Reference no: EM132811078

Problem 1: Discuss the issues and state the appropriate accounting solution for each of the following 3 transactions.

1. The Society of Eliminate Hunger spent $8,000 to complete and mail a two-page brochure to potential contributors. The brochure contained general information about the society, described its accomplishments, pointed out that a contribution of $25 would provide 25 dinners, and urged recipients to contribute. The trustees want the accountant to charge the cost of preparing and mailing the brochures to the Distribution of Food Program. The executive director thinks the expenses should be charged to fundraising expenses.

2. Professional lawyers and accountants volunteered to perform all the legal and audit services required by Youth Services, a nonprofit. The trustees of the nonprofit take great pride in their low overhead rate. They tell the accountant: "We didn't pay for these services, so there's really no point in recording any expense for them."

3. A wealthy individual donated a valuable work of art to a museum. The museum intends to keep the work, protect it from harm and deterioration, and hang it in a location so all can see it. The accountant sees no need either to recognize the asset or to depreciate it. However, one of the newer trustees, the chief executive of a large business entity, said, "In our company, we depreciate everything. And we know that ultimately, everything turns to dust. So why don't we recognize the work of art as an asset and depreciate it?"