Percy University a government university had no

endowments prior to
Percy University, a government university, had no endowments prior to September 1, 20X7. The
following transactions took place during the fiscal year ended August 31, 20X8:1. At the
beginning of the year, a cash donation of $900,000 was received to establish Endowment X,
and another donation of $600,000, also in cash, was received for the purpose of establishing
Endowment Y. The income from these endowments is restricted for specific purposes. It was
decided to invest this money immediately; to pool the investments of both endowments; and to
share earnings, including any gains or losses on sales of investments, at the end of the year
based on the ratio of the original contributions of each endowment.2. Securities with a par value
of $1,000,000 were purchased at a premium of $10,000.3. Securities with a par value of
$191,500 were acquired at a discount of $2,000; accrued interest at date of purchase amounted
to $500.4. The university trustees voted to pool the investments of a new endowment,
Endowment Z, with the investments of Endowments X and Y under the same conditions as
applied to the latter two endowments. The investments of Endowment Z at the date it joined the
pool at midyear amounted to $290,000 at book value and $300,000 at market value. (Hereafter,
the investment pool earnings are to be shared 9:6:3.)5. Cash dividends received from the
pooled investments during the year amounted to $70,000, and interest receipts were $5,500.6.
Premiums of $500 and discounts of $100 were amortized.7. Securities carried at $30,000 were
sold at a gain of $2,400.8. Each endowment was credited with its share of the investment
earnings for the year (see transactions 1 and 4).9. A provision of Endowment Y is that a
minimum of $75,000 each year, whether from earnings or principal or both, is to be made
available for unrestricted uses.10. An apartment complex comprising land, buildings, and
equipment valued at $800,000 was donated to the university, distributed as follows: land,
$80,000; buildings, $500,000; equipment, $220,000. The donor stipulated that an endowment
(designated as Endowment N) should be established and that the income therefrom should be
used for a restricted operating purpose.11. Unrestricted resources of $150,000 were set aside
by the board as a quasi-endowment (or fund functioning as an endowment) and was designated
Endowment O.12. A trust fund in the amount of $350,000 (cash) was set up by a donor with the
stipulation that the income was to go to the university to be used for general purposes. This
fund was designated Endowment P.Requireda. Prepare the necessary journal entries for Percy
University for the 20X7–20X8fiscal year.b. Explain how each transaction affects the net position
classifications.View Solution: Percy University a government university had no endowments
prior to
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