In the first year after receiving the stock, the business school earned $30,000 in cash dividends. They were credited to an appropriate fund. 5. The business school purchased $20,000 of computer equipment. 6. The computer equipment was estimated to have a useful life of four years (no salvage). The school charged one year's depreciation. Prepare journal entries, as necessary, to record these events and transactions. Be sure to indicate the type of fund (permanently restricted, temporarily restricted, or unrestricted) that would be affected by the entries.
A single contribution may affect all three types of funds.
The following events and transactions relate to a single contribution.
1. A high-tech firm pledged to contribute $1 million in the company's common stock to a university's business school if the school would establish a new program in the management of information technology. The securities were to be placed in an endowment fund and the annual dividend earnings were to be used to purchase computer hardware and software.
2. The business school established the program and thereby satisfied the conditions to receive the contribution.
3. The business school received the stock and placed it in an endowment fund.
4. In the first year after receiving the stock, the business school earned $30,000 in cash dividends. They were credited to an appropriate fund.
5. The business school purchased $20,000 of computer equipment.
6. The computer equipment was estimated to have a useful life of four years (no salvage). The school charged one year's
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