A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization.The donor did not place any use restrictions on the amount pledged.The stream of the payments is discounted at 6 percent.The first payment of $5,000 is received at the end of the first year.The present value factor for a five-payment annuity due on June 30,20X9,at 6 percent is 4.2124.The present value factor for a four-payment annuity due on June 30,20X9,at 6 percent is 3.4651.
-Based on the preceding information,at the end of the first year,the pledge increased net assets without donor restrictions by:
A)$25,000.
B)$21,062.
C)$4,212.
D)$5,000.

Question

Quizplus · Accepted Answer

At the end of the first year, the organization received the first payment of $5,000. Since the donor did not place any use restrictions on the amount pledged, the organization can recognize the entire amount as increase in net assets without donor restrictions. Therefore, the choice that represents the increase in net assets without donor restrictions at the end of the first year is option D, $5,000.

A Donor Agrees to Contribute $5,000 Per Year at the End