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 the entire gift was invested in corporate securities. At year-end, the securities had a value of $501,000. The appropriate way to recognize the change in fair value is

Question

Quizplus · Accepted Answer

The correct answer is B) Debit Investments $1,000; Credit Restricted revenue $1,000. This is because the earnings from the investment are restricted by the donor to be used for habitat acquisition for endangered snails, thus any increase in value of the investments should be recognized as restricted revenue.

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