On December 31, 2013, the child crisis center establishes an endowment fund with a $5 million gift of securities. Income from the endowment is to be used exclsuively to support a nutrition program.
During 2014, endowment earns $100,000 in interest and dividends. Portfolio increase from $500,000 to 5.5 million. 2015, endowment again earns $100,000 in interest and dividends and spends the entire amount on nutrition program. Value of the portfolio decrease $800,000, from 5.5 million to 4.7 million. 2016, endowment earns and spend $100,000 in interest and dividends. Portfolio recovers $400,000 of the investment losses and worth at the year end $5.1 million. Center had cash of $600,000 on 2014 unrestricted fund.Over 3 yr period balance was unaffected by transaction other than those just described.
1. prepare a schedule fore each of three years -- summarize the transaction as they affect permanently restricted, temporarily and unrestricted net assets.
2. beginning of 2015, the year of the loss the total value of the security portfolio was $5.5 mil. Of this amount the initial $5 mill was classified as permanently restricted, and the balance as temp.restricted. Adhere to FASB, how much of the loss did you assign to the permanently restricted assets and how much to the temporarily restricted assets? How can you justify this division of this loss?