Ken Labich Promises to Give a Not-For-Profit University $2 Million

question 5

Multiple Choice

Ken Labich promises to give a not-for-profit university $2 million for a new library,but only if the university is able to raise an equal amount in cash from other donors.When should the university recognize Ken's promise as revenue?

• A)when it receives Ken's promise
• B)when it receives Ken's promise,provided it also fully discloses (in notes to the financial statements)the conditions set forth in Roger's promise regarding other contributions
• C)gradually;that is,each time it receives cash from another donor,the entity would recognize a portion of Ken's promise as revenue
• D)when the conditions imposed by Ken are substantially met;that is,when it receives approximately $2 million in cash from other donors

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Definitions:

Workers' Compensation

A form of insurance providing wage replacement and medical benefits to employees injured in the course of employment.

Factory Workers

Individuals employed in a manufacturing setting to operate machinery and assemble goods.

Work in Process Inventory

Partially finished goods that are in the process of being converted into a final product, often reflecting the cost of raw materials, labor, and overhead involved up to that point.

Finished Goods Inventory

Refers to the inventory of goods that are completed and ready for sale.