AC 518

NON PROFIT ORGANIZATION

MULTIPLE CHOICE:
1. The following are features of nonprofit organizations, EXCEPT
a. render service for the benefit to the many rather than the few.
b. Not organize for profit and exempt from income taxes and
business taxes.
c. Finances depend on the voluntary contributions of the citizenry.
d. Must account for the resources on a stewardship basis like the
government entities.
2. SI: Nonprofit organizations are governed by elected or appointed directors.
SII: Nonprofit organizations adopt the modified accrual basis of accounting used
by government entities.
a. SI is true, SII is true.
b. SI is false, SII is false.
c. SI is true, SII is false.
d. SI is false, SII is true.
3. These are funds that includes all the assets of a nonprofit organization that are
available for use as authorized by the board of directors and not restricted for
specific purposes.
a. Unrestricted funds
b. Special funds
c. Endowment funds
d. Temporarily restricted funds

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4. These are funds in which the principal must be maintained indefinitely in revenue-producing investments.
a. Unrestricted funds

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b. Plant fund
c. Endowment fund
d. Temporarily restricted funds o.
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5. The financial statement not required of a nonprofit organization is:

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a. Statement of Financial Position

b. Statement of Activities
c. Statement of Cash Flows
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d. Statement of current fund revenues and expenses.

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6. Transactions of what fund only affect asset and liability accounts and do not result
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in revenues and expenditures.

a. Unrestricted fund
b. Restricted Fund
c. Agency fund
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d. Plant fund
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7. The Plant fund is composed of the following, EXCEPT

a. unexpended funds to be used in the acquisition of physical properties,
b. renewal and replacement funds,
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c. retirement of indebtedness funds,

d. restricted income from endowment funds.
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8. Which of the following should be used in accounting for nonprofit organization?

a. Fund accounting and accrual accounting.
b. Fund accounting but not accrual accounting.
c. Accrual accounting but not fund accounting.
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d. Neither accrual accounting and fund accounting.

9. One characteristic of nonprofit organizations that is comparable with that of
government entities is:
a. Stewardship of resources
b. Governance by board of directors
c. Measurement of cost expirations
d. None of the foregoing
10. A gift to nonprofit organization that is not restricted by the donor is credited in
the unrestricted (general) fund to:
a. Fund balance
b. Contribution revenues
c. Deferred revenues
d. Nonoperating revenues

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 11. The Statement of Financial Position of a nonprofit organization displays the
organization’s assets, liabilities, and
a. Fund balance
b. Excess of assets over liabilities
c. Net Assets
d. Equity
12. The current fair value of contributed material is recognized in a nonprofit
organization’s unrestricted fund with a debit to Inventories and a credit to:
a. Undesignated Fund Balance
b. Payable to Restricted Fund
c. Contributions Revenues
d. Designated Fund Balance - Merchandise
13. Which of the following is not a source of resources of a nonprofit organization’s
restricted fund?
a. .Operations of the nonprofit organization
b. Contributions of individual or government entities
c. Gains on disposals of investments
d. Revenues from endowment
14. A nonprofit private elementary school occupies its school building rent-free as
permitted by the building owner. The existence of rent-free facilities is
recognized in the school’s Unrestricted Fund as
. a. Rent expense and contibution revenue.
b. Rent expenses and an increase in fund balance.
c. An item requiring disclosure in the notes to the financial statements.
d. Financial aid expenses and other operating support

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15. During the year ended December 31, 2012, Cultural Center of the Philippines, a nonprofit
organization, received the following donor restricted contributions and investment income:

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a. Cash contribution of P100,000 to be permanently invested.
b. Cash dividends and interest of P5,000 to be used for the acquisition of theater equipment.
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As a result of these cash receipts, the statement of cash flows for the year ended December 31, 2012,
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would report an increase of :

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a. P105,000 from financing activities

. b. P5,000 from operating activities and an increase of P100,000 from
financing activities.
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c. P105,000 from operating activities

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d. P100,000 from operating activities and an increase of P5,000 from

financing activities.

16. A prominent collector donated an art collection to a private nonprofit museum with the stipulation that
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the art collection be shown to the public, that it should be preserved and not be sold. On the date of
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donation, what was the effect of the donation on the museum’s financial statements?
a. Unrestricted net assets increased.
b. Temporarily restricted net assets increased.
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c. Permanently restricted net assets increased.

d. No effect on net assets.
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17. On January 2, 2012, a nonprofit botanical society received a gift of an exhaustible fixed asset with an
estimated useful life of 10 years and no salvage value. The donor’s cost of this asset was P20,000,
and its fair market value at the date of the gift was P30,000. What amount of depreciation of this
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asset should the society recognize in its 2012 financial statements?

a. P 0 c. P2,500
b. P2,000 d. P3,000

18. On July 31, 2012, St. Vincent’s College showed the following amounts to be used for
Renewal and replacement of college properties P 200,000
Retirement of indebtedness on college properties 300,000
Purchase of physical properties for college purposes but
unexpended at 7/31/2012 400,000
What total amount should be included in St. Vincent’s plant funds at July 31, 2012?
a. P 600,000 c. P 200,000
b. P 400,000 d. P 900,000

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 19. Seniors Association is a nof-for-profit organization that provides services to senior citizens. Seniors
employes a full-time staff of 10 people at an annual cost of P150,000. In addition, two volunteers
work as par-time secretaries replacing last year’s full-time secretary who earned P10,000. Services
performed by other volunteers for special events had an estimated value of P15,000. These volunteers
were employees of local businesses and they received small-value items for their participation. What
amount should Seniors report for salary and wages expense related to the items above?
a. P160,000 c. P165,000
b. P175,000 d. P150,000

20. St. Charles Hospital has a marketable equity securities portfolio that is appropriately included in the
noncurrent assets in unrestricted funds. The porfolio has an aggregate cost of P300.000. It had an
aggregate fair market value of P250,000 at the end of 2012 and P290,000 at the end of 2011. If the
portfolio was properly reported in the balance sheet at the end of 2011, the change in the valuation
allowance at the end of 2012 would be
a. A decrease of P40,000 c. An increase of P 40,000
b. An increase of P50,000 d. P 0

21. The cost of charity care of a nonprofit hospital is presented in the statement of activities as
a. deduction from gross patient service revenue to get the net patient service revenue.
b. notes to financial statements
c. component of program services
d. component of supporting services

22. A nonprofit hospital received a cash donation from a generous benefactor on November 5, 2011. The
donor requested that the donation be used to acquire equipment for the hospital. The hospital used the

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donation to acquire equipment in January 2012. For the year ended December 31, 2011, the hospital
should report the cash donation on its

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a. Statement of financial position as unrestricted deferred revenue.
b. Statement of activities as unrestricted revenue
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c. Statement of activities as temporarily restricted.
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d. Statement of financial position as temporarily restricted revenue.

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23. Bantay Bata Foundation, a nonprofit organization, receives revenue from various sources during the
year to support its child care center. The following cash contributions were received during 2011:
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a. P40,000 restricted by the donor to be used for meals of children.

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b. P15,000 received by subscriptions to a monthly child care magazine with a fair value to
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subscribe of P10,000,
c. P10,000 to be used only upon completion of a new playroom that was 75% complete at
December 31, 2011.
What amount should Bantay Bata Foundation record as contribution revenues in its 2011 Statement of
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Activities?
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a. P20,000 c. P 25,000
b. P 10,000 d. P 11,000
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24. Bohol University, a private nonprofit university, had the following inflows during the year ended
December 31, 2011;
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I. P400,000 from students tuition fees

II. P200,000 from a donor who stipulated that the money be invested indefinitely.
III. P50,000 from a donor who stipulated that the money be spent in accordance with the
wishes of the University’s Board of Directors.
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On its Statement of Cash Flows for the year ended December 31, 2011, what amount of these
cash flows should be reported as operating activities:
a. P 450,000 c. P 650,000
b. P 400,000 d. P 600,000

25. UDMC hospital, a nonprofit hospital, earned P250,000 revenues from its gift shop located at the lobby
and spent P50,000 on research during the year ended December 31, 2012. The P50,000 spent on
research was part of a P75,000 contribution received during December of 2011 from a donor who
stipulated that the donation be used for medical research. Assume none of the gift shop revenues
were spent in 2012. For the year ended December 31, 2012, what was the increase in unrestricted
net assets from the events occurring during 2012?
a. P 300,000 c. P 250,000
b. P 200,000 d. P 275,000

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 26. Lihok Filipina, a nonprofit organization, received contributions restricted for research totalling
P50,000 in 2012. Assume the P50,000 was not expended in 2012. These contributions were used
to purchase P35,000 of research equipment in 2012. As a result of these transactions, for the year
ended December 31, 2012, the organization will report on its financial statements, a
a. P 15,000 increase in temporarily restricted net assets.
b. P50,000 increase in temporarily restricted net assets.
c. P35,000 increase in unrestricted net assets.
d. P15,000 increase in unrestricted net assets.

27. San Jose Clinic, a nonprofit clinic, affiliated with San Jose College, had the following cash receipts
for the year ended December 31, 2012:
Patient service revenue P750,000
Contribution from donor to be invested
Indefinitely (endowment fund) 250,000
Tuition fees from nursing school 50,000
Dividends received from permanent investments 80,000
The dividends received are restricted by the donor for hospital building improvements. No
improvements were made during 2012. On the hospital’s statement of cash flows for the year
ended December 31, 2012, what amount of these cash receipts would be included in the amount
reported for net cash provided (used) by operating activities?
a. P 880,000 c. P 1,050,000
b. P800,000 d. P 750,000

28. A nonprofit hospital affiliated with a private university, reported the following data for the year
ended Dec. 31, 2012:

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Cash contributions received from donors for acquisitioned
computer equipment on 2013 P 150,000

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Proceeds from sales of hospital gift shop and snack bar 75,000
Dividend income not restricted by donor 25,000
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Using the information provided, what amount should be reported as “other revenue and gains” on
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the hospital’s statement of activities for the year ended December 31, 2012?
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a. P 25,000 c. P100,000
b. P75,000 d. P250,000
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29. On December 31, 2012, St. Luke hospital, a nonprofit organization, received a P7,000,000 donation
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of BMW shares of stock with donor stipulated requirements as follows:

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Shares valued at P5,000,000 are to be sold, with the proceeds used to erect a building.
Shares valued at P2,000,000 are to be retained, with the dividends used to support current operations.
As a result of the receipt of the BMW shares, how much should St. Luke hospital report as temporarily
restricted net assets on its 2012 statement of financial position?
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a. P 0 c. P 5,000,000
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b. P 2,000,000 d. P7,000,000

30. NCR Foundation, Inc., _a nonprofit organization) accounting records disclosed the following
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information:
Cost of property and equipment net of accumulated depreciation P 19,000,000
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Board designated funds 6,000,000

What amount should be included as part of the Unrestricted net Assets?
a. P25,000,000 c. P 6,000,000
b. P 19,000,000 d. P 0
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31. Napoles Foundation , a not-for-profit organization, receives revenue from various sources during the year
to support its day care center. The following cash amounts were received during 2012:
- P2,000 restricted by the donor to be used for meals for the children.
- P1,500 received for subscriptions to a monthly child care magazine with a fair market value to
subscribes of P1,000.
- P10,000 to be used only upon completion of a new playroom that was 75% complete at December
31, 2012.
What amount should Napoles record as contribution revenue in its 2012 Statement of Activities?
a. P2,000 b. P2,500 c. P10,000 d. P11,000

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 32. The property, plant and equipment of a not-for-profit hospital should be accounted for as part of
a. Unrestricted funds c. Specific purpose funds
b. Restricted funds d. Other non-operating funds

33. Revenue from the parking lot operated by a hospital would normally be included in:
a. Patient service revenue.
b. Ancillary service revenue.
c. Other operating revenue.
d. Other non-operating revenue

34. A non-government, not-for-profit entity gives donors a sweatshirt imprinted with its logo when they pay
P15 dues. The value of the sweatshirt is approximately P15. This transaction is most likely reported as:
a. An exchange transaction
b. An agency transaction.
c. A Contribution
d. A gift in kind.

35. Net assets that are restricted by the governing board of a nongovernment, not-for-profit organization are
reported as a part of:
a. Permanently restricted net assets
b. Temporarily restricted net assets
c. Unrestricted net assets
d. Either permanently restricted or temporarily restricted net assets, depending on the
Term of the restriction.

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