Famous, a non-governmental not-for-profit art museum, has elected not to capitalize its donated permanent collections. In Year 1, a bronze statue was stolen. The statue was not recovered and insurance proceeds of $35,000 were paid to Famous in Year 2. This transaction would be reported in:
　　I.The statement of activities as permanently restricted revenues.
　　II.The statement of cash flows as cash flows from investing activities.
　　a.Neither I nor II.
　　b.I only.
　　c.Both I and II.
　　d.II only.
　　Answer:D
　　Choice "D" is correct. Investing activities in the statement of cash flows should include proceeds from the sale of long lived assets or insurance proceeds associated with the loss of long lived assets. Entities that do not capitalize their permanent collections display insurance proceeds from lost, stolen or damaged items on the statement of activities in an appropriate change in net asset classification separate from revenues, expenses, gains, and losses.