Ruth Richter gives a not-for-profit entity $25,000 in cash.She tells the entity that it may use the gift for particular research project but only after it receives at least $20,000 cash from other donors to help complete the project.If the entity fails to raise the additional $20,000,it must return Ruth's gift.What account should the entity credit when it receives Ruth's gift?

Question

Quizplus · Accepted Answer

Ruth Richter's gift is conditional upon the entity raising an additional $20,000 from other donors. If the condition is not met, the entity must return the gift. Therefore, the correct accounting treatment is to recognize the gift as a refundable advance (deferred revenue) until the condition is met.

Ruth Richter Gives a Not-For-Profit Entity $25,000 in Cash