Question

E22 - 1

1. Contributions that are restricted by a donor to a nongovernmental not-for-profit organization are reported as a part of:

a. Permanently restricted net asstes

b. Temporarily restricted net asstes

c. Unrestricted net assets

d. Either permanently restricted or temporarily restricted net assets, depending on the terms of the restriction

2. Unconditional promises to give are recognized as contribution revenue under GAAP when

a. The promise is received

b. The related receivable is collected

c. The time or purpose restriction is satisfied

d. The future event that binds the promisor occurs

3. Which of the following is not a characteristic of a conditional promise to give?

a. It depends on the occurance of a specified future and uncertain event to bind the promisor

b. The gift may have to be returned to the donor if the condidtion is not met

c. It is recognized as contribution revenue when the conditions are substantially met

d. It depends on demand by the promise of performance

4. Contributed long-lived assets that are donor restricted for a certain time period are reported by a nongovernmetal not-for-profit entity as:

a. Unrestricted support in unrestricted net assets

b. Restricted support in permanently resticted net assets

c. Restricted support in temporarily restricted net assets

d. Unrestricted support in temporarily restricted net assets

5. Long lived Assets are purchased by a nongovermental not-for-profit entity with cash that was restricted for that purpose. The assets are reported in temporarily restricted net assets. Depreciation expense is reported in unrestricted net assets/

a. The depriciation expense is incorrectly reported

b. An amount equal to the depriciation is reclassified from temporarily restricted to unrestricted net assets

c. An amount equal to the depriciation is reclassified from unrestricted to temporarily restricted net assets

d. An amount equal to the depriciation is reported as revenues

Answer 1

1. Option A

2. Option A

3. Option A

4. Option A

5. Option B

Explanations :-

1. Restricted contributions are recorded as Permanently restricted net assets. Those contributions cannot be used for purposes other than specified /restricted by the donors.

2. Only when the promise is received, unconditional promises are recognized as contribution revenue, as per GAAP

3. All the given options are characteristics of a conditional promise to give. It depends on certain even to bind the promisor.

4. They are reported as Unrestricted support in unrestricted net assets.

5. Depreciation expense is reclassified from the temporarily restricted assets to unrestricted net assets.

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