ExpertHard1 markMultiple Choice
CPA · Question 24 · Area I: Financial Reporting
Harmony NFP received the following during Year 1:<br/>- Unconditional pledge of $100,000 due in Year 3, restricted for building improvements<br/>- Conditional pledge of $75,000 that becomes unconditional when Harmony raises matching funds<br/>- Art collection valued at $50,000 donated with no restrictions<br/>- Volunteer services: 500 hours of general fundraising work valued at $15/hour<br/><br/>What amount should Harmony recognize as contribution revenue in Year 1?
Harmony NFP received the following during Year 1:<br/>- Unconditional pledge of $100,000 due in Year 3, restricted for building improvements<br/>- Conditional pledge of $75,000 that becomes unconditional when Harmony raises matching funds<br/>- Art collection valued at $50,000 donated with no restrictions<br/>- Volunteer services: 500 hours of general fundraising work valued at $15/hour<br/><br/>What amount should Harmony recognize as contribution revenue in Year 1?
Answer options:
A.
$100,000
B.
$150,000
C.
$225,000
D.
$232,500
How to approach this question
Under ASC 958, recognize unconditional promises immediately regardless of payment timing or restrictions. Don't recognize conditional promises until conditions are substantially met. Recognize donated assets at fair value. Only recognize volunteer services if they create/enhance assets or require specialized skills that would otherwise be purchased.
Full Answer
B.$150,000✓ Correct
$150,000
ASC 958-605 requires recognition of unconditional promises when made, regardless of payment timing. Conditional promises are recognized when conditions are substantially met. Donated assets are recognized at fair value. General volunteer services (fundraising) don't meet the specialized skills criterion for recognition.
Common mistakes
Recognizing conditional pledges before conditions are met, not recognizing donated assets, or including volunteer services that don't meet recognition criteria
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