A not-for-profit organization receives a restricted contribution of $20,000 to be used for a specific project. During the current year, $14,000 is spent toward the project with the balance to be spent next year. What will the net asset balance in the restricted fund be at the end of the year if the organization uses the restricted fund method for reporting and had a fund for this project?

Question

Quizplus · Accepted Answer

Since the organization uses the restricted fund method, the $20,000 contribution is recorded as a liability until it is used for the specific project. When $14,000 is spent on the project, the liability is reduced by $14,000, leaving a balance of $6,000. Therefore, the net asset balance in the restricted fund at the end of the year is $6,000.

A Not-For-Profit Organization Receives a Restricted Contribution of $20,000 to Be