[Biff-1955-Tannen]

FAR question 1662

The securities weren’t purchased until year 2, so why would the $1,000,000 in cash at year end not be a current asset?

In Year 1, Gamma, a not-for-profit organization, deposited at a bank $1,000,000 given by a donor to pur­chase endowment securities. The securities were purchased January 2, Year 2. At December 31, Year 1, the bank recorded $2,000 interest on the deposit. In accordance with the bequest, this $2,000 was used to finance ongoing program expenses in March of Year 2. At December 31, Year 1, what amount of the bank balance should be included as current assets in Gamma’s statement of financial position?

A.

$0

B.

$2,000

C.

$1,000,000

D.

$1,002,000

Answer is B.

“In this situation, the income from the endowment is available to fund current program expenses (those incurred within the year). Since the principal of the endowment is now in security investments (which are not current assets), only the income related to the investment is current, since it is intended to be expended within the coming year.”

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[monikernc]

It is the restriction on the cash that makes it noncurrent. See the assets paragraph here:
https://www.gasb.org/jsp/GASB/GASBContent_C/UsersArticlePage&cid=1176156736184

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Biff-1955-Tannen]

Ahhh ok. Got it. Thanks

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[monikernc]

i can't tell you how glad i am to have BEC behind me. i had no idea what score to expect but will take what i got and move on to REG. Dropping off my NTS app at board and buying my materials today to get cranking. this is taking way too long.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[nib]

@ Biff-1955-Tannen

pls check my u/s ,

unrestricted assets do relate to current assets because they can be spent for ongoing program expenses within the current period.
The $1,000,000 would be a permanently restricted asset which would be non-current because it cannot be spent in the current period. .

[Author]

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