Question

Rose Project is a nongovernmental not-for-profit entity established to help runaway children. Every year, Rose holds a charity benefit at which participants are asked to make pledges. This year, Rose received the following pledges: Unrestricted $500,000 Restricted for counseling programs 200,000 The pledges are legally binding and are expected to be received within the next 12 months. Rose estimates that 5% of the pledges will be uncollectible. At what amount should the pledges be reported on Rose’s balance sheet as pledges receivable?

A. $665,000
B. $475,000
C. $190,000
D. $700,000

Answer 1

A. $665,000

Step-by-step explanation:

Rose received the following

Unrestricted $500,000

Restricted for counseling programs $200,000

Hence, Total Outstanding Pledge = $500,000 + $200,000 = $700,000

The Amount of Provision to be reported = $700,000 x 5% = $35,000

Amount should the pledges be reported on Rose’s balance sheet as pledges receivable will be $700,000 - $35,000

= $665,000