Questions -
Q1. On January 1, 2016, The Palm Desert Pet Hospital received a $100,000 contribution restricted for the acquisition of equipment. On January 2, 2016 they purchased a new piece of equipment for $100,000. It has a useful life of 5 years with no salvage value. The Palm Desert Pet Hospital uses straight line depreciation.
1) Record the receipt of the contribution on 01/01/2016.
2) Record the acquisition of the asset on 01/02/2016 and depreciation at 12/31/16, assuming the Palm Desert Pet Hospital has a policy of recording new assets as unrestricted net assets.
3) Repeat requirement #2 assuming the Palm Desert Pet Hospital records all new assets as temporarily restricted net assets.
Q2. The Bradenton Private School received a multi-year pledge of $250,000 on January 2, 2016. They expect to receive cash payments of $50,000 at the end of each of the next five years. The appropriate rate of return is 5%. The present value of an ordinary annuity for 5 years at 5% is 4.32948. The present value of an ordinary annuity for 4 years at 5% is 3.54595. Prepare journal entries on January 2, 2016, December 31, 2016 and December 31, 2017.