Sea Life Aquarium, a not-for-prot entity, received a contribution of $500,000 that must be used to acquire

Question:

Sea Life Aquarium, a not-for-proﬁt entity, received a contribution of $500,000 that must be used to acquire plant and equipment. In the following year it applied the gift toward the purchase of various items of plant and equipment. Management estimates that the useful life will be ten years (with no ).
1. Prepare journal entries to record the contribution, the purchase of equipment, and ﬁrst-year depreciation. Be sure to indicate the type of fund in which each entry would be made. Assume that the aquarium adheres to standard practice as to when resources are released from restriction.
2. Assume now that management has a policy (consistent with donor wishes) of imposing a time restriction on contributions restricted for the acquisition of long lived assets. The policy speciﬁes that the contributed resources be released from restriction only over the life of the asset.
a. Prepare journal entries to record the contribution, the purchase of equipment, and ﬁrst-year depreciation.
b. What would be the impact of such a policy on the ﬁnancial statements and on availability for expenditure of cash or other organization assets?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...