Simplex Games, a not-for-profit entity organized to provide athletic competition opportunities for high school students, utilizes a number of volunteers in carrying out its mission.At the 2002 Games 50 volunteers provided a total of 1000 hours of service performing tasks such as picking up litter and delivering water to the athletes.A local CPA firm donates its services to prepare the annual tax return and other federal and state required paperwork which must be filed to maintain its status as a tax-exempt organization.During 2002 the CPA firm provided 50 hours of service.If purchased, the CPA services would have cost $50 per hour and the game workers would have cost $5 per hour.How much contributed service revenue should Simplex Games recognize in 2002?

Question

Quizplus · Accepted Answer

Simplex Games should recognize the contributed service revenue based on the fair value of the service received. The CPA firm provided 50 hours of service at $50 per hour, which has a fair value of $2,500. The 50 volunteers provided 1000 hours of service at $5 per hour, which has a fair value of $5,000. Therefore, the total fair value of the contributed services is $7,500, and the amount of contributed service revenue that Simplex Games should recognize is $2,500.

Simplex Games, a Not-For-Profit Entity Organized to Provide Athletic Competition