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Endowment and Related Funds Jefferson Hospital received money from a donor to set up an endowment...

Endowment and Related Funds

Jefferson Hospital received money from a donor to set up an endowment fund. The following information pertains to this contribution:

During 2012

$2,000,000 was received to establish the fund. The requirements were

(a) $100,000 of the endowment fund"s income must be used for research grants each year.

(b) The remainder of income is under the discretion of the governing board.

(c) The principal is expendable after the donor"s death. It shall be used to purchase equipment.

The cash received was invested in a number of securities.

During 2013

Dividends of $100,000 and interest of $300,000 were received.

The income was transferred to the appropriate funds.

Of the restricted income, only $80,000 was expended for its specified purpose during 2013.

The governing board specified that $200,000 of the income would be used for loans for deserving medical students.

During 2014

$180,000 was lent to medical students.

The donor died of cancer.

Required:

Set up headings for the following funds: Endowment, General, Specific Purpose, and Plant Replacement and Expansion. Prepare the entries necessary in each fund to record the events listed above.

Solutions

Expert Solution

2012                        Account Title Debit Credit
Cash 2000000
Revenue Contribution-Restricted 2000000
(Establishing the Fund)
Investment 2000000
Cash 2000000
(Invested the above cash received)
2013
Cash 400000
Due to Specific Purpose Fund 100000
Due to General Fund 300000
(Receipt of cash dividends & interest incomes)
Due to Specific Purpose Fund 100000
Due to General Fund 300000
Cash 400000
(Transfer of the above to the respective funds)
2014
Loan to Medical students 180000
Due to General Fund 180000
(Loan to medical student at the discretion of the governing board as per b.)
Plant Replacement and Expansion Fund 2000000
Cash 2000000
(On donor's death as specified in c.)

ekkarill92 answered 2 years ago
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