On December 1,2014 St.Sebastian University,a private college,received cash of $ 2,000 and a pledge for another $ 5,000 to be paid in January 2015.The amounts are to establish an endowment to provide scholarships for music majors.How should this event be recorded on December 1,2014?

Question

Quizplus · Accepted Answer

The journal entry on December 1, 2014, for the receipt of cash of $2,000 and a pledge for $5,000, should be recorded as follows:
Cash (Asset)  $2,000
Pledge Receivable (Asset) $5,000
    Contribution Revenue (Revenue) $7,000
This entry recognizes the receipt of cash and the pledge as assets, and records the revenue related to the contribution. Choice B is the best answer because it correctly records the cash and pledge receivable as assets and the contribution revenue.