On December 1,2015,St.Sebastian University,a private college,received cash of $3,000 and a pledge for another $6,000 to be paid in January 2015. The amounts are to establish a permanent endowment to provide scholarships for music majors. How should this event be recorded on December 1,2015?

Question

Quizplus · Accepted Answer

The cash received of $3,000 should be recorded as a debit to Cash. The pledge of $6,000 should be recorded as a credit to Contributions Receivable because it has not yet been received in cash. The total amount of $9,000 should be recorded as revenue because it is a contribution to establish a permanent endowment for scholarships. Since it is intended to be permanent, the contribution should be recorded as a credit to Permanently Restricted Contributions. Therefore, the journal entry on December 1, 2015, should be:

Cash 3,000 
Contributions Receivable 6,000 
Revenues: Permanently Restricted Contributions 9,000