Question

1. A not-for-profit organization receives $150 from a donor. The donor receives two tickets to a theater show and an acknowledgment in the theater program. The tickets have afair market value of $100. What amount is recorded as contribution revenue?  

a.	$0
b.	$50, answer
c.	$100
d.	$150

please explain why and how to get the answer.

2. In Year 1, Gamma, a not-for-profit organization, deposited at a bank $1,000,000 given to it by a donor to purchase endowment securities. The principal of this contribution is not to be spent according to the donor's restrictions. The securities were purchased January 2, Year 2. At December 31, Year 1, the bank recorded

$2,000 interest on the deposit. In accordance with the bequest, this $2,000 was used to finance ongoing program expenses in March Year 2. At December 31, Year 1, what amount of the bank balance should be included as current assets in Gamma's classified balance sheet?

a.	$0
b.	$2,000, answer
c.	$1,000,000
d.	$1,002,000

please explain why is 2000.

3. Cancer Educators, a not-for-profit organization, incurred costs of $10,000 when it combined program functions with fund-raising functions. Which of the following cost allocations might Cancer report in its statement of activities?

           Program Fund Raising General

a.	$0	$0	$10,000
b.	$0	$6,000	$4,000
c.	$6,000	$4,000	$0, answer
d.	$10,000	$0	$0

please explain why and how to get it thanks!

Answer 1

1.

Contribution Revenue :	Contribution revenue refers to gifts made freely without receiving any goods or services in exchange. Donations and grants are examples of contributed revenue.
So from the above it is being advised that the contribution revenues are the excess of amount donated and fair value of services received.
Donation received	US$150
Less : Fair value of tickets	US$100
Hence contributed revenue is	US$50

2.

Current assets :

Current assets are the assets which are expected to be converted into cash within 1 year from the date of gaining the same.

So from the above definition the total principal amount of contribution for an amount of US$1,000,000 because this is restricted and can't be converted into cash. However, interest earned on this deposit in year 2 is not restricted to use, hence it can be converted into cash within 1 year from the date of accrual of the same. Hence it can be classified into current assets in Gamma's balance sheet.

3.

FASB ASC 958-720-45-29 through 45-37 states that joint costs should be allocated between fundraising and the appropriate program or management and general function if three criteria are met. Otherwise, all of the joint costs should be considered fundraising costs (not one of the answer choices given). The criteria are purpose, audience, and content. The purpose of the joint activity must include accomplishing program or management and general functions, with a specific activity by the audience and a specific activity by the recipient to that end. If the criteria are not met, all the costs are considered fundraising costs. Fundraising activities that are incidental to program or management and general activities would not require all costs to be considered fundraising costs or to be allocated. They split between program services and fundraising services, thats all that you have to know. The 60/40 split is somewhat irrelevant and more of a “theoretical” scenario of how the allocation might be presented (as seen in the question).