Question

A nonprofit museum holds a collection of historical treasures. It manages the treasures in a manner that meets all three criteria permitting the option to either capitalize the collection or not. The museum has chosen not to capitalize its collection. It then receives a donation of several items that it intends to sell to help meet operating expenses. How should the museum account for these new donated items?

Answer 1

Answer:

It must recognize the fair value of the donated items as revenues or gains and assets when it receives the donation.                          

Explanation:

               A non for profit organization is one who operates and function and is dedicated to the serve the society for a social cause and does not focused on generating revenues.

             In the given context, a non for profit museum, receives several items as donations which the museum authority decides to sell the items to meet the operating expenses. Therefore, when the items were donated to the museum, they should received them as assets and should identify the as revenues by recognizing their fair values.