A not-for-profit museum holds a valuable collection of art works. On reviewing the museum's financial statements, a new trustee notices that the statement of financial position contains no line item for inventory of art works.
He is told by the accountant that the museum has never taken an inventory because it would cost too much. What are the accounting requirements regarding capitalization of the art works?
a. All collections of art works must be capitalized, regardless of the circumstances.
b. Collections of art works are not required to be capitalized under any circumstances.
c. If collections of art works meet certain criteria (such as being protected and preserved), they must be capitalized.
d. If collections of art works meet certain criteria (such as being protected and preserved), the museum has an option either to capitalize or not capitalize them.
Question 2
Net income is shown on the work sheet as a(n)
a. debit in the Balance Sheet columns.
b. credit in the Balance Sheet columns.
c. debit and a credit in the Balance Sheet columns.
d. adjustment to owner's equity.
Frank Gehry, Guggenheim Museum Bilbao.
Midstream collection kit.