Question

for the 20x6 fiscal year, ku care, a not-for-profit organization, received $300,000 in unrestricted donations and $175,000 in donations designated specifically for cancer research. $200,000 of the unrestricted donations and $100,000 of the restricted donations were expended in 20x6 for current operations and cancer research, respectively. ku did not set up a separate fund for the restricted donation. under the deferral method, how much of the donations should be reported as revenue in the statement of operations for the 20x6 fiscal year?

Answer 1

In the fiscal year 20x6, KU Care recognized $300,000 as revenue under the deferral method—$200,000 from unrestricted donations spent for current operations and $100,000 from restricted donations spent specifically for cancer research.

Step-by-step explanation:

Under the deferral method, revenue recognition is based on when the funds are used for their intended purpose and not necessarily when they are received. For the 20x6 fiscal year, KU Care, a not-for-profit organization, received $300,000 in unrestricted donations and $175,000 in donations designated specifically for cancer research. Since $200,000 of the unrestricted donations were used for current operations and $100,000 of the restricted donations were used specifically for cancer research during 20x6, these amounts would be recognized as revenues in the statement of operations for that fiscal year.

The remaining $100,000 of unrestricted donations and $75,000 of restricted donations are deferred and will not be recognized as revenue until they are used for their intended purposes in future periods. Thus, the total reported revenue for the fiscal year 20x6 under the deferral method would be $300,000 in total: $200,000 from unrestricted and $100,000 from restricted donations.