Audit for Specialized Industries Midterm Examination

San Mechael de Resurreccion College of Accountancy, a private not-for-profit college, received

the following contributions during 2021:
I. 25, 000, 000 from alumni for construction of a new college contemporary library
to be constructed in 2022.
II. 5, 000, 000 from a donor who stipulated that the contribution be invested
indefinitely and that the earnings be used for scholarships. As of December 31,
2021, earnings from investments amounted to 250, 000.
For the year ended December 31, 2021, what amount of these contributions should be reported as
temporarily restricted revenues on the statement of activities?
A. 30, 000, 000
B. 30, 250, 000
C. 25, 250, 000
D. Nil
Answer: C. 25, 250, 000
Explanation:
The 25, 000, 000 contributions from alumni for the contemporary college library should
be reported as temporary restricted revenue since it is restricted as to its purpose.
The 5, 000, 000 contribution should be classified as permanently restricted since it was
invested indefinitely.
The 250, 000 earnings that will be used for scholarships should be reported as temporary
restricted revenue since it is restricted as to its purpose.
(Dayag 2019 Adapted)

Source:
Dayag, A. J. (2019).CPA Examination Review Manual Advanced Financial Accounting and Reporting
(Theories and Problems) 2019 ed.GIC Enterprise & Co., Inc.