|Posted: 22 Aug 2009 at 22:07 | IP Logged
In 1991, Community Helpers, a private voluntary health and welfare organization, received a bequest of a $100,000 certificate of deposit maturing in 2001. 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 2001 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 2001 year-end statement of financial position?
b. Unrestricted net assets, $100,000.
c. Net assets temporarily restricted - designated for preschool program salaries, $8,000. Unrestricted net assets, $100,000.
The answer says "b" but I don't know why c is wrong. In the fact pattern it indicates in nowhere that the salaries were spent in 2001.
In 1995, Gamma, a not-for-profit organization, deposited at a bank $1,000,000 given to it by a donor to purchase endowment securities. The securities were purchased January 2, 1996. At December 31, 1995, 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 1996. At December 31, 1995, what amount of the bank balance should be included as current assets in Gamma's classified balance sheet?
answer is Choice "b" is correct. Since the external donor restricted the $1,000,000 gift for the purchase of endowment securities, that deposit is restricted cash and a non-current asset. The earnings on the endowment is designated by the external donor for ongoing program expense. As such, it is unrestricted cash and a current asset.
Why is the 2000 cash unrestricted? Only because it's to finance ongoing programs expenses? Then what about another question in becker:
During the current year, a voluntary health and welfare organization receives $300,000 in unrestricted pledges. Of this amount, $100,000 has been designated by donors for use next year to support operations. If 15% of the unrestricted pledges are expected to be uncollectible, what amount of unrestricted support should the organization recognize in its current-year financial statements?
answer is d. It's not including the $100,000 because the $100,000 "is effectively temporarily restricted by the time restriction limiting the use of the funds to the following year."
according to this logic, then that 2000 interest should also be restricted because of time (it's only going to be used the next year), but it's still considered current, is it because it's designated to be used the next year?
1). if cash is rec'd and designated by donor to be used in programs and operations, it's considered unrestricted; even if it's restricted, it's because of time (e.g. will be used to support next year's operaitons);
2). whether restricted cash is current or not depends on when it will be used. if it's going to be used the next year then it's current, otherwise noncurrent.
Am I correct? If I'm correct then becker's explanation about the intrest is wrong, that's why I need confirmation.
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