A not-for-profit organization receives a restricted contribution of $20,000 to be used for a specific project. During the current year, $14,000 is spent toward the project with the balance to be spent next year. How much donation revenue should the not-for-profit organization recognize in the current year, if the organization uses the restricted fund method of reporting and did not have a fund for this project?

Question

Quizplus · Accepted Answer

Under the restricted fund method, the organization would recognize revenue when the expenses related to the project are incurred. Since $14,000 has been spent towards the project in the current year, that amount should be recognized as donation revenue in the current year. The remaining $6,000 will be recognized as donation revenue in the next year, when it is spent towards the project. Therefore, the correct answer is B) $14,000.

A Not-For-Profit Organization Receives a Restricted Contribution of $20,000 to Be