Question

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

Answer 1

Solution b: Assumption of Southeastern College is a Private University.

S.No	Account Title and Explanation	Debit $	Credit $
1	Cash	1200000
	Cash	700000
	Restricted Endownment Investments - Capital Additions		1900000
	Endowment Investment Restricted by donor for Capital Additions
2	Cash	500000
	Restricted Endownment Investments - Capital Additions		500000
	Additional donation received for purchase of 150 acres of Land
3	Land	2400000
	Restricted Endownment Investments - Capital Additions
	Funds utilized for purchase 150 acres of land adjacent to the University		2400000
4	Cash	200000
	Cash	400000
	Unrestricted Support - Contributions		200000
	Temporarily Restricted Supplort - Contributions		400000
	An alum contributed $200,000 to the permanent endowment and pledged to provide an additional $400,000 early next year
5	Permanent Endowment Investment	200000
	Cash		200000
	Cash invested into the permanent endowment investment
6	Cash	48000
	Interest and Dividend Income		48000
	Interest and dividend received on Endowment Investment
7	Permanent Endowment Investment	7000
	Increase in Fair Value Income		7000
	To record the fair value of the investments had increased by $7,000 at the year end