Question

A company donates land that has a book value of $90,000 to a local charity to build an animal shelter for golden retrievers. The land is appraised at $100,000. Select all elements of the journal entry to record this transaction.

O Credit Contribution Revenue $100,000
O Debit Contribution Expense $100,000
O Credit Land $90,000
O Debit Contribution Expense $90,000
O Credit Gain $10,000

Answer 1

The company's journal entry to record the donation of land includes crediting Contribution Revenue for the appraised value ($100,000), debiting Land for the book value ($90,000), and crediting Gain for the difference ($10,000).

Step-by-step explanation:

The correct elements of the journal entry to record the donation of land by a company to a charity for an animal shelter are:

• Credit Contribution Revenue $100,000
• Debit Land $90,000
• Credit Gain $10,000

The answer reflects the appraised value of the land, which is $100,000, rather than its book value. When a company donates an asset like land, it must recognize the asset at its fair market value on the date of donation. The journal entry to record this transaction will include a debit to Land for the book value ($90,000), a credit to Gain to show the gain realized from donating the asset at a value higher than its book value ($10,000), and a credit to Contribution Revenue reflecting the full fair market value of the contribution ($100,000).