ExpertMedium1 markMultiple Choice
CPA · Question 04 · Area I: Financial Reporting
A nongovernmental not-for-profit entity reports the following cash flows for the current year:<br/><br/>- Cash received from donors restricted for long-term endowment: $100,000<br/>- Cash received from tuition fees: $400,000<br/>- Cash paid for salaries: $250,000<br/>- Cash received from interest on investments (unrestricted): $15,000<br/>- Cash paid to acquire equipment: $60,000<br/><br/>What is the net cash provided by operating activities?
A nongovernmental not-for-profit entity reports the following cash flows for the current year:<br/><br/>- Cash received from donors restricted for long-term endowment: $100,000<br/>- Cash received from tuition fees: $400,000<br/>- Cash paid for salaries: $250,000<br/>- Cash received from interest on investments (unrestricted): $15,000<br/>- Cash paid to acquire equipment: $60,000<br/><br/>What is the net cash provided by operating activities?
Answer options:
A.
$265,000
B.
$105,000
C.
$165,000
D.
$205,000
How to approach this question
Classify each item: Tuition (Operating), Salaries (Operating), Interest received (Operating), Endowment restriction (Financing), Equipment (Investing). Sum the Operating items.
Full Answer
C.$165,000✓ Correct
Operating Activities:<br/>+ Tuition Fees: $400,000<br/>- Salaries: ($250,000)<br/>+ Interest Income: $15,000<br/>Net Operating: $165,000.<br/><br/>Note: The endowment contribution is a Financing activity. The equipment purchase is an Investing activity.
Common mistakes
Classifying restricted contributions for long-term purposes as operating; classifying interest income as investing (it is operating under US GAAP); classifying equipment purchase as operating.
Practice the full CPA FAR Practice Exam 4
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