A county receives $10,000,000 from a private foundation. The foundation requires

Question

A county receives $10,000,000 from a private foundation. The foundation requires that the county maintain the principal of this endowment, and income from its investment must be used to maintain county parks. The county reports activities related to this endowment in a permanent fund. During the year, the county invests the $10,000,000, earns investment income of $300,000, and spends $280,000 on park maintenance. At year-end, how does the permanent fund report fund balance?

A. Nonspendable $10,000,000 and restricted $20,000

B. Restricted $10,000,000 and committed $20,000

C. Restricted $10,000,000 and assigned $20,000

D. Nonspendable $10,000,000 and assigned $20,000

Explanation / Answer

Answer is option (D). Nonspendable $10000000 and assigned $20000

Explanation;

Nonspendable balance refers to those balances which need to kept intact and can not be spend. Hence as per information of the question it is clear that $10000000 is Nonspendable.

It is also clear that income must be spend on part maintenance hence remaining amount ($300000 – $280000) = $20000 will be classified as assigned.

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