Not for profit part two new beckers f6m2

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School

Henderson State University *

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Course

3063

Subject

Finance

Date

Jan 9, 2024

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docx

Pages

9

Uploaded by LieutenantGalaxyKangaroo40

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The Jackson Foundation, a not-for-proft organization, received contributions in Year 1 as follows: + Cash contributions of $500,000 without donor restrictions. + Cash contributions of $200,000 with donor restrictions. with specific requirements relative to the acquisition of property. Jackson's statement of cash flows in Year 1 should include which of the following amounts? Operating Investing Financing sctuities sctiities sctivities A. 700,000 so s0 B. 5500000 $200,000 s0 - lc. ss00,000 s 200,000 o. so 500,000 520,000 Choice "C is correct. The cash contributions without donor restrictions totaling 500,000 are reported as increases in operating activities in the statement of Cash flows. The $200,000 cash Contributions. with donor restrictions are reported as increases in financing activities because the restriction is the acquisition of property, not general operations. Choices “A", “B", and "D" are incorrect, per above.
How should a nongovernmental, not-for-profit organization report amounts paid for interest in a statement of cash flows prepared using the indirect method? A B. c. o. As a disclosure in the required supplemental information section of the financial statements. As a supplemental disclosure of cash flow information As a cash flow from operating activities As a cash flow from investing activities Explanation Choice "B" is correct. As with commercial accounting, a cash flow statement prepared using the indirect method will not present cash payments for interest as a separate line item in the cash flow from operations section of the cash flow statement. Interest paid will be specifically included as a supplemental disclosure. Choice “A" is incorrect. Required supplemental information (RSI) is a section included in the reporting for governmental entities. Choice "C" is incorrect. While interest paid is categorized as a cash flow from operations, it will only be shown under the indirect method as a supplemental disclosure. Choice "D~ is incorrect. Interest paid is a cash outflow from operations activity.
A cash contribution without donor restrictions should be reported in a nongovernmental not-for-profit organization's statement of cash flows as an inflow from: A. Operating activities. B. Investing activities. C. Financing activities. D. Capital and related financing activities. Explanation Choice A" is correct. Cash flows from operating activities in a nongovernmental not-for-profit organization include applicable agency transactions, cash contributions without donor restrictions, program income, and interest income or dividend income from investments. Choices "B”, °C", and "D~ are incorrect, per above.
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Famous, a nongovernmental not-for-profit art museum, has elected not to capitalize ts donated permanent collections. In Year 1, a bronze statue was stolen. The statue was not recovered and insurance proceeds of $35,000 were paid to Famous in Year 2. This transaction would be reported in. L The statement of activities as revenues without donor restrictions. I The statement of cash flows as cash flows from investing activities. A. lonly. < B Nony c. Bothlandi D. Neither Inor il Explanation Choice "B~ is correct. Investing activities in the statement of cash flows should include proceeds from the sale of long lived assets or insurance proceeds associated with the loss of long lived assets. Entities that do not capialize their permanent collections display insurance proceeds from lost, stolen or damaged ftems on the statement of activities in an appropriate change in net asset classification separate from revenues, expenses, gains, and losses. Contributed collection tems should not be recognized as revenues or gains if collections are not capitalized. Cash flows from purchases, sales, and insurance recoveries of unrecognized, noncapitaiized collection items should be reported as investing activities in a statement of cash flows. A not-for_profit organization that does not recognize and capitaiize its collections should report the following on the face of its Statement of activities separately from revenues, expenses, gains, and losses: + Costs of collection ftems purchased as a decrease in the appropriate class of net assets + Proceeds from sale of collection items as an increase in the appropriate class of net assets. + Proceeds from insurance recoveries of lost or destroyed collection items as an increase in the appropriate class of net assets
The Appleton Museum, a not-for-profit organization, sells a painting donated to ts collection to a private investor. The museum plans. 10 use the proceeds associated with the sale to purchase additional works of art for display. In its statement of cash flows, the. museum typically would display proceeds from the sale as cash flows from: A. Operating activities. B. Investing activities. €. Financing activities. D. Donor-restricted resources, which are not displayed on the face of the statement of cash flows. Explanation Rule: Investing activities include proceeds from the sale of works of art or purchases of works of art. Choice "B~ is correct. Sales of collections are displayed on the statement of cash flows within investing activities Choices "A", “C", and "D~ are incorrect, per the above explanation.
Box, a nongovernmental not-for-profit organization, had the following transactions during the year: Proceeds from sale of investments s 80,000 Purchase of property, plant, and equipment S 10,000 Proceeds from long-term debt $100,000 Loss on sale of investment s s.000 What amount should be reported as net cash provided by financing activities in Box's statement of cash flows? A. 570,000 B. 575000 c. sso000 - b si00000 Explanation Choice D" is correct. The issuance of long-term debt results in a cash inflow to the organization. Proceeds from long-term debt provide $100,000 of cash that will be classified as a cash flow from financing activity.
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A not-for-profit voluntary health and welfare organization shouk report a contribution for the construction of a new buikding as cash flows from which of the following in the statement of cash flows? A. Operating activities. B. Financing activities. C. Capital financing activities. D. Investing activities. Explanation Choice "B" is correct. Cash received with donor-imposed restriction limiting its use to long-term purposes (such as construction of a new builing) is displayed as a financing activity on the statement of cash flows of a not-for-profit organization. Choice "A" is incorrect. Cash received with donor imposed restrictions limiting its use to long term purposes is a financing activity, not an operating activity, on the statement of cash flows of a not-for-profit organization. Operating activities include cash received for purposes without donor restrictions or used in the central ongoing activities of the organization. Choice "C" is incorrect. This is a distracter. There is no classification in the statement of cash flows used for not for profit organizations entitied “Capital financing activities.” This classification is used in the statement of cash flows prepared for a proprietary fund of a government. Choice D" is incorrect. Cash received with donor imposed restrictions imiting its use to long term purposes is a financing activity, not an investing activity, on the statement of cash flows of a not-for-profit organization. Investing activities include Sources of cash from the sale of long lived assets or uses of cash associated with the acquisition of long lived assets.
A nongovernmental not-for-profit organization borrowed $5,000, which #t used to purchase a truck. In which section of the organization's statement of cash flows should the transaction be reported? A. Incash inflow and cash outflow from investing activities. B. In cash inflow and cash outflow from financing activities. €. I cash inflow from financing activities and cash outflow from investing activities. D. In cash inflow from operating activities and cash outflow from investing activities. Explanation Choice "C” is correct. For a nongovernmental not-for-profit organization, the borrowing would be a cash inflow from financing activities, and the purchase of the truck would be a cash outflow from investing activities. For a nongovernmental not-for-profit organization, the commercial format for the statement of cash flows is followed. Choice "A" is incorrect. The cash inflow for the borrowing is a financing activity, not an investing activity. Choice "B” is incorrect. The cash outflow for the purchase of the truck is an investing activity, not a financing activity. Choice "D" is incorrect. The cash inflow for the borrowing is a financing activity, not an operating activity.
Zokro, a nongovernmental not-for-profit organization, uses the indirect method to prepare its statement of cash flows. In determining s net cash provided (used) by operating activities, Zokro must add back which of the following to the change in net assets? A. Purchase of equipment. B. Payment on long-term debt. C. Depreciation D. Decrease in accounts payable. Explanation Choice “C" is correct. A not-for-profit organization can prepare its statement of cash flows using the direct or indirect method. Assuming that Zokro uses the indirect method, depreciation is added back to the change in net assets because it represents a noncash expense. Choice A" is incorrect. Purchases of equipment are considered cash outflows from investing. Choice "B" is incorrect. Payments on long-term debt are considered cash outflows from financing. Choice "D~ is incorrect. A decrease in accounts payable implies that cash payments were made to vendors. As such, this. would result in a cash outflow and a subtraction from the change in net assets.
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