The Following Gifts Are Received in Year One by a Not-For-Profit

question 4

Multiple Choice

The following gifts are received in Year One by a not-for-profit organization:
I. $2,000 specified by the donor to be used to pay salaries.
II. $10,000 for new conference room furniture.
III. $5,000 to be held for one year before being expended.
The salaries are paid in Year Two and the conference room furniture is purchased in Year One.
-How much should be shown as increases as Temporarily Restricted Net Assets in Year One?

• A) $2,000
• B) $7,000
• C) $12,000
• D) $15,000
• E) $17,000

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Definitions:

Static Budget

A fixed budget that does not change or adjust to variations in sales volumes or business activity levels throughout the period.

Activity Levels

Various measures of operations or production quantity, such as units produced or hours worked, which can impact costs and managerial decisions.

Overhead Cost

Expenses that are not directly tied to production activities, such as rent, utilities, and general office expenses.

Machine Hours

A measure of production time where costs are allocated to products based on the number of hours machines are used in their manufacturing.