Just before the 1999 year-end someone pledged to give SpringTime $100, with no restrictions, and paid the amount in January before the prior year treasurer prepared the 1999 statements. Looking at the opening balances we just posted, we can see that the $100 amount was set up by the prior treasurer as a contribution receivable at December 31, 1999.
Paragraph 4420.03 of the CICA Handbook requires that contributions receivable be recorded so long as the amount can be reasonably estimated and collection is reasonably assured. Obviously both of these requirements were met at the time the treasurer prepared the statements and so he was right to record the pledge receivable and the revenue in 1999.
As the pledge was received in the 2000 year, we will have to make an adjusting entry as currently the amount is shown as revenue of the year 2000 in the cash transactions we posted. We will make the following entry to remove the receipt of the pledge from revenue and eliminate the contribution receivable that was set up:
In 2000, the Board decided the amount should be used for capital expenses. As we have a separate capital fund, we will want to record the transfer. Amounts received as unrestricted contributions that are subsequently allocated to funds are first shown as revenues of the operating fund when initially received then shown as transfers to the appropriate fund. We will also need an to set up an interfund loan as no cash has been transferred to the capital fund’s bank account. The entry to record these transactions is:
|Transfer to capital fund||100|
|Transfer from operating fund||100|
|Due from operating fund||100|
|Due to capital fund||100|