Asked by Emanuela Tigistu on Jun 16, 2024
Verified
Do-Good Inc. is a not-for-profit organization that was formed on January 1, 2020. Do-Good has a December 31 year end. It has an accounting policy of capitalizing and amortizing its capital assets. On April 1, 2020, Do-Good purchased equipment costing $8,000. The equipment is estimated to have a useful life of 4 years, with no residual value at that time. This transaction was the only transaction that took place to date. The equipment was purchased from an unrestricted contribution of $8,000.
What would be the balance in the Capital Fund on December 31, 2020?
A) $8,000
B) $6,000
C) $6,500
D) $8,400
Capital Fund
A fund dedicated to financing long-term investment projects or for acquiring fixed assets.
Unrestricted Contribution
Donations or funding received without stipulations on how they must be spent, allowing the recipient discretion in their use.
Useful Life
The expected period of time during which an asset is useful to the average owner and can generate income or benefits.
- Compute financial standings for non-profit entities by considering diverse forms of donations and expenses.
- Classify the distinct fund varieties in a Non-Financial Profit Organization and grasp the reporting directives associated with each.
Verified Answer
Thus, the equipment's net book value at December 31, 2020 would be $6,500 ($8,000 cost - $1,500 accumulated depreciation). Since the equipment was purchased from an unrestricted contribution of $8,000, that amount is included in the Capital Fund. Therefore, the balance in the Capital Fund at December 31, 2020 would be $6,500.
Learning Objectives
- Compute financial standings for non-profit entities by considering diverse forms of donations and expenses.
- Classify the distinct fund varieties in a Non-Financial Profit Organization and grasp the reporting directives associated with each.
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