A wealthy alumnae donates $500,000 in marketable securities to her alma mater to establish a scholarship fund. Per the trust agreement only the interest and dividends (including any gains in fair value) from the securities can be distributed to scholarship recipients. In addition, she stipulates that the recipients must be graduates of her own high school and members of its honor society and are to be selected by a committee of teachers from that high school.
1. In what type of fund would the resources be accounted for and reported.
2. Prepare journal entries in that fund to record the following events and transactions.
a. The university accepted the marketable securities.
b. The securities increased in fair value by $20,000
c. The university received $14,000 in interest and dividends
d. The university transferred $6,000 to its general fund to cover the tuition of a student who was
selected as a scholarship recipient.
3. In what way would your answer to the above questions differ if the university, rather than the high school, selected the scholarship recipient and there were no specific constraints on who could be selected.
