Multiple Choice Questions

1) Which of the following is NOT true?

A) A not-for-profit entity operates for purposes other than to provide goods or services at a profit.
B) A not-for-profit entity may be governmental or non-governmental.
C) A not-for-profit entity may possess ownership interests like a corporation.
D) A not-for-profit entity receives resources from resource providers who do not expect commensurate or
proportionate pecuniary return.

2) On January 1, 2011, a Voluntary Health and Welfare Organization (VHWO) receives an unconditional
promise to give $6,000. The money is not collectible until 2012. The VHWO estimates that 10% of pledges
are uncollectible. On January 1, 2011, the VHWO will credit
A) Unrestricted Support - Contribution, $6,000.
B) Allowance for Uncollectible Contributions $600, and Unrestricted Support - Contribution, $5,400.
C) Allowance for Uncollectible Contributions $600, Temporarily Restricted Support - Contribution,
$5,400.
D) Allowance for Uncollectible Contributions $600, Contribution Revenue $5,400.

3) A nongovernmental, not-for-profit entity is subject to

A) GAAP.
B) GAAS.
C) SEC.
D) AICPA.
4) A donor gives a Voluntary Health and Welfare Organization (VHWO) $1,000 cash that is restricted for
a research project. What account does the VHWO credit when the VHWO receives the money?
A) Nonoperating Revenue
B) Permanently Restricted Revenue
C) Unrestricted Support
D) Temporarily Restricted Support

5) For a Voluntary Health and Welfare Organization, what entry is prepared when the restriction on a
cash donation is met?
A) Debit Unrestricted Net Assets, Credit Restricted Net Assets
B) Debit Unrestricted Fund Balance, Credit Restricted Fund Balance
C) Debit Restricted Fund Balance, Credit Unrestricted Fund Balance
D) Debit Temporarily Restricted Net Assets - Reclassifications out, Credit Unrestricted Net Assets -

6) Under GAAP, for nonprofit, nongovernmental entities, an unconditional transfer of cash or other assets
to an entity, or a settlement or cancellation of its liabilities in a voluntary, non-reciprocal transfer, is called
a(n)
A) unconditional promise to give.
B) contribution.
C) conditional promise to give.
D) residual equity transfer.

7) For nonprofit, nongovernmental organizations, unconditional promises to give that include promises
of payments due in future periods (next year or later) are reported as
A) unrestricted revenues.
B) unrestricted support.
C) deferred revenues until payment is received.
D) restricted support.
8) A gift-in-kind, for which the not-for-profit entity has no discretion on disposition, should be accounted
for by the not-for-profit, nongovernmental entity as
A) a special purpose contribution.
B) an exchange transaction.
C) an agency transaction.
D) a conditional promise to give.
9) Voluntary health and welfare organizations must report expenses classified by
A) restriction.
B) function and natural classification.
C) restriction and natural classification.
D) restriction, function and natural classification.

10) Which one of the following statements is NOT required for voluntary health and welfare
organizations?
A) A statement of financial position
B) A statement of activities
C) A statement of functional expenses
D) A statement of changes in net assets

11) Voluntary health and welfare organizations classify fund-raising costs as

A) costs of services sold.
B) program services.
C) auxiliary expenses.
D) supporting services.
12) Voluntary health and welfare organizations
A) may not have paid executives or staff.
B) are governed by separate GASB statements.
C) use fund accounting, following the rules for proprietary fund reporting.
D) are supported by, and provide voluntary services to, the public.

13) Voluntary health and welfare organizations (VHWO) measure contributions at fair value unless
A) fair value is less than the original cost of the item.
B) the contributed item is not intended to be re-sold by the VHWO.
C) fair value cannot be reasonably determined.
D) the contributions are not in cash or cash equivalents.

14) The gift shop of a nonprofit, private hospital has cash revenue of $24,000. What account will the
hospital credit?
A) Unrestricted support
B) Unrestricted revenue
C) Temporarily restricted revenue
D) Other operating revenue - unrestricted

15) In a nonprofit, nongovernmental hospital, courtesy allowances are

A) charity care services.
B) revenue deductions.
C) expenses.
D) revenues earned even if the standard charge is above or below the allowance.
16) In a nongovernmental, nonprofit hospital, contractual adjustments are
A) the discounted rate given to hospital employees.
B) discounts arranged with third-party payors.
C) recorded as a deduction from revenue or as an expense.
D) additional amounts paid by select group participants.

17) An alumnus of a nonprofit, nongovernmental university establishes an endowment of $50,000. When

the university receives the endowment from the donor, what account will the university credit?
A) Temporarily restricted revenues
B) Temporarily restricted support
C) Permanently restricted revenues
D) Permanently restricted support
18) Not-for-profit, private colleges classify student unions, dining halls, and residence halls as
A) educational and general services.
B) auxiliary enterprises.
C) independent operations.
D) restricted enterprises.

19) An alumnus made a donation of adjoining land to a not-for-profit, nongovernmental university. The
donor made no specifications regarding the time period or use of the land. The university would record
the gift as
A) an endowment asset.
B) temporarily restricted revenue.
C) unrestricted revenue.
D) permanently restricted support.
20) In a not-for-profit, private university, the federal grant funds given directly to students for financial
aid are an example of
A) a bequest.
B) an agency transaction.
C) unrestricted revenue.
D) a restricted contribution.