The nancial statements of the Lance Armstrong Foundation (see Table 128) contain the following note titled Promises

The financial statements of the Lance Armstrong Foundation (see Table 12–8) contain the following note titled ‘‘Promises to Give’’:

Unconditional promises to give were as follows at December 31:

The discount rates used on long-term promises to give were 3 percent in 2011 and 2010.

1. Suppose that the foundation were to prepare a statement of financial position in columnar form, one column for unrestricted net assets, another for temporarily restricted net assets and a third for permanently restricted net assets. In which column would these receivables be reported? Explain.

2. Suppose that on December 31, 2011, the foundation collected $200,000 of the $449,855 due over a five year period. Prepare appropriate journal entries to record the collection of the $200,000 and to adjust the remaining balance in the receivables account. Be sure to recognize interest on the balance of the contributions due in over five years and one to five years (less the discount).

3. Another note to the statements indicates that the foundation has made grants to various other organizations. Some of these are payable over a five-year period.

Accordingly it adjusted its grants payable account to take into account the time value of money and applied a discount rate of 3 percent. What is the rationale for applying a discount rate to payables as well asreceivables?