Chapter 19, Problem 7E

To determine

Concept Introduction:

Plant fund transactions of private Universities:

Plant funds consist of several subgroups, each of which is designed to record a certain phase of activity related to fixed assets.

Treatment of given transactions and post necessary journal entries.

Answer to Problem 7E

1. Receipt of $250,000 to the plant fund

	Debit $	Credit $
Cash	250,000
Revenues − Temporarily Restricted Contributions		250,000

Payment of existing debt principal ($50,000) and building an addition to the science building ($200,000).

	Debit $	Credit $
Construction in progress	200,000
Contract payable		200,000

Payment of existing debt of $50,000

	Debit $	Credit $
Accounts payable	50,000
Cash		50,000

2. Contributions of $30,000 restricted for major repairs of university buildings are received

	Debit $	Credit $
Cash	30,000
Revenue − Temporarily restricted contribution		30,000

$20,000 is spent for appropriate repairs

	Debit $	Credit $
Expenses − Building repairs	20,000
Cash		20,000

3. A partial payment of $50,000 is made on the debt principal.

	Debit $	Credit $
Accounts Payable	50,000
Cash		50,000

4. Work on the science building addition is completed with a total cost of $220,000. Unpaid contract costs total $35,000.

	Debit $	Credit $
Construction in progress	20,000
Contracts payable	35,000
Cash		55,000

	Debit $	Credit $
Building	255,000
Construction in progress		255,000

5. Receipt of $25,000 donation form former Olympic medallist

	Debit $	Credit $
Cash	25,000
Revenues − Temporarily Restricted Contributions		25,000

gymnasium equipment costing $25,000 is purchased

	Debit $	Credit $
Gymnasium equipment	25,000
Cash		25,000

6. A building with a fair value of $300,000 was donated to the university by an alumnus.

	Debit $	Credit $
Building	300,000
Revenues − Unrestricted property Contributions		300,000

7. Depreciation on all assets totalled $75,000.

	Debit $	Credit $
Expenses − operation and maintenance of plant (provision for depreciation)	75,000
Accumulated Depreciation		75,000

8. During a celebration after a basketball victory, $2,000 of gym equipment disappeared.

	Debit $	Credit $
Expenses − loss on theft	2,000
Gymnasium equipment		2,000

Explanation of Solution

1. The above answer can be explained as plant funds received are treated as temporarily restricted contribution revenue and credited to revenue account, paid for principal debt and for new building construction. Construction in progress account is created and the amount is debited to it
2. Contribution received for major building repair received credited to Temporarily restricted contribution and appropriately recognized.
3. payment made for payment of debt principal is recognized by debiting accounts payable and credit cash accounts.
4. additional cost incurred has been transferred to construction in progress account and contract payable account
5. Plant fund received are treated as temporarily restricted contribution revenue and credited to revenue account, the next purchase of gymnasium equipment has been recognized by passing entry.
6. When an asset is donated to private university it is treated as an unrestricted contribution and treated accordingly
7. Depreciation is treated as operation and maintenance expenses, debited to expenses and credited to accumulated depreciation account
8. Loss of asset is expensed out and debited to expenses by recognizing the value of loss in an asset account