A Donor Contributed $1,000,000 to a Not-For-Profit Hospital with the Restriction

question 78

Multiple Choice

A donor contributed $1,000,000 to a not-for-profit hospital with the restriction that the funds be invested indefinitely and the income be used for cancer research. Which of the following would be true?

• A) The gift would be recorded as an increase in permanently restricted net assets.
• B) The income from the endowment would be recorded as an increase in temporarily restricted net assets.
• C) Both a) and b) above.
• D) Neither a) nor b) above.

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Definitions:

Invested Assets

Resources that are obtained with the goal of producing income or profit.

Operating Income

Income generated from the normal business operations of a company, excluding expenses such as interest and taxes.

DuPont Formula

A formula that breaks down Return on Equity (ROE) into three components: profit margin, asset turnover, and financial leverage, to analyze a company's financial performance.

Profit Margin

Profit margin is a financial metric showing the percentage of revenue that remains as profit after all operating expenses are deducted from sales.