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:

Capital

Financial assets or the financial value of assets, such as cash, properties, and machinery, used by a company to fund its operations and grow.

Saturated

A state or condition where a market has become so full or supplied to its maximum capacity that no further growth or expansion is possible.

Productive Economy

Refers to an economy that efficiently utilizes its resources to produce goods and services that meet the needs and wants of its population.

Commodity

Commodity denotes basic goods used in commerce that are interchangeable with other goods of the same type.