ANSWER IS GIVEN, PLEASE EXPLAIN WHY

Local Services, a voluntary health and welfare organization had the following classes of net assets on July 1, 20X8, the beginning of its fiscal year: During the year ended June 30, 20X9, the following events occurred: (1) It purchased equipment, costing $100,000, with contributions restricted for this purpose. The contributions had been received from donors during June of 20X8. (2) It received $130,000 of cash donations which were restricted for research activities. During the year ended June 30, 20X9, $90,000 of the contributions were expended on research. (3) It sold investments classified in the permanently restricted class for a loss of $40,000. Dividends and interest income earned on the investments amounted to $70,000. There were no restrictions on how investment income was to be used. (4) It received cash contributions of $200,000 from donors who did not place either time or use restrictions upon their donations. (5) Expenses, excluding depreciation expense, for program services and supporting services incurred during the year ended June 30, 20X9, amounted to $260,000. (6) Depreciation expense for the year ended June 30, 20X9, was $80,000.

88. Refer to the above information. On the statement of activities for the year ended June 30, 20X9, temporarily restricted net assets: A. increased $130,000. B. increased $40,000. C. decreased $100,000. D. decreased $60,000.

Unrestricted Temporarily restricted Permanently restricted $500,000 100,000 1,000,000