Reference no: EM13533918

Sagan University, a government university, had no endowments prior to September 1, 2011. The following transactions took place during the fiscal year ended August 31, 2012:
o 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.
o Securities with a par value of $1,000,000 were purchased at a premium of $10,000.
o 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.
o 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.)
o Cash dividends received from the pooled investments during the year amounted to $70,000, and interest receipts were $5,500.
o Premiums of $500 and discounts of $100 were amortized.
o Securities carried at $30,000 were sold at a gain of $2,400.
o Each endowment was credited with its share of the investment earnings for the year (see transactions 1 and 4).
o 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.
o 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 the income from the endowment should be used for a restricted operating purpose.
o 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.
o 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.
? Prepare the necessary journal entries for Sagan University for the 2011-2012 fiscal year.
? Explain how each transaction affects the net position classifications