A Group of Citizens Donate Their Time to Construct a Building

question 32

Multiple Choice

A group of citizens donate their time to construct a building to provide shelter for the homeless,to be run by a not-for-profit entity.In this situation,what is the applicable accounting rule for recognizing the fair value of the services on the face of the financial statements?

• A)donations that take a form other than cash should not be recognized.
• B)the fair value of contributed services should not be recognized unless the services require specialized skills,are provided by individuals who have those skills,and which the entity would need to be purchased if not donated.
• C)contributed services should be recognized at the fair value of the assets they create.
• D)donations should be recognized on the face of financial statements only for cash,securities,and other tangible assets;all other donations should be described in the notes.

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Definitions:

Market Value

The ongoing rate at which an asset or service can be traded or acquired in the market.

Stock Dividend

A dividend payment made in the form of additional shares rather than cash.

Stock Split

A corporate action where a company divides its existing shares into multiple shares to boost the liquidity of the shares.

Pre-split Price

The stock price of a company before it undergoes a stock split, which increases the number of shares while reducing the price per share.