Intermountain Hospital, a not-for-profit health care provider, issued $70 million in term bonds to finance construction of a new wing at its main hospital. Terms of the bond issue require that $5 million of the proceeds of the bond issue be invested in U.S. government securities. The $5 million must be held until maturity of the bonds. The $5 million will increase which class of net assets?

Question

Quizplus · Accepted Answer

The $5 million invested in U.S. government securities, as required by the terms of the bond issue, is designated for a specific purpose (to be held until maturity of the bonds) but is not restricted by donors. Therefore, it increases nonrestricted net assets, as the restriction is self-imposed by the organization's commitment related to the bond issue, not by an external donor's stipulation.

Intermountain Hospital, a Not-For-Profit Health Care Provider, Issued $70 Million