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 2011 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 2011 the CPA firm provided 50 hours of service.If purchased, the CPA services would have cost $60 per hour and the game workers would have cost $6 per hour.How much contributed service revenue should Simplex Games recognize in 2011?

Question

Quizplus · Accepted Answer

Simplex Games should recognize contributed service revenue for the value of the services provided by volunteers and the CPA firm. The value of volunteer services is generally recognized at the hourly rate that would have been paid if the service had been purchased. Therefore, the value of volunteer services provided is 50 volunteers x 1000 hours x $6 per hour = $300,000. The CPA firm provided 50 hours of service at a rate of $60 per hour, which would have cost $3,000. However, since the CPA firm donated its services, the full $3,000 can be recognized as contributed service revenue. Therefore, the total contributed service revenue to be recognized is $300,000 + $3,000 = $303,000. Since this is not one of the answer choices, the closest option is $3,000 which is Answer C.

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