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For a number of years, a private not-for-profit entity has been preparing financial statements that do not necessarily conform to U.S. generally accepted accounting principles.
For a number of years, a private not-for-profit entity has been preparing financial statements that do not necessarily conform to U.S. 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, net assets without donor restriction of $400,000, and net assets with donor restrictions of $400,000. This last category is composed of $300,000 in net assets with purpose restrictions and $100,000 in net assets that must be permanently held. At the end of Year 1, financial statements show total assets of $700,000, total liabilities of $60,000, net assets without donor restriction of $340,000, and net assets with donor restrictions of $300,000. This last category is composed of $220,000 in net assets with purpose restrictions and $80,000 in net assets that must be permanently held. Total expenses for Year 2 were $500,000 and reported under net assets without donor restrictions. Each part that follows should be viewed as an independent situation. Assume that during Year 1, the entity receives a cash gift of $80,000. The donor specifies that this money be invested in U.S. jovernment bonds with the income to be used to help pay the salaries of the entity's employees. The gift is recorded as an increase in let assets with donor restrictions. The investments earn $5,000 during Year 1 and $7,000 during Year 2 . The entity reports these Imounts on the statement of activities as increases in net assets without donor restrictions. In both cases, the entity immediately expends the money for salaries, amounts that are recorded as expenses within net assets without donor restrictions. No other journal entries are made in connection with this donation and the income it earns. Required: a. What is the appropriate amount of net assets without donor restrictions to be reported at the end of Year 2? o. What is the appropriate amount of expenses to be reported under net assets without donor restrictions for the year ending December 31, Year 2? c. What is the appropriate amount of net assets with donor restrictions to be reported at the end of Year 2
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