Question

Facts: A nonprofit has been the tenant in a school building owned by a Church. The nonprofit occupies the entire building. The Church has decided to donate the building to the nonprofit, effective January 1, 2019, with the following clauses: · The nonprofit must use the building as a school The nonprofit cannot lease out the building (in whole or in part) The nonprofit cannot sell the building If the nonprofit no longer wants to operate a school in the building ownership reverts to the Church The fair market value of the building on January 1, 2019 was $6,000,000 The building has an annual fair market rental of $450,000 Question: How should the nonprofit account for this transaction (and support your answer)?

Answer 1

In case of donations which carries the special terms and purpose are called as Specific Donations. Such type of Donations normally of comparatively huge amount of other donations and also of non-recurring in nature, so they are recognised as the Capital Fund. So, we Credit the "Capital fund account" of the Non-profit organization and Debit the "Building account". Thus, on getting donation of the building from the Church, the entry to record the building at the fair market value of $6m should be:

Date	Accounts Title	Debit $	Credit $
	Building	6m
	Capital Fund		6m
	(school building donation recorded at fair market value)