Native Art Museum, a Not-For-Profit Entity That Elects Not to Capitalize

question 24

Multiple Choice

Native Art Museum, a not-for-profit entity that elects not to capitalize its collection items, purchased for $10,000 a wonderful totem pole for display near the door of the Museum.As a result of this transaction, which of the following entries should be made?

• A)Debit Collection items $10,000; Credit Cash $10,000.
• B)Debit Collection expense $10,000; Credit Cash $10,000.
• C)Debit Unrestricted net assets $10,000; Credit Cash $10,000.
• D)No entry is required.

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Definitions:

Service Department Expenses

Costs associated with the support departments of a company that do not directly contribute to the production of goods but are necessary for operations.

Activity Base

An activity base is a measure used in cost accounting to allocate overhead costs to products or services, based on activities such as machine hours or labor hours.

Work Orders

Instructions or orders issued for the completion of a job or task, typically including details such as materials, labor, and specifications.

Income From Operations

Earnings generated from a company's regular, core business operations, excluding deductions of interest and taxes.