USA No charge asset purchase commitment

[TXcpamedical]

We entered into a purchase commitment in which we received an asset valued at $55,000 for no charge. We agree to purchase at least $15,000 of supplies over a two year period. If not, then the discount will be reduced. The title has already transferred to us.

The question is how to account for this transaction.

What would be the cost we would put the asset in our system? It seems like it would be treated like a donation (enter the asset at $55k and depreciate that amount).

 

[bklynboy]

I don't see this as a donation since you are obligated to purchase something in receipt even though timing is off. I would credit a liability. What I am surprised about is you get an asset worth way more than the purchase commitment so I don't see why they would do it. Given the higher value of the asset I would put it on the books at no more than the purchase commitment and if you sell for more then record a gain at that time. I didn't get a chance to look up the actual accounting guidance but I recall you not being able to record a gain day 1 as its assumed that the asset would be equal to no more than the liability.