Reference no: EM132949040

Problem 1: Why is a private not-for-profit entity more likely to use the direct method of reporting operating activity cash flows than a for-profit business would be?

Option 1: The direct method is the traditional approach for private not-for-profit entities.
Option 2: An indirect method reconciliation does not have to be included as it does with for-profit entities.
Option 3: The indirect method does not conform as easily with a private not-for-profit entity and its operations.
Option 4: The direct method is likely to show a more positive amount of operating activity cash inflows.

A private not-for-profit entity receives three large cash donations:

One gift of $87,000 is restricted by the donor so that it cannot be spent for four years.
One gift of $107,000 is restricted to pay the salaries of the entity's workers.
One gift of $137,000 must be held forever with the income to be used to provide food for needy families. In the current year, income of $27,000 was earned but not spent.

Problem 2: What is the increase in the current year in net assets with donor restrictions?

Multiple Choice

Option 1: $224,000
Option 2: $244,000
Option 3: $331,000
Option 4: $358,000