March 2014 - CPA EXAM Quiz – Answers and Explanations
 Net assets is an element of the financial statements of not-for-profit entities (NFPs). It
A. Net assets equal the residual interest in the assets of an entity that remains after subtracting its liabilities. For a business enterprise, equity (the ownership interest) is the analogue of net assets. In an NFP, which has no ownership interest in the same sense as a business enterprise, the net assets element is divided into three classes based on the presence or absence of donor-imposed restrictions. B. Equity and net assets are residuals.
C. Assets, not net assets, are probable future economic benefits obtained or controlled by aparticular entity as a result of past transactions or events.
D. Comprehensive income is the change in equity of a business enterprise during a periodfrom transactions and other events and circumstances from nonowner sources.
 Typical users of financial reports of nonbusiness entities include which of the following?
A. Constituents are typical users.
B. Governing and oversight bodies are typical users.
C. In addition to resource providers, constituents, and governing and oversight bodies, otherspotentially interested in the financial information provided by nonbusiness entities include managers, entity members, taxpayers, contributors, grantors, lenders, suppliers, creditors, employees, directors and trustees, service beneficiaries, financial analysts and advisers, brokers, underwriters, lawyers, economists, taxing authorities, regulatory authorities, legislators, the financial press, labor unions, trade associations, researchers, teachers, and students.
D. Resource providers are typical users.
 Evaluation of financial reporting by a not-for-profit entity should include which of the following considerations?
A. Not-for-profit entities often have no single indicator of performance comparable to abusiness entity’s net income.