The American Society of Goodwill, a political think tank, was recently establish

Question

The American Society of Goodwill, a political think tank, was recently established. During its first year of operations it engaged in the following transactions and was affected by the following events:

1. It received a $10,000,000 endowment contribution, all in stocks and bonds.

2. It received $3,000,000 in additional contributions, all restricted for its educational programs and $2,300,000 in unrestricted contributions.

3. It acquired $800,000 in furniture, fixtures, and equipment, all of which have an expected useful life of 10 years.

4. It recognized depreciation on the furniture, fixtures, and equipment, purchased earlier in the year.

5. It spent $2,400,000 on educational programs.

6. It earned $300,000 in interest and dividends on its endowment investments.

7. By year-end the value of its investments had appreciated by $600,000.

8. It incurred $1,300,000 in adminstrative expenses.

9. New year-end it received a pledge of $4,500,000 to be fulfilled in three annual installments of $1,500,000 beginning in one year. The Association determined that a discount rate of 6 percent was appropriate.

(A) Prepare journal entries to record these events and transactions. Be sure to indicate the fund-type in which the entry would be made.

Explanation / Answer

Journal entries

Date

Particulars

Debit ($)

Credit ($)

Stock and bond

10000000

Endowment fund

10000000

(Being stock and bond received as endowment contribution)

Bank (3000000 + 2300000)

5300000

Educational fund

3000000

General fund

2300000

(Being restricted and unrestricted funds received)

Furniture, fixture and equipment

800000

Bank

800000

(Being furniture, fixture and equipment purchased)

Depreciation (800000 /10)

80000

Furniture, fixture and equipment

80000

(Being depreciation charged)

Income and Expenditure account

80000

Depreciation

80000

(Being depreciation adjusted against general fund)

Educational fund

2400000

Bank

2400000

(Being fund used for educational purposes)

Bank

300000

Endowment fund

300000

(Being income earned from endowment investment)

Income and Expenditure account

600000

Appreciation in endowment fund

600000

(Being appreciation in endowment fund value is credited)

Appreciation in endownment fund

600000

Endowment fund

600000

(Being endowment fund appreciated)

Administrative expenses

1300000

Bank

1300000

(Being administrative expenses incurred)

Income and Expenditure account

1300000

Administrative expenses

1300000

(Being administrative expenses charged)

Bank

4500000

Pledge

4500000

(Being Pledge received)

Pledge

1500000

Bank

1500000

(Being first instalment paid)

Date

Particulars

Debit ($)

Credit ($)

Stock and bond

10000000

Endowment fund

10000000

(Being stock and bond received as endowment contribution)

Bank (3000000 + 2300000)

5300000

Educational fund

3000000

General fund

2300000

(Being restricted and unrestricted funds received)

Furniture, fixture and equipment

800000

Bank

800000

(Being furniture, fixture and equipment purchased)

Depreciation (800000 /10)

80000

Furniture, fixture and equipment

80000

(Being depreciation charged)

Income and Expenditure account

80000

Depreciation

80000

(Being depreciation adjusted against general fund)

Educational fund

2400000

Bank

2400000

(Being fund used for educational purposes)

Bank

300000

Endowment fund

300000

(Being income earned from endowment investment)

Income and Expenditure account

600000

Appreciation in endowment fund

600000

(Being appreciation in endowment fund value is credited)

Appreciation in endownment fund

600000

Endowment fund

600000

(Being endowment fund appreciated)

Administrative expenses

1300000

Bank

1300000

(Being administrative expenses incurred)

Income and Expenditure account

1300000

Administrative expenses

1300000

(Being administrative expenses charged)

Bank

4500000

Pledge

4500000

(Being Pledge received)

Pledge

1500000

Bank

1500000

(Being first instalment paid)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.