Question

Previously a local charity received a $1 million gift, the income from which was restricted to support activities for senior citizens. During the current year the endowment earned $40,000 of interest revenues, of which the charity designated $30,000 to support senior citizen activities. On its year-end statement of financial position, the charity would report permanently restricted net assets of:

a) $1 million.
b) $1.04 million.
c) $1.03 million.
d) $1.01 million.

Answer 1

Answer: $1 million

Step-by-step explanation:

Permanently restricted net assets are the assets that are held by nonprofit organizations whereby the donors would have imposed some usage restrictions on such asset.

It should also b noted that permanent restrictions are also found when donors give out large sums of money to nonprofits. From the question, we are informed that local charity received a $1 million gift, the income from which was restricted to support activities for senior citizens.

Therefore, on its year-end statement of financial position, the charity would report permanently restricted net assets of $1 million.