Final answer:
In NFPO accounting, donated inventory is typically reported at its fair value on the date of the donation. While 0 value or a nominal value of $1.00 can be used, they do not accurately represent the true economic value of the donation and are therefore less encouraged. option a, c.
Step-by-step explanation:
The student's question pertains to how inventory that is donated to a not-for-profit organization (NFPO) can be reported. When inventory is donated to an NFPO, it is typically recorded at its fair value on the date of the donation. Option A (0 value) and Option C (nominal value of $1) are possible reporting methods, although not commonly used in professional accounting practices. The most accepted method for reporting donated inventory in a not-for-profit setting is at its fair value, as this provides the most accurate reflection of the contribution made to the organization and is consistent with accounting standards such as FASB ASC 958-605.
Reporting donated inventory at 0 value or a nominal value is less representative of the true economic contribution and, therefore, less encouraged. In practice, reporting donations at 0 value might not adequately capture the impact on the organization's financial position and could be misleading to stakeholders. Similarly, assigning a nominal value such as $1.00 does not accurately convey the worth of the donation. The key is for NFPOs to provide a clear and accurate portrayal of their financial transactions for the purposes of accountability and transparency.