A not-for-profit art museum that has elected not to capitalize its art collection receives a donation of a rare piece of Tlinket Indian art. The donor paid $8,000 for the piece several years ago. Today the piece has an estimated fair value of $50,000. What entry should the art museum make upon receipt of this donation?

Question

Quizplus · Accepted Answer

The art museum should debit Collection items for $50,000 and credit Unrestricted net assets for $50,000. This is because the museum has received a donation of a rare piece of art that has an estimated fair value of $50,000. The museum has elected not to capitalize its art collection, so the donation is recorded as an unrestricted net asset.

A Not-For-Profit Art Museum That Has Elected Not to Capitalize