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Problem $18-45($Static$)($LO $18-1,18-2,18-4,18-5,18-8)$

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For a number of years, a private not$-$for$-$profit entity has been preparing financial statements that do not necessarily conform to U$.$S$.$ generally accepted accounting principles. At the end of the most recent year $($Year $2),$ those financial statements show total assets of $$900,000,$ total liabilities of $$100,000,$ net assets without donor restriction of $$400,000,$ and net assets with donor restrictions of $$400,000.$ This last category is composed of $$300,000$ in net assets with purpose restrictions and $$100,000$ in net assets that must be permanently held. At the end of Year $1,$ financial statements show total assets of $$700,000,$ total liabilities of $$60,000,$ net assets without donor restriction of $$340,000,$ and net assets with donor restrictions of $$300,000.$ This last category is composed of $$220,000$ in net assets with purpose restrictions and $$80,000$ in net assets that must be permanently held. Total expenses for Year $2$ were $$500,000$ and reported under net assets without donor restrictions. Each part that follows should be viewed as an independent situation.

Problem $18-45$ Part Two

Assume that during Year $1,$ the entity receives a cash gift of $$80,000.$ The donor specified that this money be invested in U$.$S$.$ government bonds with the income to be used to help pay the salaries of the entity$$s employees. The gift was recorded as an increase in net assets with donor restrictions. The investments earned $$5,000$ during Year $1$ and $$7,000$ during Year $2.$ The entity reported these amounts on the statement of activities as increases in net assets without donor restrictions. In both cases, the money was immediately expended for salaries, amounts that were recorded as expenses within net assets without donor restrictions. No other journal entries were made in connection with this income and the income earned.

Required:

a$.$ What was the appropriate amount of net assets without donor restrictions to be reported at the end of Year $2?$

b$.$ What was the appropriate amount of expenses to be reported under net assets without donor restrictions for the year ending December $31,$ Year $2?$

c$.$ What was the appropriate amount of net assets with donor restrictions to be reported at the end of Year $2?$