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

question 1

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:

Allocation

The process of distributing resources or assigning tasks among various projects, units, or individuals.

Recognized Loss

A realized loss on investments or assets reflected in a company's financial statements.

Consolidation Process

The consolidation process involves combining the financial statements of separate companies, typically within the same corporate group, to form a single set of financial statements as if they were one entity.

Subsidiary

A company that is completely or majority-owned by another company, referred to as the parent company, which controls its operations and policies.