Question

On January 1, the Voluntary Action Agency received a cash contribution of $325,000 restricted to the purchase of buses to be used in transporting senior citizens. On January 2 of that same year, buses were purchased with the $325,000 cash. The buses are expected to be used for five years and have no salvage value at the end of that time.

1. Record the journal entries on January 1, January 2, and December 31 for the receipt of cash, the purchase of buses, and one year’s depreciation, assuming that plant assets are recorded as unrestricted assets at the time of purchase.

Answer 1

Answer:

Date	Particulars	Debit ($)	Credit ($)
Jan 1	Cash	325,000
	Cintributions - Temporary Restricted		325,000
Jan 2	Motor Vechiles	325,000
	Cash		325,000
	Reclassification from temporarily restricted net assets - Satisfaction of fixed asset acquisition restrictions	325,000
	Reclassification to Unrestricted net assets - Satisfaction of fixed asset acquisition restrictions		325,000
	(To record expiration of fixed acquisition restrictions)
Dec 31	Depreciation Expense	65,000
	Accumulated Depreciation - Motor vechiles		65,000