Accounting for Not-for-Profit Organizations Test Questions
Course Introduction
Accounting for Not-for-Profit Organizations explores the unique financial reporting, budgeting, and compliance requirements of organizations that operate without the intent of making a profit. This course examines the principles and procedures involved in recording, classifying, and summarizing transactions specific to not-for-profit entities, such as charities, educational institutions, healthcare providers, and governmental organizations. Students will learn about fund accounting, donor restrictions, grant management, and regulatory frameworks that govern not-for-profits, as well as how to interpret financial statements to ensure transparency and accountability to stakeholders.
Recommended Textbook
Advanced Accounting Updated 1st Canadian Edition by Gail Fayerman
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10 Chapters
580 Verified Questions
580 Flashcards
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Page 2
Chapter 1: Accounting for Investments
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Sample Questions
Q1) At the beginning of 2013, Ridley Ltd. acquired 25% of the voting shares of Gasser Co. for $150,000. Ridley has significant influence over Gasser. In 2013, Gasser earned net income of $70,000 and paid dividends of $40,000. In 2014, Gasser earned net income of $80,000 and paid dividends of $100,000. At the end of 2014, what is the balance of Ridley's "Investment in Gasser" account?
A)$150,000
B)$147,500
C)$152,500
D)$222,500
Answer: C
Q2) How do joint ventures differ from private corporations?
A)A joint venture does not have a board of directors.
B)There can only be two parties in a joint venture.
C)Venturers cannot make unilateral decisions.
D)The venturers must share the risks and profits of the joint venture equally.
Answer: C
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3
Chapter 2: Business Combinations
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Sample Questions
Q1) How should the transaction costs of issuing shares in acquisition be recognized?
A)Deducted from shareholders' equity, net of related income tax benefits.
B)Expensed.
C)Capitalized as part of the cost of the shares.
D)Deducted in total from shareholders' equity.
Answer: A
Q2) The acquirer is usually the combining entity whose owners have the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity.
A)True
B)False
Answer: True
Q3) Having recognized any contingent liabilities of the acquiree as liabilities, the acquirer must then determine a subsequent measurement for the liability. The liability is initially recognized at book value.
A)True
B)False
Answer: False
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Chapter 3: Consolidation: Wholly Owned Subsidiaries
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Sample Questions
Q1) Helly Company purchased 100% of the outstanding common shares of Cobra Company on December 31, 2012 for $170,000. At that date, Cobra had $100,000 of outstanding common stock and retained earnings of $30,000. It was agreed that the net assets were fairly valued except that the fair value of the capital assets exceeded their net book value by $20,000 and the carrying value of the inventory exceeded its fair value by $10,000. The capital assets had a remaining useful life of eight years as of the acquisition date and have no salvage value. Inventory turns over four times a year. Both companies pay tax at a rate of 30%. What adjustment should be made to the consolidated financial statements for the year ended December 31, 2013 for the difference in inventory valuation?
A)Cost of goods sold for 2013 will be decreased by $10,000.
B)Retained earnings at the end of 2013 will be decreased by $10,000.
C)Inventory at December 31, 2013 will be decreased by $10,000.
D)Cost of goods sold for 2013 will be increased by $10,000.
Answer: A
Q2) The goodwill impairment test does not involve elimination of all goodwill as a consequence.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Consolidations: Intragroup Transactions
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Sample Questions
Q1) Dither Co. owns 100% of the common shares of Franklin Ltd. Dither records its investment in Franklin using the cost method. Dither and Franklin have transactions with each other. In preparing Dither's consolidated financial statements, which of the following should be done?
A)Dividends received by Dither from Franklin should be deducted from Dither's dividend income.
B)Franklin's retained earnings should be deducted from Dither's retained earnings.
C)Dither's receivable from Franklin should be netted with Dither's accounts receivable.
D)Franklin's share capital should be added to Dither's share capital.
Q2) Why are adjustments required for intragroup transactions involving profits and losses on the transfer of property, plant and equipment in both the current and previous periods?
Q3) If a subsidiary declares a dividend and the dividend is unpaid at the end of the period, the adjustment on the consolidated financial statements will include an increase to dividend revenue.
A)True
B)False
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Chapter 5: Consolidation: Non-Controlling Interest
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Sample Questions
Q1) Any gain on bargain purchase adjusts for the ___________ share of ___________ equity only.
A)parent's; pre-acquisition
B)subsidiary's; pre-acquisition
C)parent's; post-acquisition
D)subsidiary's; post-acquisition.
Q2) All intragroup transactions require an adjustment to the NCI.
A)True
B)False
Q3) When preparing consolidated financial statements, any profit or loss that arises in relation to the intragroup transfer of services is regarded as:
A)Immaterial and does not get adjusted on a consolidation worksheet.
B)Immediately realized.
C)Unrealized.
D)Having no impact on the non-controlling interest, and so ignored for consolidation reporting.
Q4) Discuss the implications of a gain on bargain purchase for the non-controlling interest.
Q5) What does the "group" consist of under the entity concept of consolidation?
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Chapter 6: Accounting for Investments in Associates and Joint Ventures
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Sample Questions
Q1) All dividends paid or payable by an investee to an investor are to be recognized as revenue by the investor when the investor is also a parent company and will be preparing consolidated financial statements.
A)True
B)False
Q2) Which of the following statements regarding goodwill and fair value differences from the day that an associate or joint venture is acquired, is FALSE?
A)Where differences between fair values and carrying amounts exist at the acquisition date for the investee's identifiable assets and liabilities, subsequent equity recognized by the associate or joint venture may include fair value adjustments relating to these differences.
B)Amortization of goodwill relating to an associate or a joint venture is permitted.
C)Calculation of adjustments for differences between carrying amounts and fair values is always on an after-tax basis.
D)Adjustments for any goodwill arising on acquisition would occur on impairment of goodwill.
Q3) Describe how to account for losses incurred by associate and joint venturers.
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Page 8
Chapter 7: Accounting for Foreign Currency
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Sample Questions
Q1) When a company selects a presentation currency for its financial statements that is different than its functional currency, the statements must be translated into the functional currency.
A)True
B)False
Q2) Which of the following statements about hedge accounting is TRUE?
A)Hedge accounting is mandatory.
B)Hedge accounting is applicable only if a receivable is being hedged.
C)Hedge accounting is optional.
D)Hedge accounting is applicable only if a liability is being hedged.
Q3) What is a currency swap an example of?
A)A futures contract.
B)A call option.
C)A forward contract.
D)A derivative instrument.
Q4) Monetary items are translated using the exchange rate at the balance sheet date.
A)True
B)False
Q5) What is the purpose of derivative financial instruments? Provide some examples and explain how they work in practice.
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Chapter 8: Accounting for Foreign Investments
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Sample Questions
Q1) All of the following are primary indicators of the functional currency of a group EXCEPT:
A)The currency that mainly influences sales prices for goods and services.
B)The currency of the country whose competitive forces and regulations mainly determine the sales prices of its goods and services.
C)The currency in which receipts from operating activities are usually retained.
D)The currency that mainly influences labour, material and other costs of providing goods or services.
Q2) A functional currency is a reflection of the primary economic environment in which an entity operates.
A)True
B)False
Q3) Consolidation adjustments must be restated to the _______________ currency.
A)functional
B)presentation
C)foreign
D)domestic.
Q4) When would a change in the functional currency of an entity occur, and how is it accounted for?
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Chapter 9: Reporting for Not-For-Profit Organizations
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Sample Questions
Q1) The Helping Hand Society, a not-for-profit organization, owns 25% of the shares of Dawson's Diner, a for-profit organization. Three of the ten-person board of directors of Dawson's Diner are also directors of the Helping Hand Society. How should the Helping Hand Society account for its investment in Dawson's Diner?
A)At cost.
B)The equity method.
C)Note disclosure only.
D)Consolidation.
Q2) Not-for-profit revenue recognition criteria mirror those of profit oriented entities except for contributions.
A)True
B)False
Q3) Not for profit organizations cannot be incorporated.
A)True
B)False
Q4) In a not-for-profit organization, donated capital assets are recorded at fair market value.
A)True
B)False
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Chapter 10: Reporting for Public Sector Entities
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Sample Questions
Q1) Under the PSA reporting framework, __________________ is a measure that demonstrates whether the asset position of the public sector entity has been maintained.
A)net assets
B)the operating surplus or deficit
C)net equity
D)revenues.
Q2) A public sector entity's future revenue requirements are not constrained by obligations associated with past decisions and events.
A)True
B)False
Q3) An objective of financial statements for public sector entities is to provide an accounting of financial affairs and resources.
A)True
B)False
Q4) The measure of net debt is an indicator of a public sector entity's financial position.
A)True
B)False
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Page 12