In: Accounting
E13.10 Donated Long-Lived Assets
Angel Flights provides transportation to medical facilities for special needs children. At the beginning of the year, a donor gave Angel Flights a new airport facility, with a fair value of $5 million, to house its aircraft. The donor specified that the facility must be used by Angel Flights for at least five years. The facility has a useful life of 25 years.
Required
Prepare journal entries to record the events described for the current year. If an account affects net assets, indicate which category of net assets is affected.
We first have to know if the organization receiving the donation is a for-profit company or a non-profit company. as the problem doesn´t especify it. i will give you the journal entries in both cases. it´s algo good to know that the donations are recorded with their fair market value.
when it is a for-profit:
date | account | debit | credit |
jan xxx | asset(airport facility) | 5,000,000.00 | |
donor restricted contributions revenue | 5,000,000.00 | ||
to record donated asset with the condition to be used for at least five years. |
when it is a non-profit
date | account | debit | credit |
jan xxx | asset(airport facility) | 5,000,000.00 | |
donor restricted contributions | 5,000,000.00 | ||
to record donated asset with the condition to be used for at least five years. |
if it is needed to know the depreciation of the asset,we commonly use the straight-line method. we divide the value of the aset by the total useful life of it. 5000000/25=200000. the journal entri would be
date | account | debit | credit |
dec 31, xxx | depreciation expense(airport facility) | 200,000.00 | |
accumulated depreciation (airport facility) | 200,000.00 | ||
to record depreciation of the yearr for donated asset |
If an account affects net assets, indicate which category of net assets is affected.
the category of net assets that will be affected with an increase is NET ASSETS WITH DONOR RESTRICTIONS.
HOPE YOU FIND THIS USEFUL!!