Welbrook Company gave $50,000 to a nongovernmental, not-for-profit charity with

Question

Welbrook Company gave $50,000 to a nongovernmental, not-for-profit charity with instructions that the funds be transferred to Brad Davis, an individual who lost his home due to a flood. The not-for-profit would:

A. Not record the transaction, because the money is going directly to the intended recipient.

B. None of these

C. Do either of the above, depending upon the policy of the not-for-profit.

D. Record the $50,000 cash and credit temporarily restricted revenue.

E. Record the $50,000 cash and credit a liability.

Explanation / Answer

Answer:- E. Record $50000 cash and Credit a Liability

Reason:- As Cash received for Specific Purpose, a Liability need to create for the same. Donations received need not to treat as income.

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