Steve Watson,a local certified public accountant (CPA),donates a significant amount of his spare time to Beth's Gallery,a not-for-profit museum.He donates 50 hours to audit the books and 80 hours selling products at the museum store.He charges his regular clients $200 an hour as a CPA.How should the Gallery report Mr.Watson's donation of time?

Question

Quizplus · Accepted Answer

According to the Generally Accepted Accounting Principles (GAAP), only the fair value of donated services that are specialized or require specialized skills should be recognized as contribution revenue and expense. As Steve Watson is a CPA, his 50 hours of audit services would be considered specialized, and thus the fair value of those services ($10,000) can be recognized as contribution revenue and expense. However, the 80 hours of selling services would not be considered specialized and should not be recognized as contribution revenue and expense. Instead, the fair value of those services should be disclosed in a note to the statements. Therefore, the correct choice is to report $10,000 (50 hours @ $200) as contribution revenue and expense; also, disclose in a note to the statements the fair value of selling services provided by Watson and others.

Steve Watson,a Local Certified Public Accountant (CPA),donates a Significant Amount