Question

Describe how companies record the receipt of donated assets or forgiveness of debt (i.e., they didn't provide any asset or cash in exchange for the asset or debt forgiveness) as well as how they would record the donation of PPE to another entity or forgive debt of another entity.

Answer 1

Here we need to write 2 things, those are :-

1. Record of receipt of donated assets or forgiveness of debts and

2. Record the donation of PPE to another entity or forgive debt of another entity

Let us complete one by one :-

1. Record of receipt of donated assets for forgiveness of debts :-

In this case we receive donated assets from other entities it means we get the asset into our company without any cost. Hence, we record this transaction as follows :-

Date	Particular	Debit ($)	Credit ($)
	Asset account (cash, plant & machinery, etc)	asset value
	To contribution revenue (for a for profit company)		Asset value
	To contributions (for a non profit company)		Asset value

In this case, we get forgiveness of dates from another entity

It means a liability of our company get closed without any outflow of financial resources of the company, we record is as follows :-

Date	Particulars	Debit	Credit
	Loan payable	loan amount
	To other income		Loan amount

2. Record the donation of PPE to another entity or forgiveness of a debtbof another entity

A. In this case first we need to record the donation of PPE to another entity and we record this as :-

Date	Particulars	Debit	Credit
	Contributions	asset value
	To PPE		Asset value
	Income statement	asset value
	To contributions		Asset value

B. Then we need to record the forgiveness of debt of another entity :-

Date	Particulars	Debit	Credit
	Contributions	debt amount
	To debtor company		Debt amount
	Income statement	debt amount
	To contributions		Debt amount

These are all the information required to solve the above given question.

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I hope, all the above provided information and explainations are useful and helpful to you.

Thank you.