Choice "A" is correct. Donations of medicines are included as other operating revenue at the fair value of the medicine, since the medicine constitutes part of the ongoing major operation of the hospital.
Choice "b" is incorrect. Donated goods are recorded on the books and records of a not-for-profit organization. A memorandum entry is not adequate.
Choice "c" is incorrect. Pharmaceuticals represent part of the ongoing and central operations of the hospital. Donated items would represent other operating revenue and, ultimately, operating expenses.
Choice "d" is incorrect. Donated pharmaceuticals represent operating revenue, not a reduction in expenses. Amounts would be presented gross and not net.