Question: 37. A nongovernmental not-for-profit organization received a $2 million gift from a donor who specified it be used to create an endowment fund that would

37. A nongovernmental not-for-profit organization received a $2 million gift from a donor who specified it be used to create an endowment fund that would be invested in perpetuity.

The income from the fund is to be used to support a specific program in the second year and beyond. An investment purchased with the gift earned $40,000 during the first year. At the end of the first year, the fair value of the investment was $2,010,000. What is the net effect on temporarily restricted net assets at year-end?

a. $0

b. $10,000 increase.

c. $40,000 increase.

d. $50,000 increase.

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