On November 30, 2011, Justin Barlow, an alumnus of
Murry School, a private, not-for-profit high school, contributed
$15,000, with the stipulation that the donation be used for faculty
travel expenses during 2012. During 2012, Murry spent all of the
donation in accordance with Mr. Barlow’s wishes. For the year
ended December 31, 2012, what was the effect of the donation
on unrestricted and temporarily restricted net assets?

Unrestricted net assets

Temporarily restricted net assets

(b) The use of the cash donation for faculty travel in
2011 is reported as a reclassification on the high school’s statement
of activities for 2012. Reclassifications are reported on the
statement of activities as “net assets released from restrictions.”
Net assets released from restrictions of $15,000 are reported as a
negative amount for temporarily restricted net assets in 2012,
while net assets released from restrictions of $15,000 are reported
as a positive amount for unrestricted net assets for 2012. However,
the $15,000 of travel expense is reported on the statement
of activities as an expense for 2012. All expenses are reported on
the statement of activities as decreases in unrestricted net assets.
This means that the use of the donation for faculty travel had no
effect on unrestricted net assets in 2012. Note that, when the
donation was received in 2011, temporarily restricted net assets
increased by $15,000 on the statement of activities prepared for
2011.