The governing board of a hospital operated by a religious organization designated $3,000,000 of cash to be used for plant expansion.The cash was invested in stocks and bonds which earned $250,000 of dividend and interest income.The income from investments should be reported on the hospital's statement of operations as an increase in:
A) temporarily restricted net assets.
B) operating income.
C) either temporarily restricted net assets or unrestricted net assets, depending upon the nature of the governing board's restrictions.
D) fund balance in the general fund.

Question

Quizplus · Accepted Answer

The $250,000 of dividend and interest income should be reported as part of the hospital's operating income, as it is a result of the hospital's investing activities and not restricted for a specific purpose. The fact that the cash was designated for plant expansion does not change the nature of the income earned from investing it.

The Governing Board of a Hospital Operated by a Religious