Say No To Meth, a not-for-profit entity devoted to informing the public about the hazards of methamphetamine, sends out brochures to a large number of doctors, urging that the brochures be placed in the doctors' waiting rooms.
The four-page brochure contains a description of the addictive and destructive nature of the drug, but half of the last page contains an appeal for funds, in relatively large type. How should the entity report the 30,000 expense of preparing, printing, and mailing the brochure in its statement of activities?
a. The entire 30,000 must be reported as a fund-raising expense.
b. The entire 30,000 must be reported as a program expense.
c. The 30,000 should be allocated between fund-raising and program expenses, using appropriate cost accounting techniques.
d. The 30,000 should be reported under the caption Program and fund-raising expenses.
Question 2
To record the purchase of assets on account under the modified cash basis of accounting method,
a. debit the asset and credit Accounts Payable.
b. debit the asset and credit Cash.
c. debit Accounts Receivable and credit Accounts Payable.
d. debit Accounts Payable and credit the asset.
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