Question

On November 30, Year 1, Justin Barlow, an alumnus of Murry School, a private, not-for-profit high...

On November 30, Year 1, Justin Barlow, an alumnus of Murry School, a private, not-for-profit high school, contributed $15,000, with the stipulation that the donation be used for faculty travel expenses during Year 2. During Year 2, Murry spent all of the donation in accordance with Mr. Barlow's wishes. For the year ended December 31, Year 2, what was the effect of the donation on the two categories of net assets?

Net assets without donor restriction

Net assets with donor restriction

Increase

Decrease

No effect

Decrease

Increase

No effect

No effect

No effect

You Answered Correctly! (Answer is B, No effect, Decrease)

Correct! The use of the cash donation for faculty travel in Year 1 is reported as a reclassification on the high school's statement of activities for Year 2. Reclassifications are reported on the statement of activities as "net assets released from restrictions." Net assets released from restrictions of $15,000 are reported as a negative amount for net assets with donor restriction in Year 2, while net assets released from restrictions of $15,000 are reported as a positive amount for net assets without donor restriction in Year 2. However, the $15,000 of travel expense is reported on the statement of activities as an expense for Year 2. All expenses are reported on the statement of activities as decreases in net assets without donor restriction. This means that the use of the donation for faculty travel had no effect on net assets without donor restriction in Year 2. Note that, when the donation was received in Year 1, net assets with donor restriction increased by $15,000 on the statement of activities prepared for Year 1.

I don't understand why there would be no effect on net assets without a donor restriction and a decrease on net assets with a donor restriction regardless of the explanation above? Can please provide easier simpler explanation so I can understand why this is the answer please?

Homework Answers

Answer #1

Answer:  No effect ; Decrease

Net assets without donor restriction:- In Statement of Activities in case of without restriction the donation would have no effect in Year 1. So in Year 2 the donation of $15,000 will be added in net assets and the donation of $15,000 utilized as travel expense will be deducted from Net assets. So Net asset effect will be zero.

Net assets with donor restriction:- In Statement of Activities in case of with restriction the donation would have been added in the net assets in Year 1. So in Year 2 beginning balance, the net assets will be showing $15,000 extra. In Year 2 when the donation of $15,000 is utilized as travel expense. It will be deducted from Net assets. So Net asset in Year 2 will decrease the Net assets.

Kindly give me a ?.It helps me. Thanks!!

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On November 30, Year 1, Justin Barlow, an alumnus of Murry School, a private, not-for-profit high...
On November 30, Year 1, Justin Barlow, an alumnus of Murry School, a private, not-for-profit high school, contributed $15,000, with the stipulation that the donation be used for faculty travel expenses during Year 2. During Year 2, Murry spent all of the donation in accordance with Mr. Barlow's wishes. For the year ended December 31, Year 2, what was the effect of the donation on the two categories of net assets? Net assets without donor restriction Net assets with donor...
A not-for-profit organization maintains an endowment of $1 million, the income from which must be used...
A not-for-profit organization maintains an endowment of $1 million, the income from which must be used for research into substance abuse. In a particular year, the endowment had income of $60,000, all of which was expended in accord with the donor’s specifications. The expense should be reported as a decrease in It is not recorded because it is not an expense Net assets with donor restrictions Net assets without donor restrictions None of the answers
At the beginning of 2020, a donor makes a documented promise to contribute $10,000 per year...
At the beginning of 2020, a donor makes a documented promise to contribute $10,000 per year to a private NFP organization at the end of each of the years 2020, 2021, and 2022. The donor says the contribution may be used for any purpose, and the appropriate discount rate is 4%. The organization estimates that collections will be $9,000 per year for each of the three years. When the promise is recorded at the beginning of 2020, the allowance for...
At the beginning of 2020, a donor makes a documented promise to contribute $10,000 per year...
At the beginning of 2020, a donor makes a documented promise to contribute $10,000 per year to a private NFP organization at the end of each of the years 2020, 2021, and 2022. The donor says the contribution may be used for any purpose, and the appropriate discount rate is 4%. The organization estimates that collections will be $9,000 per year for each of the three years. When the promise is recorded at the beginning of 2020, the allowance for...
1.true / False question: Nonprofit museums never show the value of their art collections on their...
1.true / False question: Nonprofit museums never show the value of their art collections on their balance sheets. Multiple choice question Assume that the Alzheimer’s Foundation got money last year restricted for its research program, but did not spend the money last year. This year, it spends the money. Where on the statement of activities would this spending be reflected? Just as a program expense in the “without donor restrictions” column Just as a program expense in the “with donor...
The Ombudsman Foundation is a private not for profit organization providing training in dispute resolution and...
The Ombudsman Foundation is a private not for profit organization providing training in dispute resolution and conflict management. The Foundation had the following preclosing trial balance at December 31, 2017 the end of its fiscal year: debite credit Accounts payable ?23500 Accounts receivable net 45000 Accrued interest receivable 15500 Accumulated depreciation ?3250500 Cash 109000 Contributed services unrestricted ?25000 Contributions unrestricted ?2300000 Contributions temporarily restricted ?780000 Contributions permanently restricted ?2650000 current pledge receivable 75000 education program expenses 1505000 fund raising expense...
For Youth Agency (FYA) is a voluntary health and welfare organization that provides counseling and recreation...
For Youth Agency (FYA) is a voluntary health and welfare organization that provides counseling and recreation programs for youthful offenders and delinquents. FYA’s programs are financed through a contract with the county in which it is located and through contributions from local citizens. Its contract with the county provides for reimbursement of allowable costs based on monthly billings to the county. FYA uses the accrual basis of accounting, and the following transactions occurred during 2021: 1. FYA received cash in...
The following selected transactions apply to Topeca Supply for November and December Year 1. November was...
The following selected transactions apply to Topeca Supply for November and December Year 1. November was the first month of operations. Sales tax is collected at the time of sale but is not paid to the state sales tax agency until the following month. Cash sales for November Year 1 were $64,500 plus sales tax of 6 percent. Topeca Supply paid the November sales tax to the state agency on December 10, Year 1. Cash sales for December Year 1...
I am unsure of what is unclear. The instructions are: 1. Set up a worksheet for...
I am unsure of what is unclear. The instructions are: 1. Set up a worksheet for the solvency ratios--current ratio and the quick ratio. 2. Compute these ratios for Doctors Smith and Brown. To do so, you will need one additional piece of information that is not present on the doctors’ statements: their maximum annual debt service is $22,200. Practice Exercise 11–II: Solvency Ratios Refer to Doctors Smith and Brown’s financial statements presented in the preceding Chapter 10. Required 1....
Annapolis Company purchased a $2,000, 7%, 9-year bond at 99 and held it to maturity. The...
Annapolis Company purchased a $2,000, 7%, 9-year bond at 99 and held it to maturity. The straight line method of amortization is used for both premiums & discounts. What is the net cash received over the life of the bond investment? (all money received minus all money paid, round to nearest whole dollar) Ocean Pines Company had net income $475,000. They also had depreciation expense of $200,000, an increase or (decrease) in accounts receivable of $-30,000, and an increase or...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT