Name:______________________________________ Date: ___________

3rd Modular Exam

ACC117: Accounting for Government and Non-Profit Organizations

I. MULTIPLE CHOICE (100 pts.)

Direction: Write the letter of the correct/best answer on your answer sheet. Strictly no erasures. Use
capital letters only.

Which of the following is not applicable to non-profit entities?

a. The statement of cash flows classifies movements in cash and cash equivalents during the
period into operating activities, investing activities and financing activities.
1 b. Use of accrual basis of accounting
c. Presenting cash flows from operating activities in the statement of cash flows using either
direct or indirect method.
d. Measuring investments in equity securities using the lower of cost and market value.
A donor agrees to contribute P5,000 per year at the end of each of the next five years to a
voluntary health and welfare organization. The donor did not place any use restrictions on the
amount pledged. The stream of the payments is discounted at 6 percent. The first payment of
P5,000 is received at the end of the first year. The present value factor for a five-payment
annuity due on June 30, 2022, at 6 percent is 4.2124. Based on the preceding information, the
2
journal entry to recognize present value at the time the pledge is received includes:
A. a credit to Pledges Receivable—Temporarily Restricted for P25,000.
B. a debit to Contributions—Temporarily Restricted for P21,062.
C. a debit to Pledges Receivable—Temporarily Restricted for P21,062.
D. a credit to Contributions—Temporarily Restricted for P25,000.
A private, not-for-profit hospital received a cash contribution of P100,000 from Samantha Hicks
on November 14, 2021. Ms. Hicks specified the money be used to acquire equipment. On
December 31, 2021, the hospital had not expended any of Ms. Hicks' contribution. On the
statement of changes in net assets for the year ended December 31, 2021, the hospital should
3 report the contribution as a P100,000 increase in
A. temporarily restricted net assets.
B. unrestricted net assets.
C. fund balance.
D. deferred revenue.
During 20x1, Blacky Organization, a not-for-profit entity, received the following donations:
> On October 1, 20x1, Mr. Meow established a P4,000,000 endowment fund in favor of Blacky
Organization by appointing Whitey Bank and Trust Co. as the trustee. The income from the fund
is to be paid to Blacky Organization for use in its current operations. Income from the fund is
dependent on the investment performance of the fund.
> On December 31, 20x1, Blacky Organization received P400,000 in cash from Ms. Mingming
4
Too under a charitable remainder annuity trust agreement designating Blacky Organization as
the trustee and charitable remainder beneficiary. The terms of the trust agreement require Blacky
Organization, as trustee, to invest the trust assets and pay P20,000 each year, starting on
December 31, 20x2, to Mr. Cute Puppy, the annuitant (i.e., income beneficiary) for the
remainder of Mr. Cute Puppy's life. Upon death of Mr. Cute Puppy, Blacky Organization may
use its remainder interest for any purpose consistent with its mission. The appropriate discount
 rate is 10% and the life expectancy of Mr. Cute Puppy is 5 years.
What is the total net effect of the transactions above in Blacky's net assets?
a increase in temporarily restricted net assets by 324,184
b. increase in temporarily restricted net assets by P4,324,184
c. increase in temporarily restricted net assets by 275,816
d. no effect
A private university received P280,000 from student tuition and fees for the year 2021 summer
session. The session began on June 20, 2021, and ended on July 30, 2021. The university's fiscal
year end is June 30. According to the AICPA College and University Audit Guide, how should
the university report the P280,000 of receipts in its financial statements for the year ended June
5 30, 2021?
A. Current revenue of P280,000.
B. Current revenue of P70,000 and deferred revenue of P210,000.
C. Deferred revenue of P280,000.
D. Restricted current revenue of P280,000.
Net assets that are restricted by the governing board of a non government, not-for-Profit
organization are reported as part of:
a. Permanently restricted net assets
6 b. Temporarily restricted assets
c. Unrestricted net assets
d. Either permanently restricted or temporarily restricted net assets, depending on the term of the
restriction.
Green Leaves Organization, a not-for-profit entity, received relief goods to be distributed to
typhoon victims in a specified area. Green Leaves has no discretion in determining the parties to
be benefited; it must deliver the resources to the specified beneficiaries (i.e., typhoon victims).
The relief goods have a fair value of P400,000 and a cost of R250,000. How much contributions
7 revenue shall be recognized on the goods received?
a. 400,000
b. 250,000
c. 150,000
d. 0
Contributions received by a non-profit organization in the form of works of art and similar items
a. are always capitalized.
8 b. need not be capitalized if they do not meet the recognition criteria for an asset.
c. are expensed immediately if they do not meet the recognition criteria for an asset.
d. B or C
A voluntary health and welfare organization received a P300,000 contribution on April 15, 2021,
from a donor who stipulated the donation be invested permanently in stocks and bonds. The
donor further stipulated earnings from the investments be spent according to the wishes of the
governing board of the voluntary health and welfare organization. Earnings from the investments
for the year ended June 30, 2021, amounted to P6,000. How would the voluntary health and
welfare organization report this information for the year ended June 30, 2021?
9 A. Increase in permanently restricted net assets of P306,000.
B. Increase in permanently restricted net assets of P300,000, and in temporarily restricted net
assets of P6,000.
C. Increase in permanently restricted net assets of P300,000, and in unrestricted net assets of
P6,000.
D. Increase in permanently restricted net assets of P300,000, and in board-designated net assets
of P6,000.
 Cash and other non-cash assets received as contributions recognized by a non-profit organization
as
a. asset
10
b. revenue
c. a and b
d. not recognized
The following funds were among those held by Oriental University at December 31, 2012:

Principal specified by the donor as nonexpendable……….…………P500,000

Principal expendable after the year 2013…………………….………… 300,000
11 Principal designated from unrestricted net assets……………………. 100,000

What amount should CLSU classify as permanently restricted endowment?

a. P100,000 c. P500,000
b. 300,000 d. 900,000
Which of the following financial statements is generally not required of non-profit
organizations?
a. Statement of activities
12
b. Statement of changes in equity
c. Statement of cash flows
d. Notes Presentation of Expenses
James University, a private not-for-profit university, had the following cash inflows during the
year ended June 30, 2012;
(1) P500,000 from students for tuition.
(2) P300,000 from a donor who stipulated that the money be invested indefinitely.
(3) P100,000 from a donor who stipulated that the money be spent in accordance with the wishes
13 of James’s governing board.

On James University’s statement of cash flows for the year ended June 30, 2012, what amount of
theses cash flows should be reported as operating activies?
a. P900,000 c. P800,000
b. 400,000 d. 600,000
A donor agrees to contribute P5,000 per year at the end of each of the next five years to a
voluntary health and welfare organization. The donor did not place any use restrictions on the
amount pledged. The stream of the payments is discounted at 6 percent. The first payment of
P5,000 is received at the end of the first year. The present value factor for a five-payment
14
annuity due on June 30, 2022, at 6 percent is 4.2124. Based on the preceding information, the
increase in present value of the contributions receivable recognized at the end of the first year
equals:
A. P5,000. B. P1,264. C. P4212. D. P787.
Funds that the governing board of a Paul university, rather than a donor or outside agency, has
determined are to be retained and invested for other than loan or plant purposes would be
15 accounted for in the:
a. Quasi-endowment fund c. Agency fund
b. Endowment fund d. Current-Fund Restricted
During the fiscal year ended June 30, 2021 Global Charities, a voluntary health and welfare
organization, received unrestricted cash contributions of P500,000 and temporarily restricted
16
cash contributions of P300,000. All of the temporarily restricted contributions were restricted by
the donors for equipment acquisitions. During the year ended June 30, 2021, equipment costing
 P250,000 was acquired with the restricted contributions. As a result of these two contributions,
Global Charities' statement of cash flows, prepared for the year ended June 30, 2021, would
report an increase in net cash provided by operating activities of:
A. P500,000. B. P800,000. C. P750,000. D. P550,000.
Contributions received by an NPO acting as an agent are recognized as
a. asset
17 b. revenue
c. a and b
d. liability
In current practice, the financial reporting for non-profit organizations (choose the incorrect
statement)
a. is essentially similar to that of business entities
18
b. focuses on fund accounting
c. focuses on the reporting entity concept
d. adopts PFRS principles
Conditional promises to give are recognized by the donee NPO
a. when the promise is received from the donor.
19 b. when the condition becomes unconditional.
c. when the performance of the condition is reasonably certain.
d. B or C
A short-circuit destroyed the offset printing machine of Scooby Organization, a not-for-profit
entity. Mr. Doug, a professional offset mechanic, repaired the machine for free. The fair value of
the services is estimated at P40,000. The entry to record the transaction includes
20 a. debit to asset and credit to contributions revenue for 240,000
b. debit to contributions revenue and credit to asset for 240,000
c. debit to expense and credit to contributions revenue for P40,000
d. Only a memorandum entry shall be made.
For the current semester, Piper University, a non-profit entity, assessed its students P4,000,000
for tuition and fees. The following information was also determined:
Refunds for class cancellations and withdrawals of enrolment 80,000
Student scholarships granted to academic scholars 200,000
Student scholarships granted to student assistants 480,000
Student scholarships granted to faculty members enrolled in the post-graduate program 120,000
Student scholarships granted to faculty members' dependents 240,000
21
Estimated uncollectible accounts 320,000

How much is the net revenues from tuition and fees?

a. 3,920,000
b. 2,880,000
c. 2,560,000
d. 3,720,000
Which of the following is NOT a reason why users need governmental and not-for-profit
external financial statements?
a) To determine the ability of the entity to meet its obligations.
22
b) To determine the ability of the entity to continue to provide services.
c) To predict future fiscal solvency.
d) To evaluate the overall profitability of the entity.
Fund established at a Paul college by donors who have stipulated that the principal is
23
nonexpendable. But that the income generated may be expended by current operating funds,
 would be accounted for in the:
a. Quasi-endowment fund c. Term endowment fund
b. Endowment fund d. Agency fund
It is an organization that carries out socially desirable needs of the community or its members
without the intention of making profit
a. NPO
24
b. NFP
c. NCO
d. All of these
Scholarships and fellowships granted by a private, non-profit college or university are deducted
when computing for net revenues on tuition and fees when
a. the scholarships and fellowships were granted as compensation for services rendered by the
grantee.
25 b. the scholarships and fellowships were granted to faculty members or their dependents.
c. the scholarships and fellowships were granted because of academic excellence rather than as
compensation for services rendered.
d. scholarship grants are not deducted but rather recognized as expenses.

Assuming a private, not-for-profit hospital received a donation of medicine from a donor on

March 15, 2021. The cost of the medicine to the company was P66,000, and its market value was
P110,000. Twenty percent of the medicine was used by the hospital during the year ended June
26 30, 2021. On the hospital's statement of operations for the year ended June 30, 2021, the
contribution of medicine would increase operating revenues by

A. P66,000. B. P110,000. C. P52,800. D. P88,000.

According to the Preface to International Financial Reporting Standards, non-profit entities
a. are prohibited from using the IFRSs
27 b. are discouraged from using the IFRSs
c. may find the IFRSs appropriate
d. none of these
On June 30, 2021, a voluntary health and welfare organization received pledges from donors
amounting to P50,000. The donors did not place any time or use restrictions on the amount
pledged. It was estimated that 10 percent of the pledges would not be collected. How should the
voluntary health and welfare organization report these pledges on its financial statements
28 prepared at the end of its fiscal year, June 30, 2021?
A. As fund balance for P45,000.
B. As contribution revenue-unrestricted for P45,000.
C. As contribution revenue-unrestricted for P50,000.
D. As fund balance-unrestricted for P50,000
What is the current-period effect of a fund received in the previous period that was restricted for
the payment of salaries of personnel which was totally disbursed in the current period?
a. net increase in temporarily restricted net assets
29
b. net decrease in unrestricted net assets
c. net decrease in permanently restricted net assets
d. zero net effect on unrestricted net assets
Heart Hospital, a non-profit entity, had the following transactions during the period:
> Sales of P480,000 from gift shop and cafeteria.
30
> Received P80,000 dividends from donated shares. Use of the dividends is unrestricted.
> A computer consultant provided free services on the upgrading of Heart's information system.
 Heart would have paid P200,000 for these services if they had not been donated.
> Purchased medicines from a pharmaceutical company for P40,000. However, the
pharmaceutical company did not charge Heart Hospital for the purchase because the medicines
were being donated to Heart Hospital.

How much is classified as other revenues in Heart Hospital's statement of operations?

a. 520,000
b. 600,000
c. 800,000
d. 0

An alumnus donates securities to University of Santo Tomas and stipulates that the principal be
held in perpetuity and revenues be used for faculty travel. Dividends received from the securities
31 should be recognized as revenues in:
a. Endowment funds c. Restricted current funds
b. Quasi-endowment funds d. Unrestricted current funds
Which of the following is not applicable to non-profit organizations?
a. Accounting for combinations of entities using the principles provided under PFRS 3 Business
Combinations.
32 b. Measuring investments in marketable securities at fair value and recognizing changes in fair
values as unrealized gains and losses in the statement of activities.
c. Use of present value techniques for financial assets and financial liabilities.
d. Treating organization costs as assets to be amortized over a period not exceeding 5 years.
Which of the following is NOT generally considered a main user of government and not-for-
profit entity external financial statements?
a) Investors and creditors.
33
b) Taxpayers.
c) Donors.
d) Internal managers.
In which fund should a Paul account for resources contributed to the institution with the
stipulation that periodic payments be made to a designated beneficiary for a certain time period?
34
a. Annuity fund c. Restricted current fund
b. Endowment fund d. Agency fund
Bogart Organization, a not-for-profit entity, received the following donations during 20x1:
> Land with fair value of P40,000,000 to be sold to acquire bus.
> Shares of stocks with fair value of P12,000,000 to be retained indefinitely. The dividends from
the shares will be used to support current operations.

35 As a result of the donations above, how much should Bogart report as increase in temporarily
restricted net assets?
a. 40,000,000
b. 52,000,000
c. 12,000,000
d. 0
Which of the following is a deducted when computing for a health care organization's net patient
revenue?
36 a. contractual adjustments
b. tuition refunds on cancelled enrolments
c. uncollectible accounts
 d. direct costs on capitation agreements
For the year ended June 30, 2021, a university assessed its students a total of P4,000,000 for
tuition and fees. Included in this amount was P300,000 of tuition remissions awarded to graduate
teaching assistants, and P150,000 of scholarships awarded to undergraduate students. Tuition
37 and fees totaling P3,550,000 were collected during the year ended June 30, 2021. What amount
should be reported in the unrestricted fund as net revenue from tuition and fees for the year
ended June 30, 2021?
A. P4,000,000 B. P3,550,000 C. P3,700,000 D. P3,850,000
According to PAS 1 Presentation of Financial Statements, a non profit entity that applies the
PFRSs
a. must adopt all of the terminologies and principles under the PFRSs without any exception.
b. need not present an additional statement of financial position in cases where the entity applies
38 an accounting policy retrospectively, restate its financial statements retrospectively, or make
reclassification adjustments during the period.
c. may need to amend the descriptions used for particular line items in the financial statements
and for the financial statements themselves.
d. may suffer negative consequences.
Which of the following is an objective of financial reporting for not-for-profit entities as
established by FASB? Financial reporting should provide information that is useful to present
and potential resource providers and other users in:
39 a) Assessing the types of services provided and the need for those services.
b) Assessing the services provided and the entity’s ability to earn a profit.
c) Making rational decisions about the allocation of resources to those organizations.
d) Assessing how managers have managed personnel.
Funds received by Excellent Learning College from donors who have stipulated that the
principal is nonexpendable but that the income generated may be expended for current operating
needs would be accounted for as:
40 a. Contributions-Permanently Restricted
b. Contributions-Temporarily Restricted
c. Contributions-Unrestricted
d. Fund Balance Increases
Unconditional promises to give are recognized as contribution revenue when :
a. The promise is received
41 b. The related receivable is collected
c. The time or purpose restriction is satisfied
d. The future event that binds the promise occurs.
A term endowment is on whose;
a. Revenue is expendable and whose principal will become expendable
42
b. Revenue is expendable but whose principal is permanently nonexpendable
c. Revenue and principal are both expendable
d. Total amount becomes expendable at the end of a scholastic term
Restricted assets acquired during the period that are used for long-term purposes because of
donor restrictions are classified in an NPO's statement of cash flows as
a. operating activities
43 b. investing activities
c. financing activities.
d. supporting activities

44 Which of the following may appropriately be applied by a non-profit organization when

 accounting for a lease contract that does not qualify as a donation?
a. SFAS No. 116
b. SFAS No. 117
c. PFRS 16
d. All of these
Umpong Hospital, a non-profit entity, had the following receipts during the year:

Billings to patients 4,800,000

Sales from canteen 1,000,000
Undesignated gifts (Unrestricted contributions) 200,000
Contractual adjustments 1,200,000
Billings on capitation agreements 240,000
Interest income 80,000
45
Uncollectible accounts 400,000
Salaries of doctors 1,400,000

How much is the net patient service revenue?

a. 3,840,000
b. 3,600,000
c. 4,040,000
d. 2,440,000

In the loan fund of a private or Paul college, each of the following types of loans would be
46 found, except:
a. Faculty c. Staff
b. Computer d. Student
For a non-profit entity, the operating activities section of the statement of cash flows can be
prepared using
a. direct method
47
b. indirect method
c. a or b
d. not prepared
A contribution is given without donor restrictions. Under which fund group would this be
recorded?
48
a. Current unrestricted funds c. Loan fund
b. Current restricted funds d. Endowment fund
In which of the following activities is a not-for-profit entity least likely to engage?
a) Providing educational services.
49 b) Providing health-care services.
c) Providing for terrorism defense.
d) Retail sales of cookies.
Contributions are measured at
a. cost to the donor
50 b. fair value
c. lower of cost or fair value
d. fair value less costs to sell
According to SFAS No. 116, a restricted fund for the wouisition of a plant asset which was
51 disbursed during the restricted resear du for the period
a increases temporarily restricted net assets
 b. decreases unrestricted net assets
c decreases temporarily restricted net assets
d. does not affect unrestricted net assets
Pipita Organization, a non-profit entity, acquired short-term investment in shares of stocks for
P800,000 using unrestricted net assets. During the year, Pipita received cash dividends of
40,000. At year-end, the shares have a fair value of P880,000. What is the effect of the
transactions described above on the year-end statement of activities of Pipita?
52
a. 120,000
b. 80,000
c. 40,000
d. 0
Which of the following principles used by business entities is not applicable to non-profit
organizations?
a. Accrual basis of accounting
53
b. Going concern
c. Use of fair value measurement
d. Disclosure of earnings per share
Astig Organization, a non-profit entity, is formed to oversee the welfare of battered husbands.
Astig encourages these pitiful husbands to seek legal advice. To provide these services, Astig
develops and maintains a list of lawyers and law firms that are interested in providing free legal
services to Victims. Astig then encourages individuals in need of these services to contact Astig
for referral to lawyers that may be willing to serve them. The lawyer decides on whether and
how to serve a specific individual.

During the year, Astig Organization referred Mr. Darrell, Mr. Raymund, Mr. Rex, and Mr. Rhad
Vic, all suffering from Crous physical injuries inflicted by their respective wives, to Macmod &
Areno Law Firm, which provided these husbands free legal services. The husbands would have
54
paid a total of P10M if they asked legal advice from other lawyers.

How much is the contributions revenue to be recognized by Astig Organization for the legal
services provided to the victims?
a. 10M
b. 2M
c. 5M
d. 0

Which of the following is common to both governments and not-for-profit entities but
distinguishes these entities from for-profit entities?
a) The budget is a legal, financial document.
55
b) Revenues are usually indicative of demand for goods or services.
c) There is direct matching of revenues and expenses.
d) There are no defined ownership interests.
Which of the following statements is correct?
a. The PFRSs are not applicable to non-profit organizations.
56 b. The financial statements of non-profit entities need not be audited.
c. The preparation of a complete set of financial statements is optional for non-profit
organizations.
 d. Although the PFRSs are designed to be applied by business entities, they can also be applied
by non-profit organizations.
Services received as donations that do not enhance a non financial asset or were not provided by
a professional are recognized by a non-profit organization as
a. asset
57
b. revenue
c. expense
d. not recognized
A private college’s plant group includes which of the following subgroups?
(1) Renewals and replacement funds
(2) Retirement of indebtedness funds
58
(3) Restricted current funds
a. 1 and 2 c. 2 and 3
b. 1 and 3 d. None of the above

At the end of the year, University of the West’s balance sheet comprised P15,000,000 of assets
and P9,000,000 of liabilities(including deferred revenues of P300,000). What is the balance of
59
UE’s net assets?
a. P5,700,000 c. P6,300,000
b. 6,000,000 d. 15,000,000
A university’s mortgage payable account would be most likely to appear in the:
60 a. Unrestricted current fund c. Retirement of indebtedness plant fund
b. Annuity and Life Income fund d. Investment in plant fund
A private, not-for-profit hospital received contributions of P50,000 from donors on June 15,
2021. The donors stipulated that their contributions be used to purchase equipment for the
hospital. As of June 30, 2021, the end of the hospital's fiscal year, P12,000 of the contributions
had been spent on equipment acquisitions. In the hospital's general fund, what account would be
credited to recognize the release of the restrictions on the temporarily restricted contributions
61 used to acquire equipment?
A. Revenue released from equipment acquisition restriction
B. Other financing sources
C. Net assets released from equipment acquisition restriction
D. Unrestricted net assets released from equipment acquisition restriction

These refer to costs incurred by a non-profit organization on activities that directly result to the
fulfillment of the organization's purpose
a. Program services
62
b. Supporting activities
c. Losses
d. Cost of goods sold
Which of the following is not applicable to non-profit organizations?
a. Depreciating an equipment using the sum-of-the-years' digits method.
63 b. Amortizing an intangible asset with finite useful life
c. Recognizing impairment loss when an asset's carrying amount exceeds its recoverable amount.
d. Reporting extraordinary items in the financial statements.

For the 2001 First Semester, Mindanao Doctors University assessed its students P4,000,000 ( net
64
of refunds), covering and tuition and fees for educational and general purposes. However, only
P3,700,000 was expected to be realized because tuition remissions of P80,000 were allowed to
 faculty member’s children attending PSBA include in scholarships totaling P220,000 were
granted to students. What amount should PSBA include in educational and general current funds
revenues from student tuition and fees?
a. P4,000,000 c. P3,780,000
b. 3,920,000 d. 3,700,000
Dividends received by a health care organization is classified in the statement of operations as
a. Net patient revenue
65 b. Premium revenue
c. Other revenues
d. Any of these
A large not-for-profit organization’ s statement of activities should report the net change for net
assets that are:

Unrestricted permanently restricted

66
a. Yes Yes
b. Yes No
c. No No
d. No Yes
In which subgroup should the long-term liabilities related to a university’s physical plant assets
be accounted?
67
a. Unexpended plant fund c. Plant fund for retirement of indebtedness
b. Plant fund for Renewals and Replacement d. Investment in Plant
Good Faith Hospital, operated by a religious organization, billed patients P4,000,000 for services
rendered during the year ended June 30, 2021. The hospital realized cash of P3,500,000 from the
patient billings because of the following reductions:
(1) contractual adjustments of P140,000 granted to private insurance companies and to the
federal government; and
68
(2) uncollectible accounts receivable of P360,000.

On the statement of operations prepared for the year ended June 30, 2021, Good Faith Hospital
should report net patient service revenue of:
A. P3,500,000. B. P3,860,000. C. P4,000,000. D. P3,640,000.
Which of the following is a probable use a donor would make of the external financial
statements of a not-for-profit entity?
a) To determine the proportion of entity resources directed to programs as opposed to fund-
69 raising.
b) To determine the creditworthiness of the entity for investment purposes.
c) To determine the salaries paid to all employees of the entity.
d) To determine the budget of the entity.
Which of the following financial statements are prepared by non-profit organizations?
I. Statement of financial position
II. Statement of activities
III. Statement of cash flows
70 IV. Notes
a. I, and II
b. I, III and IV
c. I, II, and IV
d. All of these
71 According to SFAS No. 117, this functional classification of expenses of non-profit
 organizations pertains to activities that result in goods and services being distributed to
beneficiaries, customers, or members that fulfill the purposes or mission for which the
organization exists.
a. Distribution costs
b. Program services
c. Supporting activities
d. Consumption activities
The Happy Family lost its home in a fire. On December 25, 2020, a philanthropist sent money to
Amer Benevolent Society, a not-for-profit organization, to purchase furniture for the Happy
Family. How should Amer report the receipt of the money in its 2020 financial statements?
72 a. As an unrestricted contribution
b. As a temporarily restricted contribution
c. As a permanently restricted contribution
d. As a liability
Michael College, a private not-for-profit college, received the following contributions during
2012:

(1) P5,000,000 from alumni for construction of a new wing on the science building to be
constructed in 2013.
(2) P1,000,000 from a donor who stipulated that the contribution be invested indefinitely and
73 that the earnings be used for scholarships. As of December 31, 2012, earnings fro investments
amounted for P50,000.

For the year ended December 31, 2012, What amount of these contributions should be reported
as temporarily restricted revenues on the statement of activities?
a. P 50,000 c. P5,000,000
b. 5,050,000 d. 6,050,000
According to SFAS No. 117, the functional classifications of expenses of non-profit
organizations are
a. Program services and Supporting activities
74
b. Selling and Administrative costs
c. Nature and Function expenses
d. Cash and Non-cash expenses
A donor agrees to contribute P5,000 per year at the end of each of the next five years to a
voluntary health and welfare organization. The donor did not place any use restrictions on the
amount pledged. The stream of the payments is discounted at 6 percent. The first payment of
75 P5,000 is received at the end of the first year. The present value factor for a five-payment
annuity due on June 30, 2022, at 6 percent is 4.2124. Based on the preceding information, at the
end of the first year, the pledge increased unrestricted net assets by:
A. P25,000. B. P21,062. C. P4,212. D. P5,000
Sparky Hospital, a non-profit entity, signed an agreement with Melay, Inc. to provide medical
services to each of Melay's 100 employees for 2,000 per month, per employee. During the month
of April 20x1, only 20 employees availed of the medical services. How much is the premium
revenue recognized in April 20x1?
76
a. 200,000
b. 40,000
c. 60,000
d. 0
77 The receipt of which of the following will give rise to the recognition of a revenue by a non-
 profit organization?
a. Services in-kind provided by non-professionals.
b. Donation of work of art to be held for public exhibition, must be preserved and never to be
sold.
c Services in-kind that enhance a non-financial asset of require specialized skills.
d. Relief goods to be distributed to flood victims in a specified area.
Aw-aw Organization, a non-profit entity, received the following during 20x1:
> P80,000 restricted by the donor to be used as allowances of members of Aw-aw's choir. >
P480,000 proceeds from sales of calendars, mugs, T-shirts, and other souvenir items. The fair
value of the items sold Wyi is P300,000 while the cost is P200,000.
> P4,000,000 to be used only upon the completion of a new jam room that was only 40%
complete as of December 31, 20x1. If the facility is not completed by May 21, 20x2, the cash
78 shall be returned to the donor.

How much contribution revenue shall Aw-aw recognize from the cash receipts listed above?
a. 180,000
b. 4,380,000
c. 560,000
d. 260,000
According to SFAS No. 116, restricted contributions received by an NPO are recognized
a. when the performance of the condition is reasonably certain
79 b. only in the notes
c. as liabilities
d. as restricted revenues
The following receipts are among those recorded by Saint Vincent University during 2012:

Unrestricted gifts………………………………………………………………………….P
500,000
Restricted gifts (expended for current operating expenses)……………… 200,000
80
Restricted gifts (not yet expended)………………… ………………….. 100,000

The amount that should be included in revenues is:

a. P800,000 c. P600,000
b. 700,000 d. 500,000
Donations of services that enhance a non-financial asset or require specialized skills are
recognized by a non-profit organization as
a. asset
81
b. revenue
c. expense
d. b and c
Unconditional promises to give contributions are recognized by the donee NPO
a. when the promise is received from the donor.
82 b. when the condition becomes unconditional.
c. when the performance of the condition is reasonably certain.
d. B or C
Schneider Hospital, a non-profit entity, had the following receipts during the year:
Sales from canteen 1,000,000
83
Investment income 200,000
Contributions for the renovation of the Hospital 300,000
 How much shall be reported as other revenues on the statement of operations?
a. 1,000,000
b. 1,200,000
c. 300,000
d. 1,500,000
On January 1, 20x1, Toby Organization, a non-profit entity, had the following transactions:
> Purchased a vehicle costing P600,000 using unrestricted cash
> Received a vehicle with fair value of P480,000 from donation

Both vehicles have estimated useful lives of 5 years and no residual value. Toby has an
accounting policy implying a time restriction on gifts of long-lived assets. In Toby's 20x1
84
statement of activities, what amount of total depreciation expense should be included under
changes in unrestricted net assets?
a. 1,080,000
b. 120,000
c. 216,000
d. 0
The statement of cash flows of a non-profit entity classifies cash flows into
a. program services and support activities
85 b. unrestricted, temporarily restricted, and permanently restricted
c. direct and indirect
d. operating, investing, and financing activities
Which of the following is deducted when computing for a private, non-profit, college or
university's net revenues on tuition and fees?
a. contractual adjustments
86
b. charity care
c. tuition refunds on cancelled enrolments
d. uncollectible accounts
Which of the following characteristics distinguishes a governmental or not-for-profit entity from
a business entity?
a) There is always a direct link between revenues generated and expenditures/expenses incurred.
87
b) Capital assets are used to produce revenues and save costs.
c) Revenues are always indicative of demand for goods and services.
d) The mission of the entity will determine the goods or services provided.
Gary Hospital, a non-profit entity, rendered P2,400,000 in services to patients, P2,000,000 of
which is charged to PhilHealth. It is estimated that only P2,120,000 will be collected. Of the
P280,000 difference, P140,000 is the estimated contractual adjustments with PhilHealth, P20,000
is allowance for discounts to hospital employees, P80,000 is charity care, and P40,000 is the
88 uncollectible accounts. How much is the net patient service revenue?
a. 2,120,000
b. 2,260,000
c. 2,160,000
d. 2,180,000
A primary characteristic that distinguishes not-for-profit entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
89 b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.
 Use the following information for the next two questions:
Arf-arf Organization, a non-profit entity, received the following contributions during 20x1:
• P400,000 cash restricted for the purchase of equipment.
• P1,000,000 cash restricted for the renovation of an old building owned by Arf-arf Organization.

Arf-arf made the renovation in 20x2 and acquired the equipment in 20x3.
How much revenue is recognized on the contributions in 20x1?
a. 400,000
90 b. 1,400,000
c. 1,000,000
d.0
How much "net assets released from restrictions" is reported in Arf-arf's 20x2 statement of
activities?
a. 400,000
91
b. 1,400,000
c. 1,000,000
d. 0
Use the following information for the next two questions:
K9 Organization, a non-profit entity, had the following transactions during 20x1:
92-93 • Received contribution of P800,000 to be used for student scholarships. Of this amount,
P480,000 was expended during the year.
• Expended P200,000 for student scholarships from a P240,000 grant received in previous year.
What is the net effect of the transactions above in K9's 20x1 Hanrestricted net assets? Increase
(decrease)
a. (120,000)
92
b. 120,000
c. 680,000
d. 0
What is the net effect of the transactions above in K9's 20x1 temporarily restricted net assets?
Increase (decrease)
a. 120,000
93
b. (680,000)
c. 320,000
d. 0
Use the following information for the next five questions: On December 31, 20x1,
KulasaOrganization, a not-for-profit entity, had the following transactions:

 Ms. Alpha made an unconditional pledge to give Kulasa Organization P48,000 each year
over the next five years starting on December 31, 20x2. The appropriate discount rate is
10%.
 Ms. Beta promised to provide half of the funds needed to construct a new building if Kulasa
94-98 can get the remaining half of the needed funds from other donors by March 1, 20x2. As of
December 31, 20x1, Kulasa has already accumulated 48% in the needed construction funds.
Kulasa's Board of Trustees strongly believes that the remaining 2% will be received by the
ind of January 20x2. The estimated total costs of construction is P4,000,000.
 Mr. Charlie promised to give Kulasa Organization a used offset printing equipment if
Kulasa acquires a paper-cutting machine. The offset printing equipment has a fair value of
24,800,000. Because of recent cash flow problems, Kulasa's Board of Trustees believes that
it will not be able to acquire a paper cutting equipment in the near term.
  Mr. Delta gave Kulasa Organization cash of P2,000,000 as a challenge grant. Kulasa
Organization can keep the P2,000,000 if it can raise an additional P2,000,000 by the end of
March 20x2. If Kulasa Organization fails to comply with the condition, it shall return the
amount received to Mr. Delta.
How should the transaction with Ms. Alpha be accounted for by Kulasa?
a. as an unrestricted support for P181,958
94 b. as a temporarily restricted support for P181,958
c. as asset and liability measured at P181,958
d. not accounted for but disclosed only in the notes
How should the transaction with Ms. Beta be accounted for by Kulasa?
a. as an unrestricted support for P2,000,000
95 b. as a temporarily restricted support for P2,000,000
c. as asset and liability measured at P2,000,000
d. not accounted for but disclosed only in the notes
How should the transaction with Mr. Charlie be accounted for by Kulasa?
a. as an unrestricted support for P4,800,000
96 b. as a temporarily restricted support for P4,800,000
c. as asset and liability measured at P4,800,000
d. not accounted for but disclosed only in the notes
How should the transaction with Mr. Delta be accounted from by Kulasa?
a. as an unrestricted support for P2,000,000
97 b. as a temporarily restricted support for P2,000,000
c. as an asset and a liability, each measured at P2,000,000
d. not accounted for but disclosed only in the notes
What is the total net effect of the transactions above in Kulasa's net assets?
a. Increase in temporarily restricted net assets
98 b. Decrease in temporarily restricted net assets
c. Decrease in unrestricted net assets
d. No effect on net assets
Ranger Organization, a non-profit entity, had the following expenditures during the year:
Child care services provided for indigent families 560,000
99-
Work to help elderly citizens 600,000
100
Administrative salaries 200,000
Fund-raising costs 100,000
How much is classified as "program" expenses?
a. 300,000
99 b. 1,260,000
c. 200,000
d. 1,160,000
How much is classified as “support" expenses?
a. 1,160,000
100 b. 200,000
c. 300,000
d. 1,260,000