Final answer:
The not-for-profit hospital would record the $100,000 as temporarily restricted revenue in 2014, and when the cash is received and the time restriction is fulfilled in 2015, it would reclassify this amount as unrestricted revenue. Thus, the correct answer option is D) None of the above. The hospital will not recognize a total of $200,000 at any point for a single pledge of $100,000.
Step-by-step explanation:
The not-for-profit hospital would recognize contribution revenue when the pledge is made, unless there is explicit donor-imposed restriction which stipulates how and when the funds can be spent. In this case, the donor indicated that the funds were to be used in a specific year (2015), but did not restrict their use for a particular purpose. As per accounting standards for not-for-profit organizations, since there is a time restriction but no purpose restriction, the $100,000 would be recorded as temporarily restricted revenue in 2014 when the pledge is made. When the cash is received in 2015 and the time restriction is met, the revenue is then reclassified to unrestricted revenue.
Therefore, the proper accounting entry in 2014 would be to increase temporarily restricted net assets by $100,000. Then, in 2015 when the cash is received, the hospital would decrease temporarily restricted net assets and increase unrestricted net assets by $100,000. At no point would the hospital recognize $200,000 in revenue, as the pledge was for $100,000 only, making options A and B incorrect. Option C suggests that the hospital can choose the policy, which is not the case as accounting standards guide the treatment of such transactions. Hence, the correct answer is D) None of the above.