The ratio unrestricted net assets as a percent of operating expenses is helpful in determining if thenot-for-profit organization can cover its debt service expense.. Private colleges and
Trang 211 Performance measures that can be used to evaluate NPOs include percentage of total expenses spent onthe programs versus on supporting the programs) and total dollars raised for fund-raising dollars spent.True False
12 Not-for-profit organizations risk loss of their tax-exempt status if they engage in any political activity.True False
13 "Excess benefit transactions" are those in which persons who have substantial influence over the
not-for-profit organization engage in transactions that result in economic benefits to them that areexcessive, such as unreasonable compensation, sale of assets at bargain prices, and lease arrangements.True False
14 One of the limitations of financial ratio analysis for not-for-profit organizations is that donors mayincorrectly assume that there are federal or state laws that govern the percentage of annual revenues that
a charity must spend on its programs
True False
15 The ratio unrestricted net assets as a percent of operating expenses is helpful in determining if thenot-for-profit organization can cover its debt service expense
True False
16 Which of the following is a not a true statement about tax-exempt organizations?
A They must be organized to serve the charitable needs of the public at large
B They must first become a not-for-profit corporation or charitable trust
C They are permitted to do some political lobbying if guidelines are met
D Their unrelated business income is taxed at corporate income tax rates
17 Tax-exempt organizations must complete a Form 990 and send it to the IRS
A Only if they have unrelated business income
B If they are nongovernmental (and not a church) and their gross receipts are greater than $25,000
C Whether they are governmental or nongovernmental
D All of the above are true statements
18 Which of the following not-for-profit organizations is most likely to be tax-exempt under IRC Sec.501(c)(3)?
A Beta Kappa Alpha Sorority
B Peaceful Dreams Cemetery Association
C Regional Association of Tree Trimmers
D Survivors of Breast Cancer Club
19 Which of the following is a reason why an NPO might fail to qualify for tax-exempt status?
A It is operated primarily for the benefit of its members
B Its officers are paid excessive wages
C Its primary purpose is to promote the passage of legislation favorable to institutions of higher
education
D It has unrelated business income
Trang 320 The Internal Revenue Service may impose intermediate sanctions on a tax-exempt organization thatgives an officer
A Excessive compensation
B More than the fair rental value for property owned by the officer
C A bargain on the sale of assets
D All of the above are transactions that may result in intermediate sanctions
21 The income most likely to be considered unrelated business income of a human service organization thatprovides immunizations to children in the community is
A Rental of extra space in the building
B Regular sale of sweatshirts with the organization's logo on it at a price considerably above cost
C Interest and dividend income on investments
D Gain on the sale of equipment no longer needed by the organization
22 The term that means information skewed toward a particular belief with a tendency to have little or nofactual basis is
D Voluntary health and welfare organization
24 The incorporating documents that have an external focus and describe the purpose of the organizationwithout being too restrictive are called
A By-laws
B IRS Form 990
C Articles of incorporation
D Minutes of the Board meetings
25 The incorporating documents that have an internal focus and describe the functional rules of the
C Total revenues divided by total expenses
D Percentage of total expenses spent on the program function as opposed to supporting the programs
Trang 427 A good measure of whether the NPO is a "going concern" and can sustain its operations into the futureis
A Total revenues divided by total expenses
B Percentage of unrestricted net assets to operating expenses
C Percentage of total expenses spent on the program function as opposed to support function
D Both A and B
28 A good measure of whether the NPO is "liquid" and can meet its short-term obligations is
A Percentage of total expenses spent on the program function as opposed to support function
B Total revenues divided by total expenses
C Current assets divided by current liabilities
D Percentage of unrestricted net assets to operating expenses
29 A good measure of whether the NPO is efficient in its fund-raising efforts is
A Public support as a percentage of fund-raising expenses
B Current ratio
C Total revenues divided by total expenses
D Percentage of total expenses spent on the program function as opposed to support function
30 Nongovernmental (private) colleges and universities follow FASB standards; governmental (public)colleges and universities should follow GASB standards
Trang 537 An unrestricted endowment established by the governing board of a public college is considered apermanent fund and would be reported as unrestricted net assets.
40 The sale of bonds for construction of a college residence hall would always result in a credit to proceeds
of bonds in the accounts
True False
41 A statement of cash flows is required by GAAP for all colleges and universities
True False
42 Private colleges and universities must provide aggregated entity-wide financial statements prepared in
conformity with FASB Statement No 117 Consequently, private colleges and universities no longer
utilize fund accounting
C Public and private colleges and universities must comply with the 1973 AICPA Audit and
Accounting Guide Audits of Colleges and Universities for guidance in financial reporting.
D The GASB is responsible for establishing GAAP for public colleges and universities
45 What type of college or university should report expenses by functional classification?
A Both private and public colleges and universities
B Private colleges and universities
C Public colleges and universities
D Neither private nor public colleges and universities
Trang 646 If a public college or university has an independent not-for-profit fund-raising foundation, then thefinancial position and activity of the foundation should be
A Disclosed in the notes to the university's financial statements
B Consolidated with the university's financial information
C It depends on the degree of control, economic interest, and influence the university has over thefoundation
D Considered a component unit of the university
47 GASBS 34/35 accounting and reporting standards applicable to public colleges and universities
A Are the same as FASB standards to permit consistent reporting
B Permit public colleges and universities to use the AICPA model which differs substantially from thereporting model used by private colleges and universities subject to FASB jurisdiction
C Permit public colleges and universities to optionally follow FASB standards
D None of the above is correct regarding GASB standards
48 The cost of professors' salaries would normally be recorded in which functional area?
of SFAS No 116 the grant would be reported as an increase in:
A Unrestricted net assets
B The fund balance of restricted current funds
C Permanently restricted net assets
D Temporarily restricted net assets
50 Which of the following receipts may properly be accounted for as an increase in unrestricted net assets?
A Student tuition and fees
B Gift from an alumnus for a new college of business building
C Federal grant for genetic research
D Acceptance of assets the income from which will be paid to the donor
51 Economic rationality would argue against a university accepting a split interest agreement in which afixed annuity is payable to the donor if:
A The donor has attached conditions to the gift
B The university has no immediate need for the assets
C The sum of future annuity payments plus interest thereon exceeds the fair market value of the assets
D The present value of the future annuity payments and other liabilities exceed the fair market value ofthe assets
52 FASB standards applicable to private colleges and universities require that their financial statements
A Provide separate columns for each fund group
B Provide aggregated financial information on an entity-wide basis
C Include a statement of changes in fund balances
D Include a statement of cash flows prepared using the direct method
Trang 753 Which of the following items would not be reported in the section on revenues and gains in the
statement of activities of a private college or university?
A Student tuition and fees
B Gifts and donations
C Net assets released from restriction
D None of the above; that is, all are reported as a revenue, support, or gain
54 Which of the following is not a condition that would permit a public college or private college or
university to avoid accounting recognition of the value of its collections of art, historical treasures, andsimilar assets?
A The assets are held for public exhibition, education, or research in furtherance of public service ratherthan financial gain
B The assets are protected, kept unencumbered, cared for, and preserved
C The assets are subject to an organizational policy that ensures the proceeds of sales of collectibleassets are used for operations of the organization
D None of above; all three items are conditions that will avoid accounting recognition
55 Which of the following is required as part of a complete set of financial statements for a private college
or university?
A Statement of changes in financial position
B Statement of revenues, expenses, and changes in net assets
C Statement of activities
D All of these statements are required
56 Assets that the governing board of a public university, rather than a donor or other outside agency, hasdetermined are to be retained and invested for future scholarships would be reported as
A An endowment
B Unrestricted net assets
C Deposits held in custody for others
D Restricted net assets
57 Which of the following statements usually will not be included in the annual financial report of a
governmentally owned public university engaged only in business-type activities?
A Statement of cash flows
B Statement of net assets
C Statement of activities
D Statement of revenues, expenses, and changes in net assets
Trang 858 Pinewood College, a public college, has a 10-week summer session that starts on June 25, 2008, so thatone week is held during FY 2008 and the other nine weeks meet during FY 2009 Tuition and fees in theamount of $900,000 were collected from students for classes to be conducted in this session Whatamount should Pinewood College recognize as unrestricted revenue in each of the years ended June 30,
A Revenues and expenditures
B A reduction of gross revenue to arrive at net revenue
C Revenues and expenses
D Any of the above
60 An alumnus donates securities to St Aloysius College, a private college, and stipulates that the principal
be held in perpetuity and income from the securities be used for faculty travel Dividends received fromthe securities should be recognized as increases in:
A Endowments
B Unrestricted net assets
C Permanently restricted net assets
D Temporarily restricted net assets
61 During the years ended June 30, 2008 and 2009, Jasper University, a public university, conducted acancer research project financed by a $1,000,000 gift from an alumnus The entire amount was pledged
by the donor on July 10, 2007, although she paid only $200,000 at that date The gift was restricted tothe financing of this particular research project During the two-year research period, Jasper's related giftreceipts and research expenditures were as follows:
How much gift revenue should Jasper University report for the year ended June 30, 2009?
A $1,000,000
B $900,000
C $800,000
D $0
Trang 962 Are public and private colleges and universities required to report depreciation expense in their financialstatements?
A Public: No; Private: No
B Public: Yes; Private: No
C Public: Yes; Private: Yes
D Public: No; Private: Yes
63 During the year ended June 30, 2009, Hopkins College, a private college, received a federal governmentgrant of $800,000 for research on the role of music in improving math skills for students Expenses forthis research amounted to $100,000 during the same year Under applicable FASB standards, assumingthis is a nonexchange transaction, Hopkins College would report what amount(s) as revenues or supportfor the year ended June 30, 2009?
A Item A
B Item B
C Item C
D Item D
64 Which of the following is not a classification of revenues for a college or university as provided by the
National Association of College and University Business Officers (NACUBO)?
A Private gifts
B Federal appropriations
C Sales and services of educational activities
D All of the above are included in NACUBO's suggested chart of accounts
65 State appropriations received by a public university are classified as which of the following on thestatement of revenues, expenses, and changes in net assets?
A Nonoperating revenue
B Operating revenue
C Other financing source
D Increase in unrestricted net assets
66 Which of the following is a typical classification of a functional expense in a college or university?
A Recreation and culture
Trang 1068 Financial reporting standards for all government owned and operated hospitals would be found in GASBpronouncements.
71 Investor-owned health care entities recognize all revenues and expenses on the accrual basis of
accounting, whereas all governmentally owned health care entities recognize revenues and expenditures
on the modified accrual basis
True False
72 An expense for diabetes research that was in accordance with the stipulation of the donor would berecorded as a decrease of unrestricted net assets of a not-for-profit health care organization
True False
73 Long-term debt related to a construction project in a public hospital that follows business-type
accounting should be recorded in the capital projects fund
Trang 1179 Continuing care retirement communities (CCRC) provide residential care in a facility, along with somelevel of long-term medical care that is less intensive that hospital care.
True False
80 A health care organization reports its investments at fair value and records any unrealized gains or losses
on the statement of operations
True False
81 Contingencies that are unique to health care providers arise from malpractice claims, risk contracting,and third-party payor payment programs, obligations to provide uncompensated care, and contractualagreements with physicians
A Private hospitals follow guidance from the GASB
B Public health care organizations follow guidance from the GASB
C The AICPA Audit and Accounting Guide Health Care Organizations provides guidance for public,
private, and for-profit health care entities
D All of these statements are true
Trang 1289 The AICPA Audit and Accounting Guide Health Care Organizations requires that the following
statements be prepared for health care organizations:
A Balance sheet, statement of activities, statement of changes in equity, statement of cash flows
B Balance sheet, statement of revenues and expenses, statement of changes in equity, statement of cashflows
C Balance sheet, statement of operations, statement of changes in equity, statement of cash flows
D Balance sheet, statement of operations, statement of changes in equity, statement of cash flows,statement of functional expenses
90 If the equity section of the balance sheet is comprised of unrestricted net assets, temporarily restrictednet assets, and permanently restricted net assets, then the health care organization is
A Bad debt expense
B Disclosures in the notes to the financial statements
C It depends on how material the differences are
D Deductions from gross patient revenue in arriving at net patient revenue
92 Which of the following statements is true about diagnosis-related groups (DRGs)?
A DRGs are the basis for a cost accounting method that groups costs together by departments
performing the services
B The federal Medicare system of retroactive payment for services depends on DRGs
C A DRG is a case-mix classification scheme that is used to determine the payment provided to thehospital for inpatient services, regardless of how much the hospital spends to treat a patient
D None of the above is a true statement
93 Assets whose use is limited by contracts or agreements with outside parties other than donors or grantorsare labeled
A Assets limited as to use
B Designated assets
C Temporarily restricted net assets
D Restricted assets
94 The primary source of revenue for hospitals is
A Nonexchange transactions, such as contributions
B Exchange transactions, such as fees for services
C Investment income
D Capitation fees from health maintenance organizations
95 A contribution that is restricted by the donor to be held in perpetuity and for which the investmentincome can be spent at the discretion of a nongovernmental, not-for-profit hospital's governing board,will be reported as an increase to
A Endowments
B Current restricted funds
C Permanently restricted net assets
D Specific purpose assets
Trang 1396 Charity service and bad debts in a public hospital that follows business-type accounting are reported
A The same, both as deductions from gross patient revenue in arriving at net patient revenue
B The same, both are reported as expenses
C Differently, charity service is reported as a deduction from gross patient revenue and bad debts arereported as an expense
D Differently, charity service is merely disclosed in the notes to the financial statements, and bad debtsare reported as a deduction from revenue
97 For which of the following volunteers in a hospital is there most likely going to be reported contributionincome and salary expense?
A Community members who plant flowers on the grounds once a year in the spring
B Volunteers in the gift shop who work a few hours a day serving customers
C Nurses who are affiliated with a religious organization and do not receive a salary
D An accountant who is a member of the board of directors
98 Which of the following would not be considered a health care organization required to follow guidance
in the AICPA Audit and Accounting Guide Health Care Organizations?
A A heart research and education foundation
B A home health agency
C A hospice
D A health maintenance organization
99 Which of the following would usually be considered as temporarily restricted funds in a
nongovernmental not-for-profit hospital?
A Investment income
B Donated services by senior citizens
C A permanent endowment received from the city's leading citizen
D A research grant from the federal government to study high blood pressure
100.Independent health care organizations that associate for the specific purpose of obtaining financing arecalled a (an)
A Consolidation
B Obligated group
C Affiliation
D Joint venture
101.Which of the following statements is true?
A Hospital accounting and financial reporting is identical to that used by for-profit businesses
B Hospitals use modified accrual accounting
C Hospitals record revenues based upon full charges and report contractual adjustments as a deductionfrom revenues
D None of the above is true
102.Contractual adjustments is properly characterized as
Trang 14103.An unrestricted pledge from an annual contributor to a not-for-profit hospital with a December 31 yearend that was made in October 2007 to be paid in cash March 2008 would generally be credited to:
A Contributions Temporarily Restricted in 2007
B Contributions Unrestricted in 2007
C Contributions Temporarily Restricted in 2008
D Contributions Unrestricted in equal amounts in 2007 and 2008
104.Donated medicines that normally would be purchased by a hospital should be recorded at fair marketvalue and should be credited to
A Net patient Service Revenue
B Nonoperating Gains
C Other Revenue
D Deferred Revenues
105.Under SFAS No 116, pledges received by a nongovernmentally owned not-for-profit hospital during its
building construction fund drive, and restricted for that purpose, would be recognized as an increase intemporarily restricted net assets (support)
A When the building is constructed
B When the pledge is made
C When the pledge is collected
D During each period of construction using the percentage-of-completion method
106.SFAS No 117 requires that interest received on endowment funds be reported in the statement of cash
107.The statement of activities required by SFAS No 117 for health care entities subject to its jurisdiction
must display changes for the period in which of the following categories of net assets?
A Unrestricted
B Temporarily restricted
C Permanently restricted
D All of the above
108.Which of the following would be an appropriate performance indicator for a not-for-profit health careorganization?
A Revenues
B Excess of revenues and gains over expenses and losses
C Expenses and losses
D Contributions to long-lived assets
Trang 15Ch15-17 Key
1 A state has the obligation to monitor and regulate a not-for-profit (NPO) organization because it gave
the NPO legal life through the not-for-profit corporation laws
TRUE
Just as commercial businesses apply to the state to become corporations, so do not-for-profit
organizations, although they apply under the not-for-profit incorporation laws
Content: Concept Level: Medium Wilson - Chapter 15 #1
2 The federal government's primary objective in regulating not-for-profit organizations through the
income tax laws is to limit the number of exempt organizations that operate at any one point in time
FALSE
Congress has always encouraged not-for-profit associations and charitable contributions to theseorganizations The primary purpose in regulating exempt organizations at the federal level is toensure that the public is being served by relieving public charities of the liability for income taxes
Content: Concept Level: Medium Wilson - Chapter 15 #2
3 Not-for-profit corporations cannot lobby or attempt to influence legislation or politicians
FALSE
This statement is too strong At both the state and federal level, it is important that a NPO not beorganized primarily for the purposes of carrying on a political agenda, unless it is tax-exempt underIRC Sec 527 Some lobbying and political activity is allowed if the organization registers with thestate, properly discloses this activity on appropriate annual reports (including the Form 990 to thefederal government), and makes sure the amount is not significant or excessive
Content: Concept Level: Medium Wilson - Chapter 15 #3
Trang 164 The not-for-profit organization applying for tax-exempt status determines the appropriate subsection
under IRC Sec 501 for which it wants to be considered and the Internal Revenue Services thenapproves or does not approve the application
TRUE
It is the NPO that determines under which subsection of IRC Sec 501 it wants to be considered fortax-exempt status
Content: Concept Level: Medium Wilson - Chapter 15 #4
5 The unrelated business income tax is a significant penalty and therefore should be of concern to
6 Intermediate sanctions are often imposed by the Internal Revenue Service in addition to the revoking
tax-exempt status for organizations that confer excessive economic benefits on persons with
substantial influence over the organization
FALSE
Intermediate sanctions, introduced in 1996, are a tool the IRS may use in curbing excess benefittransactions favoring certain people related to an NPO so that the NPO does not have to lose itstax-exempt status Loss of tax-exempt status is considered unduly harsh, but the only sanction thatthe IRS had before the Taxpayer Bill of Rights 2 in 1996
Content: Concept Level: Medium Wilson - Chapter 15 #6
7 If a tax-exempt organization dissolves and goes out of business, it must distribute its assets to another
tax-exempt organization
TRUE
State laws, IRS regulations, and most likely the governing documents (i.e., articles of incorporationand by-laws) of the NPO require that the assets of an exempt organization be distributed to otherexempt organizations upon the dissolution of the exempt organization
Content: Concept Level: Easy Wilson - Chapter 15 #7
Trang 178 Board members of a not-for-profit organization have a fiduciary responsibility to provide fiscal
guidance and ongoing governance over the not-for-profit organization to ensure that its exemptmission is carried out as described in the incorporating documents and exempt application
TRUE
Not all Board members may understand their fiduciary responsibility It is advised that Board
members carry errors and omissions insurance to protect them from harm in lawsuits
Content: Concept Level: Medium Wilson - Chapter 15 #8
9 All officers of a not-for-profit organization have the same responsibilities to the organization and its
constituents
FALSE
The treasurer of the board has specific responsibilities to the NPO in the area of financial
management, in particular to safeguard the assets and approve all disbursements, that go beyond thatexpected of the president, vice-president, and secretary
Content: Concept Level: Medium Wilson - Chapter 15 #9
10 Not-for-profit organizations are so diverse in nature that it is not feasible to find benchmarks with
which to compare their financial and operating performance
11 Performance measures that can be used to evaluate NPOs include percentage of total expenses spent
on the programs versus on supporting the programs) and total dollars raised for fund-raising dollarsspent
TRUE
These are two measures that are tracked by watchdog groups, such as the National Charities
Information Bureau and the BBB Wise Giving Alliance
Content: Concept Level: Medium Wilson - Chapter 15 #11
Trang 1812 Not-for-profit organizations risk loss of their tax-exempt status if they engage in any political
activity
FALSE
Although state and federal regulations are somewhat different with respect to political activities, bothallow some level of participation in legislative efforts and lobbying as long as it is not a materialamount or directed toward influencing legislation or participating in a political campaign of a
particular candidate for office
Content: Concept Level: Medium Wilson - Chapter 15 #12
13 "Excess benefit transactions" are those in which persons who have substantial influence over the
not-for-profit organization engage in transactions that result in economic benefits to them that areexcessive, such as unreasonable compensation, sale of assets at bargain prices, and lease
14 One of the limitations of financial ratio analysis for not-for-profit organizations is that donors may
incorrectly assume that there are federal or state laws that govern the percentage of annual revenuesthat a charity must spend on its programs
TRUE
A common ratio "program expenses as a percent of total expenses" is often misinterpreted as a way togauge whether the NPO is spending what it is legally required to do
Content: Concept Level: Medium Wilson - Chapter 15 #14
15 The ratio unrestricted net assets as a percent of operating expenses is helpful in determining if the
not-for-profit organization can cover its debt service expense
FALSE
Unrestricted net assets divided by operating expenses can be used to assess whether the NPO is agoing concern, but a better measure to determine if the NPO's debt service expense is adequatelycovered by income is revenue, support, gain plus interest and depreciation expense divided by annualdebt service expense
Content: Concept Level: Medium Wilson - Chapter 15 #15
Trang 1916 Which of the following is a not a true statement about tax-exempt organizations?
A They must be organized to serve the charitable needs of the public at large.
B They must first become a not-for-profit corporation or charitable trust
C They are permitted to do some political lobbying if guidelines are met
D Their unrelated business income is taxed at corporate income tax rates
Content: Concept Level: Medium Wilson - Chapter 15 #16
17 Tax-exempt organizations must complete a Form 990 and send it to the IRS
A Only if they have unrelated business income
B If they are nongovernmental (and not a church) and their gross receipts are greater than $25,000.
C Whether they are governmental or nongovernmental
D All of the above are true statements
Content: Concept Level: Easy Wilson - Chapter 15 #17
18 Which of the following not-for-profit organizations is most likely to be tax-exempt under IRC Sec
501(c)(3)?
A Beta Kappa Alpha Sorority
B Peaceful Dreams Cemetery Association
C Regional Association of Tree Trimmers
D Survivors of Breast Cancer Club.
Content: Concept Level: Medium Wilson - Chapter 15 #18
19 Which of the following is a reason why an NPO might fail to qualify for tax-exempt status?
A It is operated primarily for the benefit of its members
B Its officers are paid excessive wages
C Its primary purpose is to promote the passage of legislation favorable to institutions of higher
education
D It has unrelated business income
Content: Concept Level: Medium Wilson - Chapter 15 #19
20 The Internal Revenue Service may impose intermediate sanctions on a tax-exempt organization that
gives an officer
A Excessive compensation
B More than the fair rental value for property owned by the officer
C A bargain on the sale of assets
D All of the above are transactions that may result in intermediate sanctions.
Content: Concept Level: Medium Wilson - Chapter 15 #20
Trang 2021 The income most likely to be considered unrelated business income of a human service organization
that provides immunizations to children in the community is
A Rental of extra space in the building
B Regular sale of sweatshirts with the organization's logo on it at a price considerably above cost.
C Interest and dividend income on investments
D Gain on the sale of equipment no longer needed by the organization
Content: Concept Level: Medium Wilson - Chapter 15 #21
22 The term that means information skewed toward a particular belief with a tendency to have little or
23 A tax-exempt organization that receives its support primarily from a large number of individuals or
corporations and a relatively small amount from investment income is called a
24 The incorporating documents that have an external focus and describe the purpose of the organization
without being too restrictive are called
25 The incorporating documents that have an internal focus and describe the functional rules of the