CPA Financial Accounting and Reporting (FAR) : Not for Profit Accounting
Study concepts, example questions & explanations for CPA Financial Accounting and Reporting (FAR)
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Example Questions
Example Question #1 : Statement Of Activities
The ABC museum, a not for profit organization, received a contribution of historical artifacts. It need not recognize the contribution if the artifacts are to be sold and the proceeds used to:
Acquire other items for collections
Purchase buildings to house collections
Repair existing collections
Support general museum activities
Acquire other items for collections
An entity need not recognize contributions of works of art if the donated items are added to collections that are held for public exhibit, are protected, and are subject to organizational policies that require the proceeds of sale to be used to acquire other items for the collection.
Example Question #2 : Statement Of Activities
Of the following, which would be listed on a non for profit entity's balance sheet?
Net assets
All income items
All assets and liabilities
A non governmental non for profit entity does not have a balance sheet
A non governmental non for profit entity does not have a balance sheet
This is a trick question as the financial statements for non for profit entities and governmental entities are different from standard US GAAP corporate financial statements.
Example Question #1 : Nonreciprocal Transfers
The New York Museum of Art is a private, not-for-profit organization. It receives a gift of a painting worth $1 million on the date of the gift, which qualifies as a work of art or historical treasure. How will this donation be recorded by the museum?
The museum must record an asset of $1 million
The museum can report an asset of $1 million or have no reporting at all
The museum must record an increase in restricted net assets of $1 million
The art work is not recorded in the financial statements
The museum can report an asset of $1 million or have no reporting at all
While ordinary donations are recorded as assets and revenue at fair value at the time of the donation, items that qualify as artworks or historical treasures are treated differently. The organization can choose to report them as they would any other asset, or not report them at all, since these assets typically don't provide future economic benefits.
Example Question #2 : Nonreciprocal Transfers
Which of the following statements is not required to be prepared by a private, not-for-profit organization?
Statement of unrestricted assets
Statement of financial position
Statement of cash flows
Statement of activities and changes in net assets
Statement of unrestricted assets
The required statements for non-profit organizations included the statement of financial position, the statement of activities and changes in net assets, and the statement of cash flows. There is no such thing as the statement of unrestricted net assets.
Example Question #3 : Nonreciprocal Transfers
A private, not-for-profit organization receives a gift of a sculpture worth $1.5 million on the date of the gift. The sculpture qualifies as a work of art or historical treasure. Which of the following is not a requirement that must be met before the sculpture can be omitted as an asset for reporting purposes?
It must have a life that is judged to be of extraordinary length
A policy must be in place so that, if sold, receipts will be used to acquire other collection items
It must be added to a collection for public exhibition, education, or research
It must be protected and preserved
It must have a life that is judged to be of extraordinary length
In order to exclude an asset in its reporting, the organization must be holding the asset for public exhibition, education, or research; must protect and preserve the asset; and musts using any sale proceeds to acquire a new collection item. While many of these such assets do have an extraordinary life, it is not a requirement for this type of reporting.
Example Question #4 : Nonreciprocal Transfers
On a not for profit entity's statement of activities, which of the following amounts should not be netted together under any circumstances?
Gains and losses from exchange rates or other foreign currency
Revenues and expenditures from the sale of used equipment
Investment income, custodial fees, and other advisory expenditures
Revenues and expenditures from an annual fundraising campaign
Revenues and expenditures from an annual fundraising campaign
While peripheral or incidental events may be presented on a net basis, major fundraising campaigns will present revenues and expenses separately.
Example Question #5 : Nonreciprocal Transfers
A man donated securities with a cost of $20,000 and a fair market value of $50,000 to a local theatre. His tax deduction was limited to $30,000. At what amount should the theatre record the securities at the date of donation?
$20,000
$50,000
$35,000
$0
$50,000
Donated securities are recorded at $50,000 the fair value when received. Contributions are measured at their fair value at the time of the gif, the securities are measured at fair value.
Example Question #1 : Nonreciprocal Transfers
Expenses for a nongovernmental non for profit organization can be classified as:
Neither
Both
Natural
Functional
Both
Functional classifications can be allocated by program and support services while natural classifications are aligned to account such as salary, supplies, etc.
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