Question

Southeastern College began the year with endowment investments of $1,200,000 and $700,000 of restricted cash designated...

Southeastern College began the year with endowment investments of $1,200,000 and $700,000 of restricted cash designated by a donor for capital additions.

During the year an additional $500,000 donation was received for capital additions. These funds, together with those contributed in the prior year, were used to purchase 150 acres of land adjacent to the university.

An alum contributed $200,000 to the permanent endowment and pledged to provide an additional $400,000 early next year. The cash was immediately invested.

By terms of the endowment agreement, interest and dividends received on the investments are restricted for scholarships. Gains or losses from changes in the fair value of the investments, however, are not distributed but remain in the endowment. During the year, $48,000 of interest and dividends were received on endowment investments.

At year-end, the fair value of the investments had increased by $7,000.


Required:
Prepare journal entries to record the above transactions assuming:
a. Southeastern College is a public university.
b. Southeastern College is a private university.

Homework Answers

Answer #1

The journal entries are as follows:

On receipt of Endowment Fund:

Cash A/c Dr 5,00,000

To Contributions-Temporary Restriction 5,00,000

On purchase of land:

Land A/c Dr 22,00,000

To Cash A/c 22,00,000

On Subsequent Contribution:

Cash A/c Dr

To Contributions- Permanent Restriction

Pledge may be of two types: Conditional and unconditional.

For a conditional pledge ,we can recognise such pledge only upon satisfying conditions attached to such pledge.

For an unconditional pledge we can recognise as and when the pledge is made.

So entry for recognising a unconditional pledge is:

Pledge Asset Receivable A/c Dr 4,00,000

To Pledge Income A/c 4,00,000

On receipt of interest and dividends from endowment Investment:

Cash A/c Dr 48,000

To Scholarship Reserve A/c 48,000

On Increase in Fair Value of Endowment Fund:

Investments A/c Dr 7000

To Gain on increase in value 7000.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
D. The following problem is an example of typical transactions that a not-for-profit college or university...
D. The following problem is an example of typical transactions that a not-for-profit college or university might have for student loans.  Use the information in the FASB Accounting Standards Codification to help you answer the requirements of the problem. Carry University maintains a loan fund of $1,000,000 including receivables.  The funds are invested in stocks and bonds – and all investment income must be added to the balance in the fund.  The fund is unrestricted because it was established by the college itself...
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In...
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2018, John worked as a computer technician at a local university earning a salary of $154,200, and Sandy worked part-time as a receptionist for a law firm earning a salary of $31,200. John also does some Web design work on the side and reported revenues of $6,200 and associated expenses of $1,850. The Fergusons received $1,240 in qualified dividends and a $310 refund of...
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In...
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,300, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,300. John also does some Web design work on the side and reported revenues of $4,300 and associated expenses of $900. The Fergusons received $860 in qualified dividends and a $215 refund of...
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In...
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund...
Hahndorf Ltd acquired 100% of the shares of Sarina Ltd on 1 July 2015 for $700,000,...
Hahndorf Ltd acquired 100% of the shares of Sarina Ltd on 1 July 2015 for $700,000, when the equity of Sarina Ltd consisted of: Share Capital                                  $500,000 General Reserve                                 80,000 Retained Earnings                             30,000 All identifiable assets and liabilities of Sarina Ltd were fairly valued at acquisition except the machinery, which had a fair value of $140,000. The machinery had a further 7-year life with depreciation based on the straight-line method. Selected financial information for both companies at 30 June 2018...
14. Jim, single, took out a mortgage on his home for $590,000 five years ago. In...
14. Jim, single, took out a mortgage on his home for $590,000 five years ago. In September of this year, when the home had a fair market value of $620,000 and he owed $550,000 on the mortgage, he took out a home equity loan for $80,000. Will used the funds to purchase a yacht to be used for recreational purposes. What is the maximum amount of debt on which he can deduct home equity interest? a. $70,000. b. $80,000. c....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT