On January $31,20$X$1,$ a nongovernmental not$-$for$-$profit entity $($NFP$)$ received a $$2$ million gift.

The donor specified that the gift be invested in perpetuity. The donor did not restrict the

investment return. But the Uniform Prudent Management of Institutional Funds Act $($UPMIFA$)$

applies to this perpetual endowment. For the year ending December $31,20$X$1,$ the

investments purchased with the gift earned $$50,000$ of dividend income. The fair value of the

investments increased by $$120,000.$

Early in $20$X$2,$ the directors decided to lobby for educational reforms. Lobbying fees were

$$90,000.$ The directors appropriated the $$50,000$ of dividend income to cover part of the total

fees. They used $$40,000$ of other unrestricted resources to pay the remainder of the fees.

The NFP$\text{'}$s policy is to report donor$-$restricted investment income as an increase in net assets

without donor restrictions if the restriction expires in the same period the income is

recognized. The NFP meets the requirements to apply this policy.

Select from the option list provided the appropriate classification of net assets in which each

transaction should be reported in the statement of activities. Each choice may be used once,

more than once, or not at all.

Select an option below

Net assets without donor restrictions

Net assets with donor restrictions

Permanently restricted net assets

Either net assets without donor restrictions or net assets with donor

restrictions

No effect on net assets