Question

On January 1, Read, a nongovernmental not-for-profit entity, received $20,000 and an unconditional promise of $20,000 for each of the next four calendar years to be paid on the first day of each year. The present value of an ordinary annuity for four years at a constant interest rate of 8% is 3.312. What amount of net assets with donor restrictions is reported in the year the promise was received?

a. $100,000b. $66,240c. $86,240d. $80,000

Answer 1

amount of net assets with donor restrictions is $66240

correct option is B $66,240

Step-by-step explanation:

given data

received = $20000

paid = $20000

interest rate = 8%

interest = 3.312

to find out

What amount of net assets with donor restrictions is reported

solution

we know here contributions received are accounted for at fair value

and fair value is $20000

so present value of the payments = $20000 × 3.312

present value of the payments = $66240

and here Unconditional promises for give cash amounts in the future

ans reported as donor-restricted support,

unless donor clearly intended support to current activities

so amount of net assets with donor restrictions is $66240

and amount $20000 receive on 1st January

increases net assets without donor restrictions