During the year, a state-owned university received a $5 million gift. The donor specified that the principal of the gift must be held intact for 3 years, but the earnings from the gift can be used to support technology improvements in the college of business. At the end of the 3 years, the donor together with the university president and the college dean will decide how the $5 million gift can be used. The university will report the gift in what type of fund?
A) Permanent fund.
B) Private-purpose trust fund.
C) Plant fund.
D) Special revenue fund

Question

Quizplus · Accepted Answer

The correct answer is A) Permanent fund. This is because the principal amount of the gift must be held intact, which is a characteristic of a permanent fund. Permanent funds are used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs—that is, for the benefit of the government or its citizenry. In this case, the earnings from the $5 million gift can be used for technology improvements in the college of business, fitting the criteria for a permanent fund.

During the Year, a State-Owned University Received a $5 Million