A Donor Agrees to Contribute $5,000 Per Year at the End

question 71

Multiple Choice

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization. The donor did not place any use restrictions on the amount pledged. The stream of the payments is discounted at 6 percent. The first payment of $5,000 is received at the end of the first year. The present value factor for a five-payment annuity due on June 30, 20X9, at 6 percent is 4.2124.
Based on the preceding information, at the end of the first year, the pledge increased unrestricted net assets by:

• A) $25,000.
• B) $21,062.
• C) $4,212.
• D) $5,000.

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Definitions:

Common Shareholders

Individuals or entities that own shares of a company's common stock, granting them rights to vote on corporate matters and receive dividends.

Net Property, Plant, And Equipment

This term refers to the aggregate amount of a company's physical assets (property, plant, and equipment) minus any accumulated depreciation, representing the actual value of these assets on the balance sheet.

Total Dollar Amount

The aggregate or total value expressed in dollars; often refers to the total sum of money involved in a transaction or financial statement item.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations, calculated as current assets divided by current liabilities.