When a capital asset is acquired by donation, the preferred accounting at acquisition date is to:

Question

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When a capital asset is acquired by donation, the preferred accounting at acquisition date is to record its cost at its current market value plus transfer costs, if any. This is because the asset has been acquired without any exchange of cash or other assets, and the market value represents the fair value of the asset at the acquisition date. Including transfer costs ensures that the cost of acquisition is accurately reflected in the financial statements. Memo entries or recognizing the market value as revenue are not appropriate treatments for donated capital assets. Recording transfer costs as the total cost of the asset would not accurately reflect its market value.

When a Capital Asset Is Acquired by Donation, the Preferred