Ask Question
BusinessBusiness
16 November, 16:20

Society is a nongovernmental not-for-profit organization. Recently, Food Company made an oral conditional promise to donate $20,000 to Society contingent upon its recognition as "best foundation of the year" by local government. The $20,000 is restricted to construction of a children's library. In Year 2, Society is recognized as "best foundation of the year" by local government. However, due to financial difficulties, Food Company can offer only $5,000 in Year 2 but cannot fulfill its promise until Year 3. How should the event be reported on Society's statement of financial position for Year 2?

+3
Answers (2)
  1. 16 November, 18:30
    0
    Dr Cash with donor restrictions 5,000

    Dr Pledges receivable 15,000

    Cr Contributions 20,000

    Explanation:

    Nonprofits can record promised donations (when the donor is expected to fulfill his/her promise), and this will increase pledges receivable account which has a debit balance. The $5,000 received in cash were received with a usage restriction since they must be used in the construction of a children's library. That is the reason why they are recorded as an asset with restrictions.
  2. 16 November, 20:09
    0
    The $20000 must be recognized as expense of which $5000 would be paid in cash and the rest $15000 would be increase in liability.

    Explanation:

    The reason is that the liability has arised as the conditions are met in the year 2 which means the food company now owes money $20,000 to Not for profit organization. So the company must recognize an increase in the cost and liability expense.

    The entry would be:

    Dr Donation Expense $20000

    Cr Cash $5000

    Cr Donation Payables $15000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Society is a nongovernmental not-for-profit organization. Recently, Food Company made an oral conditional promise to donate $20,000 to ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Closing entries and a post-closing trial balance are steps in the accounting cycle that occurA : quarterly. B : monthly. C : daily. D : annually.
Answers (1)
Which of the fallowing jobs duties would a software developer perform? A. Developing a product that is easy to use and melts a customer's need. B. Establishing security procedures to protect important information. C. Managing and security data. D.
Answers (2)
Judy works at the headquarters of an online shoe store. She is a member of the advertising team, which is a team within the marketing department. Which type of department is this? a. A staff department b. A primary department c. A line department d.
Answers (1)
Which statement below best describes the accounting equation? A) Financing activities equal investing and operating activities. B) The change in retained earnings equals net income less dividends.
Answers (1)
Why might the government freeze assets? - apex
Answers (2)
New Questions in Business
Farah is an engineer with an idea for a flexible solar energy material that would have a wide range of military and civilian applications. She estimates that she will need approximately $300,000 to develop a prototype.
Answers (1)
Can you slowly put drug money in your bank account
Answers (1)
Selma deposited a paycheck for $378.42. She'll use the check register to record her transaction. What will be her new balance? $2,257.99 $2,337.06 $3,014.83 $3,057.31
Answers (2)
A company recently paid out a $4 per share dividend on their stock. Dividends are projected to grow at a constant rate of 5% into the future, and the required return on investment is 8%.
Answers (1)
What is the average tax rate for a firm with taxable income of $118,740 in 2017? Taxable Income Tax Rate $ 0 - 50,000 15 % 50,001 - 75,000 25 75,001 - 100,000 34 100,001 - 335,000 39 Group of answer choices 34.87 percent 39.00 percent 24.
Answers (1)
Home » Business » Society is a nongovernmental not-for-profit organization. Recently, Food Company made an oral conditional promise to donate $20,000 to Society contingent upon its recognition as "best foundation of the year" by local government.
Sign Up Forgot Password?