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Multiple Choice Quiz
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1
Generally accepted accounting principles (GAAP) for nongovernmental not-for-profit colleges and universities would be found in:
A)AICPA Audit and Accounting Guides, "Not-for-Profit Entities."
B)FASB pronouncements.
C)National Association of College and University Business Officer's Financial Accounting and Reporting Manual (FARM).
D)All of the above.
2
The financial statements for a nongovernmental not-for-profit college or university will include:
A)Statement of financial position; statement of activities; statement of cash flows.
B)Statement of financial position; statement of activities; statement of cash flows; statement of functional expenses.
C)Statement of net assets; statement of revenues, expenses and changes in net assets; statement of cash flows.
D)Statement of net assets; statement of activities; statement of cash flows.
3
Which of the following methods must be followed in preparing a statement of cash flows for a governmental college or university?
A)The indirect method.
B)The direct method.
C)Either the direct or indirect method.
D)The worksheet method.
4
Which of the following is a typical source of revenue for both nongovernmental not-for-profit and public colleges and universities?
A)Federal grants and contracts.
B)Tuition and fees.
C)Investment income.
D)All of the above.
5
A wealthy alumna pledged $1,000,000 for stem cell research, payable in full the following year, with the intent that research not commence until the pledge is paid. Her pledge would be recorded as a revenue in the current year by:

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A)A
B)B
C)C
D)D
6
The appropriate classification of net assets on the statement of financial position for a nongovernmental not-for-profit college or university includes the categories of:
A)Unrestricted, reserved, and permanently restricted.
B)Unrestricted, restricted, and net investment in capital assets.
C)Temporarily restricted, permanently restricted, and unrestricted.
D)Unreserved fund balance, reserved fund balance.
7
A statement of cash flows prepared for a nongovernmental not-for-profit college or university following FASB standards:
A)Must use the indirect method.
B)May use the direct or indirect method.
C)Must use the direct method.
D)None of the above.
8
NACUBO provides guidance to colleges and universities that causes the reporting for nongovernmental not-for-profit colleges and universities to differ from that of nongovernmental voluntary health and welfare organizations. Which of the following would be reported differently by a voluntary health and welfare organization and a nongovernmental not-for-profit college?
A)An increase in estimated uncollectible receivables.
B)Depreciation expense on buildings and equipment.
C)Division of expenses into program and support functions.
D)Grant revenue restricted for a specific purpose.
9
Which of the following is a reporting difference between a governmental college following GASB standards for business-type reporting and a nongovernmental not-for-profit college following FASB standards?
A)The requirement that revenues and expenses be reported on the accrual basis.
B)The requirements for non-recognition of works of art and historical treasures on the financial statements.
C)The requirement that investments be reported at fair value.
D)The requirement that revenues and expenses be reported as operating and non-operating.
10
Near the end of the current fiscal year, Southeastern University, a governmental university, collected tuition and fees in the amount of $50,000 for classes that will be held early in the following fiscal year. The required journal entry to record this transaction is:

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A)A
B)B
C)C
D)D
11
A bequest of $35,000 in securities was made to Snow Mountain College, a nongovernmental not-for-profit college. The decedent specified that both principal and interest were to be used for student loans. The required journal entry to record this transaction is:

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A)A
B)B
C)C
D)D
12
Western University, a nongovernmental not-for-profit university, received gifts of $2,000,000 for which the donors have stipulated that the principal must remain intact in perpetuity and the investment income is restricted for scholarships and fellowships. The journal entry to record the receipt of these gifts:

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A)A
B)B
C)C
D)D
13
An agreement in which the donor receives a pro rata share of the investment income earned by the university on the donor's contribution best defines which of the following?
A)Split-interest agreement.
B)Annuity agreement.
C)Life income fund.
D)Quasi-charitable trust agreement.
14
Which of the following is an example of a split-interest agreement?
A)Term endowment.
B)Quasi-charitable trust agreement.
C)Permanent endowment.
D)Pooled (life) income fund.
15
Student groups and other campus groups deposited an additional $150,000 of organization funds with the University; $120,000 was withdrawn; and $40,000 in cash was invested for the long term. Assuming a nongovernmental not-for-profit college, the journal entry(ies) that capture these transactions is (are):

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A)A
B)B
C)C
D)D
16
At the end of the year, the account Academic Support Expense in a nongovernmental not-for-profit college or university is closed to:
A)Net Assets—Unrestricted.
B)Net Assets—Temporarily Restricted.
C)Revenues—Tuition and Fees.
D)Net Assets—Released from Restrictions—Unrestricted.
17
Funds received from an external donor are to be used solely for the purchase of library books. The donation would result in an increase to:
A)Unrestricted net position in a governmental university.
B)Temporarily restricted net assets in a nongovernmental not-for-profit university.
C)Unrestricted net position/assets in a governmental or nongovernmental not-for-profit university, respectively.
D)Permanently restricted net assets in a nongovernmental not-for-profit university.
18
Which of the following statements is not true about auditing colleges and universities?
A)Colleges and universities must have audits done by external auditors following generally accepted governmental auditing standards (GAS or GAGAS).
B)Universities that expend more than $500,000 in federal financial assistance in a year must have a single audit.
C)Guidance over spending federal money is provided in both Circular A-21 (Cost Principles) and A-110 (Administrative Requirements) from the Office of Management and Budget.
D)OMB Circular A-133 provides guidance for auditors performing a single audit for a college or university.
19
Which of the following statements most accurately reflects how federal sponsored research funds awarded to a university are to be recorded?
A)Universities should record federal research funds awards as exchange transactions.
B)The terms of a federal sponsored research funds award should dictate whether funds are recorded as an exchange or nonexchange transaction.
C)Universities should record federal research funds awards as nonexchange transactions.
D)Universities with an established policy on classifying federal sponsored research funds awards as exchange transactions should record federal sponsored research fund awards as exchange transactions.
20
Which of the following statements concerning the Uniform Prudent Management of Institution Funds Act (UPMIFA) is correct?
A)All nongovernmental not-for-profit entities are required to comply with the provisions of the act.
B)The act sets an investment risk level for entities to ensure contributed assets are not placed in overly risky investments.
C)The act sets a spending rate equal to 5 percent of the average three-year return earned on investments.
D)The act provides guidance on conditions under which a not-for-profit can modify restrictions placed on net assets.







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