For a number of years, a private not-for-profit entity has been preparing financial statements that do not necessarily follow generally accepted accounting principles. At the end of the most recent year (Year 2), those financial statements show total assets of $900,000, total liabilities of $100,000, total unrestricted net assets of $400,000, total temporarily restricted net assets of $300,000, and total permanently restricted net assets of $100,000. In addition, total expenses for the year were $500,000 (shown in unrestricted net assets). During Year 1, the entity above received a gift of $80,000. The donor specified that this money be invested in government bonds with the interest to be used to pay the salaries of the entity’s employees. The gift was recorded as an increase in permanently restricted net assets. It earned interest income of $5,000 during Year 1 and $7,000 during Year 2. The entity reported this interest on the statement of activities as an increase in unrestricted net assets. In both cases, the money was immediately expended for salaries, amounts that were recorded as expenses within unrestricted net assets. No other entries were made in connection with these funds.a. What was the correct amount of unrestricted net assets at the end of Year 2?b. What was the correct amount of expenses in unrestricted net assets for Year 2?c. What was the correct amount of temporarily restricted net assets at the end of Year 2?
For a number of years, a private not-for-profit entity has been preparing financial statements that do not necessarily follow generally accepted accounting principles. At the end of the most recent year (Year 2), those financial statements show total assets of $900,000, total liabilities of $100,000, total unrestricted net assets of $400,000, total temporarily restricted net assets of $300,000, and total permanently restricted net assets of $100,000. In addition, total expenses for the year were $500,000 (shown in unrestricted net assets).
During Year 1, the entity above received a gift of $80,000. The donor specified that this money
be invested in government bonds with the interest to be used to pay the salaries of the entity’s employees. The gift was recorded as an increase in permanently restricted net assets. It earned interest income of $5,000 during Year 1 and $7,000 during Year 2. The entity reported this interest
on the statement of activities as an increase in unrestricted net assets. In both cases, the money was immediately expended for salaries, amounts that were recorded as expenses within unrestricted net
assets. No other entries were made in connection with these funds.
a. What was the correct amount of unrestricted net assets at the end of Year 2?
b. What was the correct amount of expenses in unrestricted net assets for Year 2?
c. What was the correct amount of temporarily restricted net assets at the end of Year 2?
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