than the Statement of Financial Position.
Question #11 (AICPA.090811FAR)
Which of the following not-for-profit entities is required to prepare a Statement of
Functional Expenses?
A. An art museum

B. A shelter for the homeless

According to SFAS No. 117 para. 26, voluntary health and welfare organizations
(VHWO) must prepare a Statement of Functional Expenses along with their other
financial statements. VHWO are human service organizations that receive
contributions from the public and provide health and welfare services for little or no
fee to the recipients of the services. A homeless shelter is an example of a VHWO;
therefore, it must prepare a Statement of Functional Expenses. The Statement of
Functional Expenses is encouraged, but not required, for other types of not-for-profit.
Therefore, the private foundation and the art museum (assuming it is a not-for-profit
organization) have the option of presenting a Statement of Functional Expenses but
are not required to do so. A public golf course is part of a governmental entity and is
subject to GASB rather than FASB standards and will not present a Statement of
Functional Expenses.
C. A private foundation

According to SFAS No. 117 para. 26, voluntary health and welfare organizations
(VHWO) must prepare a Statement of Functional Expenses along with their other
financial statements. VHWO are human service organizations that receive
contributions from the public and provide health and welfare services for little or no
fee to the recipients of the services. A homeless shelter is an example of a VHWO;
therefore, it must prepare a Statement of Functional Expenses. The Statement of
Functional Expenses is encouraged, but not required, for other types of not-for-profit.
Therefore, a private foundation has the option of presenting a Statement of Functional
Expenses but is not required to do so.
D. A public golf course

Question #12 (AICPA.090820FAR)

Arkin Corp. is a nongovernmental not-for-profit organization involved in research. Arkin's
Statement of Functional Expenses should classify which of the following as support
services?
A. Salaries of staff researchers involved in research

B. Salaries of fund-raisers for funds used in research

The Statement of Functional Expenses requires that expenses be reported by

functional classification as either (a) program related or (b) support service related.
Support expenses include management, general administrative, and fund-raising
expenses required to operate. Program expenses are directly related to the program
or mission of the organization. The salaries of researchers, cost of equipment used in
research, and cost of laboratory supplies used in research are all examples of program
expenses. The salaries of fund-raisers for funds used in research are support expenses
because their efforts are not directly related to conducting the research itself.
C. Cost of equipment involved in research

D. Cost of laboratory supplies used in research

Question #13 (AICPA.090817FAR)

A nongovernmental not-for-profit organization's Statement of Activities is similar to which
of the following for-profit financial statements?
 A. Balance sheet

B. Statement of Cash Flows

According to SFAS No. 117 para. 30(b), the Statement of Activities for not-for-profit
organizations is the financial statement that is issued instead of a business entity's
income statement.
C. Statement of Retained Earnings

D. Income statement

Income statement. According to SFAS No. 117 para. 30(b), the Statement of Activities
for not-for-profit organizations is the financial statement that is issued instead of a
business entity's income statement.
Question #14 (AICPA.130702FAR)
Which of the following resources increases the temporarily restricted net assets of a
nongovernmental, not-for-profit voluntary health and welfare organization?
A. Refundable advances for purchasing playground equipment.

FASB Statement No. 117 basically provides for two kinds of temporarily restricted net
assets: restricted as to (1) use or as to (2) time. The donor contributions to fund a
resident camp program are a example of a temporary restriction as to use. When the
expenditures are made for the camp program, Temporarily-restricted Net Assets will
be reduced for the amount of the expenditures ("net assets released from
restrictions") and Unrestricted Net Assets will be increased by the same amount. The
expenditures are recorded as expenses within unrestricted net assets. The other three
possible answers all represent exchange transactions and are reported under
Unrestricted Net Assets.
B. Donor contributions to fund a resident camp program.

FASB Statement No. 117 basically provides for two kinds of temporarily restricted net
assets: restricted as to (1) use or as to (2) time. This answer is correct. The donor
contributions to fund a resident camp program are a example of a temporary
restriction as to use. When the expenditures are made for the camp program,
Temporarily-restricted Net Assets will be reduced for the amount of the expenditures
("net assets released from restrictions") and Unrestricted Net Assets will be increased
by the same amount. The expenditures are recorded as expenses within unrestricted
net assets. The other three possible answers all represent exchange transactions and
are reported under Unrestricted Net Assets.
C. Membership fees to fund general operations.

D. Participants' deposits for an entity-sponsored trip.