Deceryl P.

Adapon
BSA 3

Chapter 16
Non-profit Organizations

QUIZ 1

1. Financial accounting (financial reporting) applies to which of the following?

a. Businesses
b. Governments
c. Non-profit organizations
d. All of these

2. A non-profit organization receives donation of services in-kind from an accountant who was
consulted regarding the NPO’s financial reporting system. The NPO will most likely recognize
those services as
a. assets and revenues
b. liabilities and revenues
c. expenses and revenues
d. none of these

Use the following information for the next three questions:

An NPO disclosed the following in its 20x1 notes to financial statements:
a. Received shares valued at ₱2,000,000 to be retained with the dividends used to support current
operations.
b. Net resources of ₱1,000,000 invested in plant assets.
c. Received equipment valued at ₱5,000,000 which is to be sold with the proceeds used to renovate
the children’s playground.
d. Board-designated funds of ₱600,000.
e. Received ₱20,000 cash from a donor who did not specify any use restrictions on the contribution;
however, the donor specified that the donation should not be used until 20x2.
f. Received ₱800,000 from a donor who stipulated that the contribution shall be invested
indefinitely and that the earnings shall be used for research purposes. Investment income in 20x1
amounted to ₱50,000.

3. How much is included in unrestricted net assets?

a. 1,000,000 c. 1,620,000
b. 1,600,000 d. 1,670,000

4. How much is included in temporarily restricted net assets?

 a. 5,000,000 c. 5,050,000
b. 5,020,000 d. 5,070,000

5. How much is included in permanently restricted net assets?

a. 2,800,000 c. 800,000
b. 3,800,000 d. 2,000,000

6. According to US GAAP, the accounting requirement unique to Voluntary Health and Welfare
Organizations (VHWO) is the
a. accounting for marketable securities which are subsequently measured at the lower of cost
and market value.
b. non-depreciation of property, plant and equipment.
c. provision of a statement of functional expenses that reports expenses by both functional and
natural classifications.
d. recognition criteria for assets, which allow the recognition of items with improbable inflows
of resources embodying economic benefits.

7. ABC Organization, a non-profit entity, acquired shares of stocks to be held as investment for
₱200,000 using unrestricted net assets. During the year, ABC received cash dividends of ₱10,000.
At year-end, the shares have a fair value of ₱220,000.

What is the effect of the transactions described above on the year-end statement of activities of
ABC? increase (decrease)
a. 30,000
b. 20,000
c. (10,000)
d. 10,000
8. On December 1, 20x1, ABC Organization, a non-profit entity, had the following transactions:
 Purchased a vehicle costing ₱150,000 using unrestricted cash
 Received a vehicle with fair value of ₱120,000 from donation

ABC estimates that both of the vehicles have useful lives of 5 years and no residual value. ABC
has an accounting policy implying a time restriction on gifts of long-lived assets.

In ABC’s 20x1 statement of activities, what amount of depreciation expense should be included
under changes in unrestricted net assets?
a. 54,000
b. 4,500
c. 13,312
d. 0
9. The machine of ABC Organization, a not-for-profit entity, has malfunctioned. Mang Tony, a
professional mechanic, repaired the machine for free. The fair value of the services is estimated
at ₱10,000. Which of the following statements is correct?
 a. This event is not recognized in the books of ABC.
b. This event gives rise to revenue only.
c. This event is recognized only if ABC wants to.
d. This event has a zero net effect on ABC’s net assets.

10. ABC Organization, a not-for-profit entity, received the following donations during 20x1:
 Land with fair value of ₱10,000,000 to be sold to acquire a bus.
 Shares of stocks with fair value of ₱3,000,000 to be retained indefinitely. The dividends from
the shares will be used to support current operations.

As a result of the donations above, how much should ABC report as increase in temporarily
restricted net assets?
a. 10,000,000
b. 13,000,000
c. 3,000,000
d. 0

“From the ends of the earth I call to you, I call as my heart grows faint; lead me to the rock that is higher than
I.” (Psalms 61:2)

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QUIZ 2

1. Private not-for-profit organizations should report a statement of cash flows using the
a. Direct method.
b. Indirect method
c. Working capital method
d. a or b

2. On the statement of operations of a health care organization, expenses are deducted from (use
SFAS 117 in answering this question)
a. Temporarily unrestricted revenues.
b. Unrestricted revenues.
c. Unrestricted revenues and temporarily unrestricted revenues.
d. Permanently restricted revenues.

3. On the statement of activities of a private university, expenses are reported by (use SFAS 117 in
answering this question)
a. Character
b. Department
c. Object
 d. Function

Use the following information for the next two questions:

An NPO received the following contributions in 20x1:
 ₱100,000 cash for the purchase of equipment.
 ₱250,000 cash restricted for the renovation of an old building owned by the NPO.

None of the contributions were used in 20x1. However, in 20x2, the entity acquired an
equipment for ₱110,000.

4. How much contributions revenue is recognized in 20x1?

a. 100,000
b. 250,000
c. 350,000
d. 0
.

5. How much “net assets released from restrictions” is reported in the 20x2 statement of activities?
a. 110,000
b. 100,000
c. 350,000
d. 0

Use the following information for the next four questions:

On December 31, 20x1, ABC Organization, a not-for-profit entity, received the following donations:
 Ms. Alpha made a pledge (promise) to give ₱12,000 to ABC Organization each year for the next
five years starting on December 31, 20x2. The appropriate discount rate is 10%. The pledge is
unconditional.
 Ms. Beta made a pledge (promise) to provide half of the funds needed to construct a new
building for ABC Organization if ABC could get the remaining half of the needed funds from
other donors by March 1, 20x2. As of December 31, 20x1, ABC has already accumulated 47% of
the needed construction funds from donations and ABC’s Board of Trustees strongly believes
that the remaining 3% will be received by the end of January 20x2. The estimated total costs of
construction is ₱1,000,000.
 Mr. Charlie made a pledge (promise) to give ABC Organization a used offset printing equipment
if ABC acquires a paper cutting equipment. The offset printing equipment has a fair value of
₱1,200,000. Because of recent cash flow problems, ABC’s Board of Trustees believes that it will
not be able to acquire a paper cutting equipment in the near term.
 Mr. Delta gave ABC Organization ₱500,000 as a challenge grant. ABC Organization can keep the
₱500,000 if it can raise an additional ₱500,000 by the end of March 20x2. If ABC Organization
fails to comply with the condition, it shall return the amount received to Mr. Delta.

6. The entry to record the promise of Ms. Alpha is

a. Contributions receivable 45,490
Contributions revenue – 45,490
 unrestricted support
b. Contributions receivable 45,490
Contributions revenue – 45,490
temporarily restricted support
c. Contributions receivable 45,490
Liability for refundable advance 45,490
d. None of these

7. The entry to record the promise of Ms. Beta is

a. Contributions receivable 1,000,000
Contributions revenue – 1,000,000
temporarily restricted support
b. Contributions receivable 500,000
Contributions revenue – 500,000
temporarily restricted support
c. Contributions receivable 470,000
Contributions revenue – 470,000
temporarily restricted support
d. None of these.

8. The entry to record the promise of Mr. Charlie is

a. Contributions receivable 1,200,000
Contributions revenue – 1,200,000
temporarily restricted support
b. Equipment 1,200,000
Contributions revenue – 1,200,000
temporarily restricted support
c. Equipment 1,200,000
Liability for refundable advance 1,200,000
d. None of these.

9. The entry to record the promise of Mr. Delta is

a. Contributions receivable 500,000
Contributions revenue – 500,000
temporarily restricted support
b. Cash 500,000
Contributions revenue – 500,000
temporarily restricted support
c. Cash 500,000
Refundable advance (liability) 500,000
d. None of these

10. According to SFAS 117, the financial statements of a not-for-profit entity should focus on the
a. Economic resources measurement approach.
 b. Current resources measurement approach.
c. Basic information on the organization as a whole.
d. Modified accrual approach.

“Hear my cry, O God; listen to my prayer.” (Psalms 61:1)

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