Katerah College, a private college, received a $1 million donation.The donor specified that the principal of her gift could never be used for program activities but the earnings on the principal must be used to provide scholarships to academically qualified students in the business school.The $1 million gift would increase which of the following categories of net assets?

Question

Quizplus · Accepted Answer

The donation is stipulated for a specific purpose, which is to provide scholarships to academically qualified students in the business school. Therefore, it falls under the category of permanently restricted net assets. The principal cannot be used for any other purpose, and only the earnings on the principal can be used to provide scholarships.

Katerah College, a Private College, Received a $1 Million Donation