EXERCISE 19-7 Endowment and Related Funds LO 10

Jefferson Hospital received money from a donor to set up an endowment fund. The following information pertains to this contribution:

During 2015

• 1.$2,000,000 was received to establish the fund. The requirements were
  • (a)$100,000 of the endowment fund's income must be used for research grants each year.
  • (b)The remainder of income is under the discretion of the governing board.
  • (c)The principal is expendable after the donor's death. It shall be used to purchase equipment.
• 2.The cash received was invested in a number of securities.

During 2016

• 3.Dividends of $100,000 and interest of $300,000 were received.
• 4.The income was transferred to the appropriate funds.
• 5.Of the restricted income, only $80,000 was expended for its specified purpose during 2016.
• 6.The governing board specified that $200,000 of the income would be used for loans for deserving medical students.

During 2017

• 7.$180,000 was lent to medical students.
• 8.The donor died of cancer.

Required:

Set up headings for the following funds: Endowment, General, Specific Purpose, and Plant Replacement and Expansion. Prepare the entries necessary in each fund to record the events listed above.