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yukagin
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| Posted: 13 Feb 2011 at 06:31 | IP Logged
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In Year 1, Community Helpers, a private voluntary health
and welfare organization, received a bequest of a
$100,000 certificate of deposit maturing in Year 11. The
testator's only stipulations were that this certificate
be held until maturity and that the interest revenue be
used to finance salaries for a preschool program.
Interest revenue for Year 11 was $8,000. When the
certificate was redeemed, the board of trustees adopted a
formal resolution designating $20,000 of the proceeds for
the future purchase of equipment for the preschool
program. What should be reported in the Year 11 year-end
statement of financial position?
a.Temporarily restricted net assets (for purchase of
equipment), $20,000; unrestricted net assets, $80,000.
b.Unrestricted net assets, $100,000.
c.Net assets temporarily restricted - designated for
preschool program salaries, $8,000. Unrestricted net
assets, $100,000.
d.Temporarily restricted assets - designated for
preschool program, $28,000; Net assets unrestricted,
$80,000.
The answer is B. I understand that the 100K is
unrestricted after the CD matures, but I thought at first
the answer would be C because the interest income is
supposed to be used to finance salaries for the preschool
program which would make it temporarily restricted? Why
is this not included? Thanks. The becker explanation says
that the $8000 interest has been expensed to finance
current period salaries. Where does that come from based
on the facts in the question?
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jiejenn
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| Posted: 13 Feb 2011 at 10:25 | IP Logged
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Only the donor has the right to restrict the fund.
the board of trustees adopted a
formal resolution designating $20,000 = the party who received the donation (not the party who donate the fund).
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garyboy86
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| Posted: 13 Feb 2011 at 13:21 | IP Logged
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jiejenn wrote:
Only the donor has the right to restrict the fund.
the board of trustees adopted a
formal resolution designating $20,000 = the party who received the donation (not the party who donate the fund).
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this is not he was asking,thanks. Pls be more careful next time!
he is confused with the interest income amount $8,000 in CD which was designated by the donar that must be use on the preschool program salary, not on the $20,000 proceeds!!!!
As far as i concern the $8,000 should be included in the temp restricted column
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MAII
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| Posted: 13 Feb 2011 at 18:25 | IP Logged
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Since the restriction of the 100,000 CD expires in 2011, you would do a reclassification of the 100,000. Reduce temp restricted and increase unrestricted of 100,000. Since the 8000 interest revenue is also expires in year 11 it is released from restriction. it should be recorded as increase to unrestricted. However, since it's to be used to finance salaries for preschool program, it would also be recorded as an expense to unrestricted. So, the increase and decrease of the 8000 would be a net of zero. Leavng unrestricted of 100,000.
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MAII
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| Posted: 13 Feb 2011 at 18:27 | IP Logged
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the 8k would no longer be considered temp. restricted because the restriction is until the CD matures, which it did in year 11.
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Topic: need help with NFP question (F9supp.)
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