Question

2. In January 2016, the Free Cancer Foundation accepted an endowment of $500,000, the income from which is restricted to promoting research related to recovery from cancer. All gains, whether realized or unrealized are available for distribution. During 2016 the market value of endowment's investment portfolio increased to $520,000. Accordingly, at year-end $20,000 was credited to a temporarily restricted expendable fund. During 2017 the market value of the portfolio decreased to $480,000 and the foundation spent $12,000 on qualifying projects Owing to these events and transactions, what should be the reported net asset balance of the following categories during 2017 (assuming a zero beginning balance in unrestricted net assets): 1. Permanently restricted 2. Temporarily restricted 3. Unrestricted

Answer 1

1. Jan 2016

$500,000 is the amount of endowment which is an Asset having a restriction to use only for research related to recovery from cancer that makes it Temporarily Restricted Asset.

As Temporarily restricted net assets when the donor imposes restrictions as to purpose (how the asset is used) or time (when the asset is used)

$20,000 Gain on such Temporarily restricted assets are available for distribution and can be called as unrestricted. The non-profit often can use only the income from a permanently restricted net asset--not the principal.

2. In 2007

Permanently Restricted - NIL

Temporarily Restricted - $ 500,000 - 20,000 - 12,000 = 468,000

Unrestricted - $20,000.

any loss on underwater Endowment fund should be shown as temporarily restricted fund in negative column,