Another question..I'm not understanding why secretarial services is included in contribution revenue in the first question but not the second. I understand that you have to record it when it req specialized skills and would otherwise be purchased but how am I supposed to know in the second case that it doesn't meet that criteria but it does in the first?
Super Seniors is a not-for-profit organization that provides services to senior citizens.
Super employs a full-time staff of 10 people at an annual cost of $150,000. In addition, two volunteers work as part-time secretaries replacing last year's full-time secretary who earned $10,000. Services performed by other volunteers for special events had an estimated value of $15,000.
These volunteers were employees of local businesses and received small-value items for their participation.
What amount should Super report for salary and wage expenses related to the above items?
A: $160,000
The $150,000 that is paid to the full-time staff should be included in salary and wage expenses. The two volunteers who are replacing a full-time secretary are providing specialized secretarial skills that would have been purchased if not donated; therefore, the criteria for recognizing donated services set by FASB Statement No. 116 are met.
Second question:
A nongovernmental not-for-profit animal shelter receives contributed services from the following individuals valued at their normal billing rate:
Veterinarian provides volunteer animal care $8,000
Board members volunteer to prepare books for audit 4,500
Registered nurse volunteers as receptionist 3,000
Teacher provides volunteer dog walking 2,000
What amount should the shelter record as contribution revenue?
A: $12,500
Three conditions must exist in order for donated services to be recognized as contributions: (1) the services require specialized skills, (2) the persons providing the services possess those skills, and (3) the services would have been purchased if they had not been donated. Those conditions appear to apply in the case of the animal care and preparing the books for audit (assuming the board members are competent to do so, which is highly likely). The other two services (receptionist and dog walker) do not meet the conditions.
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