Which of the Following Statements About a Not-For-Profit Firm's Ownership

question 4

Multiple Choice

Which of the following statements about a not-for-profit firm's ownership is most correct?

• A) The residual earnings (profits) of not-for-profit firms can be distributed to the firm's top managers.
• B) Not-for-profit firms are exempt from federal taxes, but they must pay state and local taxes, including property taxes.
• C) Upon liquidation of a not-for-profit firm, the proceeds from the sale of its assets are distributed, on a pro rata basis, to the firm's employees.
• D) None of the profits are used for private inurement.
• E) Not-for-profit firms are governed by a board of trustees whose members are elected by the community at large.

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Definitions:

Gain on Disposal

Gain on disposal refers to the financial profit made from selling an asset for more than its carrying amount on the books.

Market Value

The current price at which an asset or service can be bought or sold in an open market.

Book Value

The book value of an asset is its value on a balance sheet, calculated by subtracting any depreciation, amortization, or impairment costs from its original cost.

Salvage Value

The forecasted residual worth of an asset at the conclusion of its serviceable life.