Case 8.3 - Friendly Contribution A new children’s hospital is being built in Springfield, and Friendly Corp. has publicl

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Case 8.3 - Friendly Contribution
A new children’s hospital is being built in Springfield, andFriendly Corp. has publicly pledged that it will contribute $5million toward the hospital’s construction. In its pledge agreementdated 1/1/X1, Friendly Corp. and the hospital have agreed upon thefollowing contribution schedule: $2 million to be contributed at12/31/X1, $2 million at 12/31/X2, and $1 million at 12/31/X3.Friendly’s typical borrowing rate is 6%.
How must Friendly Corp. report the contribution in itsfinancial statements at the end of each reporting period and as ofthe inception of the agreement? What disclosures are required, ifany? Include references to Accounting Standards.
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