The Save the Animals Foundation received a gift of $500,000 from a donor who wanted the gift used to acquire habitat for endangered snails.The money may be invested but all earnings are restricted to habitat acquisition.During the year all of the gift was invested in corporate securities.At year-end, the securities had a value of $501,0000.The appropriate way to recognize the change in fair value is

Question

Quizplus · Accepted Answer

The donor has specified that the earnings from the investment of the gift should be restricted to habitat acquisition for endangered snails. Therefore, the earnings are temporarily restricted until they are used for the specified purpose. The increase in fair value of the investment should be recognized with a debit to Investment and a credit to Temporarily Restricted Revenue, as the earnings are restricted for a specific purpose and not yet available for use in the organization's normal activities.

The Save the Animals Foundation Received a Gift of $500,000