Question 1 :

A cash flow draft for Meadowlark Children’s Museum classifies $300,000 of contributions restricted for acquisition of equipment as operating cash inflows, and the equipment has not yet been purchased, what correction is most defensible?

Leave it in operating because all contributions are operating under GAAP.

Move it to investing because the restriction relates to equipment.

Classify it as financing cash inflow if the restriction is for long-term purposes such as acquiring or constructing long-lived assets, consistent with ASC 230 guidance as applied to NFPs.

Classify it as noncash and remove it from the cash flow because the equipment is not purchased.

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Question 2 :

Stonegate Cultural Center posted releases from restriction based on cash receipts into restricted funds rather than based on eligible spending, what should the close team change?

This is acceptable because restricted cash receipts represent the source of program funding

This is acceptable if the cash receipts approximate spending

Releases should be based only on budget approvals rather than spending

Releases must be tied to satisfaction of donor restrictions, so rebuild the release schedule based on eligible expenses or timing satisfaction and reverse any unsupported releases

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Question 3 :

The grant file for Harborview Youth Arts includes a signed award stating funds must be used to run a free summer program and any unused funds must be returned. Staff recorded the full award as restricted contribution revenue on signing. What is the most supportable conclusion?

Recognize as contribution revenue with donor restrictions because the purpose restriction is clear.

Recognize as contribution revenue without donor restrictions because it supports general operations.

Record as exchange revenue because the nonprofit must provide services to students.

Do not recognize contribution revenue until the program is delivered because the award is conditional due to a barrier and right of return, and record cash received as a refundable advance.

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Question 4 :

The nonprofit received $22,000 of in-kind legal services from an attorney, supported by an invoice showing standard hourly rates, and the client did not record it because "no cash changed hands," what is the most supportable correction?

No correction because only donated goods are recorded.

No correction because professional services cannot be valued reliably.

Record contribution revenue and the corresponding expense because donated professional services that require specialized skills and would otherwise be purchased meet recognition criteria when valuation is supportable.

Record it only in the notes because it is noncash.

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Question 5 :

An allocation workbook for Lakeshore Counseling Network uses the prior-year time study percentages for salaries and related benefits, but the NFP added a full-time development director mid-year and expanded fundraising events, and staff did not update the allocation percentages, what is the most defensible corrective action?

Keep the prior-year percentages because consistency is more important than precision.

Update the allocation to reflect current-year activities using supportable evidence such as updated time studies, job descriptions with reasonable estimates, or event-based tracking, and document the basis for the change.

Allocate all payroll to program services because the mission is program-driven.

Stop allocating payroll and disclose only natural expenses.

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Accounting For NFP Organizations

A cash flow draft for Meadowlark Children’s Museum classifies $300,000 of contributions restricted for acquisition of equipment as operating cash inflows, and the equipment has not yet been purchased, what correction is most defensible?

MCQ

0

5

Stonegate Cultural Center posted releases from restriction based on cash receipts into restricted funds rather than based on eligible spending, what should the close team change?

MCQ

0

5

The grant file for Harborview Youth Arts includes a signed award stating funds must be used to run a free summer program and any unused funds must be returned. Staff recorded the full award as restricted contribution revenue on signing. What is the most supportable conclusion?

MCQ

0

5

The nonprofit received $22,000 of in-kind legal services from an attorney, supported by an invoice showing standard hourly rates, and the client did not record it because "no cash changed hands," what is the most supportable correction?

MCQ

0

5

MCQ

0

5