Question

The maryville cultural center recently conducted a successful talent show in which local talent performed for a nominal prize. the talent show is an ongoing major event and is central to the center's mission. the event raised $4,800 in gross revenue. expenses related to the event included $1,000 to rent an auditorium, $1,200 to advertise the event, $500 for trophies and other awards for the winner and the runners up, and $100 for printing and mailing tickets. the center believe there was no monetary value received by donors (attendees). to report this event in its statement of activities, the center will report ____

a. special event revenue of $4,800 and special event expense of $500.
b. special event revenue of $4,800 and fund-raising expense of $1,200.
c. special event revenue of $2,300 and fund-raising expense of $1,300.
d. special event revenue of $4,800, special event expense of $1,500, and fund-raising expense of $1,300.

Answer 1

The financial statement should show special event revenue of $4,800 and include both special event expense of $1,500 and fund-raising expense of $1,300. This accounting reflects proper categorization of event-related costs and aligns with the reference example of the Yoga Center, where sustainable operations are defined by the ability to cover variable costs with revenues. The correct answer is option d.

Step-by-step explanation:

When reporting the talent show financials in the statement of activities, the Maryville Cultural Center will list both the revenues and expenses related to the event. The correct entry is special event revenue of $4,800, special event expense of $1,500 (which includes costs for renting the auditorium, trophies, and printing and mailing tickets), and fund-raising expense of $1,300 (the cost to advertise the event). This detail is taken from the premise that costs directly related to the production of the event are classified as special event expenses, while costs to solicit attendees, which is an overarching activity, are classified as fundraising expenses.

Considering the provided reference, the situation is analogous to that of the Yoga Center. When the center earns revenues higher than variable costs, as in revenues of $20,000 against variable costs of $15,000, it indicates that continuing business is sustainable. Conversely, if revenues do not cover variable costs, as in revenues of $10,000 against variable costs of $15,000, it suggests the business should consider shutting down to minimize losses.