On June 30,2009,a voluntary health and welfare organization received pledges from donors amounting to $50,000.The donors did not place any time or use restrictions on the amount pledged.It was estimated that 10 percent of the pledges would not be collected.How should the voluntary health and welfare organization report these pledges on its financial statements prepared at the end of its fiscal year,June 30,2009?

Question

Quizplus · Accepted Answer

The organization should report the pledges as contribution revenue-unrestricted for $45,000, which represents the estimated collectible amount after deducting the estimated uncollectible amount of 10%. This is in accordance with the principle of conservatism, which requires that the financial statements reflect a cautious and prudent approach to reporting financial information. Reporting the pledges as fund balance or contribution revenue for the full amount of $50,000 would overstate the organization's financial position and performance. Reporting the pledges as fund balance-unrestricted would also be inappropriate as the funds are restricted by the donors.

On June 30,2009,a Voluntary Health and Welfare Organization Received Pledges