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Revenue Recognition: Donated Services

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For each of the following situations, indicate whether the organization should recognize the described services as revenue (offset by corresponding expenses). Briefly justify your response or identify key issues.

1 Nellie Wilson, the noted country-western singer performs a benefit concert for the Save-Our-Farms Association, a political advocacy group. Wilson, who normally charges $60,000 per concert, did not accept a fee.

2 Camp Chi-Wan-Da, a summer camp for disadvantaged youth, benefits from the services for four physicians, each of whom spend two weeks at the camp providing medical services to the campers. The doctors receive free room and board but no salary. Camp association standards require that a camp of Chi-Wan-Da's size either have a physician on the premises or one on call.

3 The Taconic Music Festival, a performing arts association, needed new practice facilities. The architecture firm Lloyd-Wright designed the facilities for the association with out charge, and local merchants provided the building materials. All construction was carried out by community volunteers, only a few of whom had professional experience in the building trade,

4 A neurologist serves on the board of trustees of the Neurological Disease Foundation, and organization that funds clinical research. He was asked to serve because of his expertise in the area of neurological research and he chairs the board's committee that selects grant recipients.

5 The Museum of Natural History benefits from the volunteer services of twenty docents (museum guides), who provide approximately 10,000 hours of service per year. The docents give tours, staff the information desk, and assist in the museum gift shop. Were it not for their voluntary service, the museum would have to hire employees, who would be paid a least $10 per hour.

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Solution Preview

For each of the following situations, indicate whether the organization should recognize the described services as revenue (offset by corresponding expenses). Briefly justify your response or identify key issues.

General rule:

With regard to donated services, the FASB mandated calculating value "if the services received (a) create or enhance non-financial assets; or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation."

Statement No. 116 also cited "accountants, architects, carpenters, doctors, electricians, lawyers, nurses, plumbers, teachers and other professionals and craftsmen" as the types of professionals that have specialized skills.

An exception to the recognition rule is time routinely contributed by skilled persons on the ...

Solution Summary

The solution provides the "rule" and then indicates when revenue would be recognized. No journal entries are given. 527 words total.

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Government and Nonprofit Accounting: Journal Entries

Some, but not all, contributions of goods and services are given accounting recognition. In each of the following scenarios, an organization receives a contribution in kind. Prepare journal entries, as necessary, to give them accounting recognition. For each, tell why you made an entry or why you did not.

1. A local not-for-profit art museum receives advertising for its yearly benefit from radio station WLOU. The airtime would have cost the museum $1,000.

2. Volunteers for ''Breakfast on Bikes,'' a voluntary health and welfare organization, deliver hot meals to the elderly three times a week. Each of the ten volunteers works about six hours per week. All of the volunteers have permanent jobs with pay averaging $16.10 an hour.

3. Lynn Simms, a local CPA, maintains the books and records of her church. Although her normal billing rate is $60 per hour, she accepts no payment from the church. She works on church matters approximately four hours a week.

4. A construction company allows a not-for-profit community association to use its bulldozer at no cost to clear land for a new baseball park. If the association had to rent the bulldozer it would have incurred costs of $1,400.

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