Reference no: EM132949047

Problem 1: A private not-for-profit entity spends $100,000 to send a mailing that solicits donations and provides educational and other information about the charity. Which of the following is true?

Multiple Choice

Option 1: No part of the $100,000 can be reported as a program service expense.
Option 2: Some part of the $100,000 must be reported as a program service expense.
Option 3: No authoritative guidance exists, so the entity can allocate the cost as it believes best.
Option 4: Under certain circumstances, the entity should allocate a portion of the $100,000 to program service expenses.

Problem 2: A private not-for-profit entity sends a mailing to all of its current and former members regardless of whether they have ever donated money or not. The mailing has a total cost of $22,000. It asks for monetary contributions to help achieve the charity's stated mission. In addition, 80 percent of the mailed material is educational in nature, providing information about the entity's goals. Which of the following is true?

Multiple Choice

Option 1: Some part of the $22,000 should be reported as a program service cost because of the educational materials included.
Option 2: No part of the $22,000 should be reported as a program service cost because there is no specific call to action.
Option 3: No part of the $22,000 should be reported as a program service cost because the mailing was sent to both current and former members regardless of their donation history.
Option 4: Some part of the $22,000 should be reported as a program service cost because more than 50 percent of the material was educational in nature.