Altruistic University, a not-for-profit research university, conducts cancer research as part of its normal ongoing activities and regularly receives contributions to support these efforts. Experimental Pharmaceuticals Corporation, a large for profit corporation that markets drugs for cancer treatment, provides resources to Altruistic University to perform clinical trial research on an experimental drug to treat cancer. Resources are provided on the condition that Altruistic University comply with strict specifications governing the manner in which the research is conducted and the frequency and the character of outcome reports. Altruistic University should account for the resources provided by Experimental Pharmaceuticals as:
a.A contribution that increases temporarily restricted net assets and is reclassified as an increase to unrestricted net assets upon satisfaction of research and reporting restrictions.
b.A contribution that increases permanently restricted net assets.
c.An exchange transaction that increases unrestricted net assets.
d.A contribution that increases unrestricted net assets provided the restrictions are met in the current year and the university uniformly applies this method of recognition to all similar transactions.
Answer:C
Choice "C" is correct. This is an exchange transaction, which increases unrestricted net assets. The results of the clinical trials performed by Altruistic University have a commercial value to Experimental Pharmaceuticals Corporation. Resources have been provided in exchange for research results and do not constitute a contribution.
Choice "b" is incorrect. The transaction represents a reciprocal transfer, or exchange, not a contribution.
Choice "a" is incorrect. The transaction represents a reciprocal transfer, or exchange, not a contribution.
Choice "d" is incorrect per the above explanation.