[agripper]

A not-for-profit voluntary health and welfare entity received a $500,000 permanent endowment. The donor stipulated that the income must be used for a mental health program. The endowment fund reported $60,000 net decrease in market value and $30,000 investment income. The organization spent $45,000 on the mental health program during the year. What amount of change in temporarily restricted net assets should the organization report?

A.

$75,000 decrease.

B.

$15,000 decrease.

Correct C.

$0

D.

$425,000 increase.

You are correct, the answer is C.

FASB ASC 958-225-45-1 through 45-8 requires that all expenses be reported in the unrestricted category. Only net assets released from restriction reduce temporarily restricted revenue. In this problem the $30,000 investment income would increase temporarily restricted net assets and the release-from-restriction reclassification would reduce it $30,000. The $15,000 additional amount spent would come from unrestricted resources. The decrease in market value would affect only the endowment fund (classified as permanently restricted).

[pryambudhi cahyadi]

$60,000 decrease in market value => classified as permanently restricted
$30,000 investment income => temporarily restricted net asset => add $30,000

$45,000 spending on mental health program => should reduce our temporarily restricted net asset

Temporarily restricted = add $30,000 from investment income less 30,000 from mental health program = $0

Remaining $15,000 spending on mental health program => reduce unrestricted

[Author]

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