Social Studies

Adan Barry

4 October, 07:47

Fact Pattern: Early in Year 2, a nongovernmental not-for-profit entity (NFP) received a $2,000,000 gift. The donor specified that the gift be invested in a permanent endowment, with income restricted to provide speaker fees for a lecture series named for the benefactor. The NFP is permitted to choose suitable investments and is responsible for all other costs associated with initiating and administering this series. Neither the donor's stipulation nor the law addresses gains and losses on this permanent endowment. In Year 2, the investments purchased with the gift earned $50,000 in dividend income. The fair value of the investments increased by $120,000.

Question: 7 The $2 million gift from the benefactor should be recorded in the Year 2 statement of activities as an increase in

Permanently restricted net assets.