What would be the impact of the donor request

Reference no: EM132674013

The manner in which depreciation on capital assets acquired with donated funds depends on the terms of the donation.

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).

Asume 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.

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

Problem 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: EM132674013

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