Prepare journal entries to record the contribution

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Question - Sea Life Aquarium, a not-for-profit entity, received a contribution of $500,000 that must be used to acquire plant and equipment. In the following year it applied the gift toward the purchase of various items of plant and equipment. Management estimates that the useful life will be 10 years (with no salvage value).

1. Prepare journal entries to record the contribution, the purchase of equipment, and first-year depreciation. Be sure to indicate the type of fund in which each entry would be made. Assume that the Aquarium adheres to current standard practice as to when resources are released from restriction.

2. Assume now that the donor specifies that the contributed resources be released from restriction by the not-for-profit over the life of the asset rather than follow current standard practice.

a. Prepare journal entries to record the contribution, the purchase of equipment, and first-year depreciation.

b. What would be the impact of the donor request on the financial statements and on availability for expenditure of cash or other organization assets?

Reference no: EM132426738

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