A private, not-for-profit hospital received a contribution of $40,000 on June 15, 20X8. The donor restricted the contribution to funding research activities currently being performed by the hospital. For the year ended December 31, 20X8, the hospital spent $30,000 of the contribution on research activities. The hospital expended the remaining $10,000 on research activities in January of 20X9.
-Refer to the above information.On the statement of operations prepared for the year ended December 31,20X8,the events described would:
A) increase operating income by $30,000.
B) have no effect on operating income.
C) increase unrestricted net assets by $30,000.
D) decrease unrestricted net assets by $30,000.

Question

Quizplus · Accepted Answer

The contribution was restricted for funding research activities which were already performed during the year. So, the hospital spent $30,000 on research activities which will be recorded as expenses in the statement of operations, leaving no impact on the operating income. The remaining $10,000 was spent on research activities in the following year, which will not be considered in the statement of operations for the current year. Therefore, there will be no effect on the operating income or unrestricted net assets.

A Private, Not-For-Profit Hospital Received a Contribution of $40,000 on June