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Showing posts from September, 2014

Journal Entries for Land Acquisition - Modified Cash Basis

Question:

A church is in the process of purchasing property and wants to use the modified cash basis. The church plans to pay for part of the property with cash while financing the remainder of the payments through a long-term note. What are the debit and credit effects of the following hypothetical scenario?
Hypothetical Scenario:
The property that the church desires to purchase costs $100,000. The church is able to pay $50,000 with cash, meaning that the remaining $50,000 will be financed through a long-term note. The church expects to pay monthly payments of $500 on the long-term note. 
Answer:
The modified cash basis, as we recommend its application, includes no long-term assets or liabilities on the balance sheet. Therefore, the journal entries for the above scenario are as follows:
*Capital Expenditures (debit)$50,000 Cash (credit)$50,000
The above journal entry is the only current entry. However, monthly payments on the long-term note are recorded as follows:
**Long-Term Loan Payments (…

Donating a Timeshare Vacation to a Pastor

Question:

A member of our congregation owns a timeshare at a resort. He would like to donate a two week stay at the timeshare to our pastor. This situation leads me to ask the following questions: 
1)The donor is requesting a deductible contribution letter. Is it appropriate for us to give him one?
2)Is this situation taxable to our pastor?
Answer:
1)There is little difference between this situation and donating one’s services. Remember, there is no deduction for donating one’s services. Similar to donating one’s services, the tax benefit of what this donor is contemplating is limited to the following: He does not have to report income that he does not receive since he will collect no rent from the pastor.However, we believe it is appropriate to provide a letter thanking the member for making his timeshare available. The letter should not be prepared on church letterhead; instead, it should be prepared and sent from the pastor himself. Further, this is not an action taken by the pastor’s e…