Sam Smith Died, Leaving a Will That Provided That $1,000,000

question 67

Multiple Choice

Sam Smith died, leaving a will that provided that $1,000,000 be transferred to a private not-for-profit college. The college is to invest the funds for 10 years and give $40,000 each year to the granddaughter. At the end of the 10 years, the $1,000,000 can be used for any purpose desired by the college. Which of the following is true?

• A) The college would record revenue in the amount of $1,000,000, increasing temporarily restricted net assets.
• B) The college would record revenue in an amount equal to the $1,000,000 less the present value of the 10 payments to the granddaughter.
• C) The college would record revenue in an amount equal to the present value of the 10 payments to the granddaughter.
• D) The college would not record revenue for 10 years; then a revenue would be recorded, increasing unrestricted net assets.

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