Question

In: Accounting

Southeastern College began the year with endowment investments of $1,290,000 and $780,000 of restricted cash designated...

Southeastern College began the year with endowment investments of $1,290,000 and $780,000 of restricted cash designated by a donor for capital additions.

  1. During the year an additional $508,000 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.
  2. An alum contributed $280,000 to the permanent endowment and pledged to provide an additional $500,000 early next year. The cash was immediately invested.
  3. 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, $58,000 of interest and dividends were received on endowment investments.
  4. At year-end, the fair value of the investments had increased by $7,700.


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

Solutions

Expert Solution

Answer:

a.)

Date Particulars Debit ($) Credit ($)
1 Cash 508000
Capital Investment fund - Restricted 508000
(To record receipt additional capital for restricted fund)
2 Investment in land 1290000
Cash 1290000
(To record investment in land)
3 Cash 280000
Endovment Fund - Unrestricted 280000
4 Investment - Endowment fund unrestricted 280000
Cash 280000
(To record invesrtment made out of endowmentr fund)
5 Investment fund - Endowment fund unrestricted 58000
Interest and dividend 58000
(To record interest and dividend received)
6 Contribution receivable 500000
Endowment fund unrestricted 500000

b.)

Date Particulars Debit ($) Credit ($)
1 Cash 508000
Capital Investment fund - Permanently Restricted 508000
(To record additional capital for restricted fund)
2 Investment in land 1290000
Cash 1290000
(To record investment in land)
3 Cash 280000
Endovment Fund - Unrestricted 280000
4 Investment - Endowment fund unrestricted 280000
Cash 280000
(To record invesrtment made out of endowmentr fund)
5 Investment fund - Endowment fund unrestricted 58000
Interest and dividend 58000
(To record interest and dividend received)

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