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

question 58

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.The present value factor for a four-payment annuity due on June 30,20X9,at 6 percent is 3.4651.
-Based on the preceding information,the journal entry to recognize present value at the time the pledge is received includes:

• A)a credit to Pledges Receivable-Temporarily Restricted for $25,000.
• B)a debit to Contributions-Temporarily Restricted for $21,062.
• C)a debit to Pledges Receivable-Temporarily Restricted for $21,062.
• D)a credit to Contributions-Temporarily Restricted for $25,000.

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Definitions:

Rate of Change

A mathematical calculation that identifies the degree to which a quantity increases or decreases over a given period.

Complexity

The state or quality of being intricate or complicated, often requiring sophisticated understanding or solutions.

High-uncertainty Environments

Situations or contexts in which there is a high level of unpredictability or instability, making it difficult to forecast future events or outcomes.

Decision Makers

Individuals or groups responsible for making choices that will impact the outcomes of certain situations or projects.