Grace Church, a not-for-profit entity, operates a school in connection with the church. This year members of the church decided to construct a new wing on the school with six classrooms. The church hired an architect and a construction supervisor. The bulk of the labor for construction was donated by church members who were willing workers but not necessarily skilled carpenters. Materials for the construction cost $600,000 and the paid labor was $200,000. The fair value of the completed building is $2 million. When the building is completed what should be the balance in the asset account "Building" and the account "Contributed revenue"?

Question

Quizplus · Accepted Answer

The building should be recorded at the cost of materials and paid labor, totaling $800,000. The difference between the fair value and the cost is recognized as contributed revenue, which is $1,200,000.

Grace Church, a Not-For-Profit Entity, Operates a School in Connection