Answer:
a. It should not be accounted for until it is received.
Step-by-step explanation:
When a donor make a promise to make a donation of certain amount of money to a not-profit-organization, the amount is referred to as a pledge.
There are two important variations of a pledge depending on the conditions attached to it. These variations have to be considered when the pledge is being accounted for. The following are the two variations:
1. Unconditional pledge: This occurs when a pledge is committed to by a donor without any reservation. In this case, the funds will be recorded as revenue and an account receivable by the not-for-profit organisation that is receiving it.
2. Conditional pledge: This occurs when a pledge is committed to by a donor but with a condition to be met attached to it. That is, the donor promises the organisation certain amount of money contingent upon some future event. In this case, the not-for-profit organisation will not record anything. The organisation has to wait until the condition is met. When the condition is eventually met, the pledge will then be recorded as revenue and an account receivable.
The answer:
Since a pledge of $10,000 received by the League has a condition attached to it that the donation will not be received for three years, that is, it will not be received until after three years, the pledge is considered as a conditional pledge. Therefore, the League will not record anything until after it receives the pledge.
Therefore, the Cats and Dogs League should not be accounted for until it is received.
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