Question

Community Enhancers, a nongovernmental not-for-profit organization, received the following pledges:________Unrestricted $400,000Restricted for capital additions 300,000All pledges are legally enforceable. However, Community's experience indicates that 5% of all pledges prove to be uncollectible.What amount should Community report as pledges receivable, net of any required allowance account?A. $700,000B. $665,000C. $380,000D. $285,000

Answer 1

Answer:

B) $665,000

Explanation:

Total pledges receivable are $700,000 but they should be reported minus the allowance for uncollectible pledges = $700,000 - 5% = $665,000

The journal entry to record the pledges receivable:

• Dr Pledges Receivable account 700,000
• Cr Allowance for Uncollectible Pledges account 35,000
• Contributions Revenue account 665,000

The allowance for uncollectible pledges account is a contra asset account that reduces the value of the pledges receivable account.