Question

14. A not-for-profit museum’s governing board decides to set aside $50,000 in a separate fund called the Visitor Study Fund which will be used to finance a study on the exhibit viewing interests of the museum’s patrons. In which net asset classification of the museum's Statement of Financial Position should this fund be reported?

                a.     Unrestricted

                b.    Temporarily restricted

                c.     Permanently restricted

                d.    Endowment funds

15. A not-for-profit maintains a Shelter Fund to account for its extensive program of financial assistance to individuals needing to pay for temporary housing. The Shelter Funds are derived from many sources, including both donations and amounts set aside by the agency’s governing board. When it prepares its statement of financial position, how should the agency classify the net assets of the Shelter Fund?

                a.     All net assets should be classified as temporarily restricted.

                b.    All net assets should be classified as permanently restricted.

                c.     Net assets should be classified as either temporarily or permanently restricted, depending on the restrictions imposed by the governing board and the donors.

                d.    Net assets set aside by the governing board should be classified as unrestricted, and net assets from donations should be classified as temporarily or permanently restricted, depending on the nature of the donor-imposed restrictions.

16. A not-for-profit entity that conducts numerous programs receives investments as a donation. The donor, in a letter accompanying the donation, states that the principal of the donation must be maintained intact permanently, and that the income from the investment must be used to finance research in developing a onetime flu shot vaccination. If the entity receives income of $8,000 from these investments, how should be income be reported?

                a.     as an increase in unrestricted net assets

                b.    as an increase in temporarily restricted net assets

                c.     as an increase in permanently restricted net assets

                d.    as an increase in any of the net asset classifications directed by the entity's trustees

17. A not-for-profit entity receives equipment having a fair value of $50,000 as a gift. How should the gift be reported in the entity's financial statements?

                a.     as an asset and as an increase in permanently restricted net assets

                b.    as an asset and as an increase in unrestricted net assets

                c.     as a footnote only, because gifts of equipment are not be reported on the face of financial statements

                d.    as an asset and as an increase in temporarily restricted net assets

Answer 1

14. Answer is b Temporarily Restricted as the funds are kept to be spent for a special purpose.

15. Answer is d Net assets set aside by the governing board should be classified as unrestricted, and net assets from donations should be classified as temporarily or permanently restricted, depending on the nature of the donor-imposed restrictions.

16. Answer is  c as an increase in permanently restricted net assets.

17. Answer is  b as an asset and as an increase in unrestricted net assets