AICPA Governmental & Not-for-Profit Accounting 3

Question 1

Under FASB ASC 958, not-for-profit organizations classify net assets into which two categories?

Accepted Answer

Net assets with donor restrictions and net assets without donor restrictions

Answer

ASU 2016-14 simplified the previous three-class model to two classes: net assets with donor restrictions and net assets without donor restrictions.

Question 2

The Statement of Activities for a not-for-profit organization reports revenues and expenses:

Accepted Answer

Separated by each program and supporting service with functional expense allocation

Answer

The not-for-profit Statement of Activities presents revenues and expenses by net asset class and requires expenses to be reported by function (program vs. supporting services).

Question 3

Unrelated Business Income Tax (UBIT) applies to a tax-exempt organization when it earns income from:

Accepted Answer

A trade or business regularly carried on that is not substantially related to its exempt purpose

Answer

UBIT applies when a 501(c)(3) or similar entity operates a trade or business regularly for profit that is not substantially related to the purpose that qualifies it for exemption.

Question 4

Which of the following correctly describes how a not-for-profit organization recognizes contribution revenue?

Accepted Answer

At fair value when the contribution is unconditional and the organization has legal control

Answer

Unconditional contributions are recognized as revenue at fair value when received (or pledged), because no future performance is required by the donor.

Question 5

A community foundation receives a gift with the stipulation that only the investment income may be used and the principal must be maintained in perpetuity. Under FASB ASC 958, this is reported as:

Accepted Answer

Net assets with donor restrictions — perpetual in nature

Answer

When a donor permanently restricts principal, the gift creates net assets with donor restrictions that are perpetual in nature, previously called 'permanently restricted.'

(AICPA) Association of International Certified Professional Accountants Practice Test

(AICPA) Association of International Certified Professional Accountants Practice Test

AICPA Governmental & Not-for-Profit Accounting 3