On June 30,20X9,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 30,20X9?

Question

Quizplus · Accepted Answer

The voluntary health and welfare organization should report the pledges as contribution revenue without donor restrictions for $45,000. This is because the organization does not have any restrictions placed on the amount pledged, and the estimated uncollectible amount of 10% indicates that there is some uncertainty in the collection of the full amount. Therefore, the organization should only recognize the amount expected to be collected, which is $45,000. Reporting the pledges as fund balance would be incorrect, as fund balance is a residual category and should only include amounts that have already been collected and are available for use. Reporting the pledges for the full $50,000 would also be incorrect, as this amount includes the estimated uncollectible amount.

On June 30,20X9,a Voluntary Health and Welfare Organization Received Pledges