Question

A wealthy alumna pledged $1,000,000 for stem cell research, payable in full the following year, with the intent that research not commence until the pledge is paid. Her pledge would be recorded as a revenue in the current year by ________.

Answer 1

A wealthy alumna's pledge of $1,000,000 for stem cell research should not be recorded as revenue in the current year since the research is not to commence until the pledge is paid. The pledge's treatment depends on accounting principles applied, and if the pledge is conditional, revenue recognition is typically deferred.

Step-by-step explanation:

The student asked how a pledged donation for stem cell research, intended to be paid in the following year, should be recorded in terms of revenue. In general accounting principles, revenue recognition is subject to specific criteria, which typically involve the realization or earning of the revenue and the likelihood of collection being reasonably assured. Since the alumna pledged the amount with the stipulation that the research not commence until the pledge is paid, this would likely mean that the pledge should not be recorded as revenue in the current fiscal year.

However, it is important to note that the accounting treatment could be different based on the specific accounting framework used, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). Under some circumstances, like in the case of a conditional pledge where the donor sets a specific condition for payment, recognition of revenue would be deferred until the condition is met.