Question

In: Accounting

Net assets are recategorized from net assets with donor restrictions to net assets without donor restrictions...

Net assets are recategorized from net assets with donor restrictions to net assets without donor restrictions for which one of the following reasons?

a.Increase in the present value of a promise to contribute

b. Increase in the fair value of investments

c. Collection of promised contributions

d. Board-designated resources are used for the designated purpose

Solutions

Expert Solution

Net assets without donor restrictions

If a donor does not specify a restriction on his or her contribution, the amount received by the nonprofit is recorded as an asset and as contribution revenues. Unrestricted contribution revenues (reported on the statement of activities) also cause the amount of net assets without donor restrictions to increase.

Net assets with donor restrictions

If a nonprofit receives a contribution that has a donor-imposed restriction, the amount is usually recorded as an asset and as donor-restricted contribution revenues. Donor-restricted contribution revenues (reported on the statement of activities) also cause the amount of net assets without donor restrictions to increase.

The process for moving funds from the “with donor restriction” category to the “without donor restriction” category is referred to as “releasing (funds) from restriction.” When the funds are used for its designated purpose the net assets are classified from net assets with donor restrictions to net assets without donor restrictions.

Therefore, option d is the correct answer.

ekkarill92 answered 1 year ago
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