Question

A private, not-for-profit hospital received a donation of medicine from the Xengen Pharmaceutical Company on February 13, 20X2. The cost of the medicine to the company was $34,000, and its market value was $76,000. Thirty percent of the medicine was used by the hospital during the year ended June 30, 20X2.
On the hospital's statement of operations for the year ended June 30, 20X2, the contribution of medicine would increase operating revenues by:

Answer 1

Answer:

The contribution of medicine would increase the operating revenues by $76,000.

Explanation:

The medicine donated to the not for profit hospital received  by Xengen Pharmaceutical Company would be recorded as a revenue to the hospital since the hospital a not -for profit organization that records revenue from donations from well meaning corporate bodies and individuals.

However,the hospital would have reflect the donation of medicine at its fair market value since it would have to incur the cost at the prevailing market rate if the medicine is purchased.