Question

Select from the option list provided the most likely classification(s) of net assets, if any, that are affected by each transaction of a not-for-profit entity. The entity reports the minimum required classes of net assets. Each choice may be used once, more than once, or not at all.

1. Legally restricted gains.
2. Expenses reported by functional classification.
3. Contributions of services that do not create or enhance nonfinancial assets or require special skills.
4. Costs of collection items not capitalized by the NFP.
5. Board-designated endowment.
6. Expenses reported by natural classification.
7. Conditional promise to give if the barrier has not been overcome.
8. Unconditional promises to give cash with amounts due in future periods.
9. Receipt of a gift restricted to acquisition of a long-lived asset that has been placed in service. The entity chooses to imply a time restriction over the life of the asset.
10. Investment return on a donor-restricted perpetual endowment fund with no donor restriction on the investment return, which has not been appropriated by the governing board.
11. Losses on an underwater endowment fund.

a. Net Assets without Donor Restrictions
b. Net Assets with Donor Restrictions
c. Net Assets without Donor Restrictions or Net Assets with Donor Restrictions
d. Temporarily Restricted Net Assets
e. Permanently Restricted Net Assets
f. No Effect on Net Assets

Answer 1

1. Legally restricted gains

Classification: Net Assets without Donor Restrictions

2. Expenses reported by functional classification

Classification: Net Assets without Donor Restrictions

3. Contributions of services that do not create or enhance nonfinancial assets or require special skills

Classification: No Effect on Net Assets

4. Costs of collection items not capitalized by the NFP

Classification: No Effect on Net Assets

5. Board-designated endowment

Classification: Net Assets without Donor Restrictions

6. Expenses reported by natural classification

Classification: Net Assets without Donor Restrictions

7. Conditional promise to give if the barrier has not been overcome

Classification: No Effect on Net Assets

8. Unconditional promises to give cash with amounts due in future periods

Classification: Temporarily Restricted Net Assets

9. Receipt of a gift restricted to acquisition of a long-lived asset that has been placed in service. The entity chooses to imply a time restriction over the life of the asset

Classification: Net Assets with Donor Restrictions

10. Investment return on a donor-restricted perpetual endowment fund with no donor restriction on the investment return, which has not been appropriated by the governing board

Classification: Net Assets with Donor Restrictions

11. Losses on an underwater endowment fund

Classification: Net Assets with Donor Restrictions