Beatty College, a not-for-profit college, engaged in the following transactions
ID: 2548621 • Letter: B
Question
Beatty College, a not-for-profit college, engaged in the following transactions during its fiscal year ending June 30, 2015. Requirements: Prepare appropriate journal entries, indicating the types of funds (by restrictiveness) in which they would be recorded. Transactions: 1. In May 2015 Beatty College collected $100,000,000 in student tuition. Of this amount $10,000,000 was applicable to the summer semester, which ran from June1 to August 30, 2015, and $1,000,000 was applicable to the fall semester that began September, 2015. 2. Beatty College received a contribution of $1,000,000 in stocks and bonds to establish an endowed chair in accounting. Income from the chair endowment must be used to supplement the salary of a professor accounting. 3. During 2015, the accounting chair endowment earned interest and dividends of $50,000 all of which was used to supplement the salary of the chair of the accounting department. (Note: a. record the investment earnings and b. record cash paid for the chair’s salary.) Use the same $50,000 for both entries. 4. The fair value of the investment of the accounting chair endowment declined by $80,000. 5. Using funds restricted for this purpose, the college purchased $150,000 of equipment for the college athletics department. 6. Beatty College recorded depreciation of $30,000. 7. The annual alumni campaign yielded $1,800,000 in pledges. The college estimated that 2% would be uncollectible. During the year, Beatty college collected $1,500,000 on the pledges.
Explanation / Answer
1)a) May 2015 Cash/ Bank A/c ............Dr $100,000,000
To Tution fees A/c $100,000,000
(Being tution fees received.)
b) Tution Fees A/c ........Dr $ 1,500,000
To Prepaid Income A/c $ 1,500,000
(Being Tution fees of next month ie Aug 15 and sept semester 2015 received in advance)
2) Stock and Bonds A/C .......Dr $ 1,000,000
To Chair Endowment A/c $ 1,000,000
(Being contribution received in form of shares and bonds to establish an endowed chair)
3)a) Cash/ Bank A/c .....Dr $ 50,000
To Interest /Dividend A/c $ 50,000
(Being income from shares and bonds)
b) Salary A/c .......Dr $ 50,000
To Cash/ Bank a/c $ 50,000
(Being salary paid out of interest and dividend income received)
4) Chair Endowment unrealised Loss A/c ....Dr $ 80,000
To Chair Endowment A/c $ 80,000
(Being value of investment done at fair value)
5) Athletics equipment A/c...................Dr $150,000
To Investment Fund A/c $ 150,000
(Being investment done in equipments for which fund was created)
6) Depreciation A/c ....................Dr $ 30,000
To Profit/ Loss A/c $ 30,000
(BEing depreciation on FA)
7) Caah / Bank A/c ..........Dr $1,500,000
To Pledges A/c $ 1,500,000
(Being collections from Pledges)
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