The Bismark family contributed $500,000 to a local university to establish a scholarship fund in the name of their father. From this contribution, $400,000 will be invested, and the investment income must be used to provide scholarships to indigenous students enrolled in nursing or medical school. The remaining $100,000 may be used to provide immediate scholarships to indigenous students enrolled in nursing or medical school. The university uses the restricted fund method, with general, scholarship, capital asset, and endowment funds. How should the $500,000 contribution be accounted for?
Question 5 options:
$400,000 of the contribution should be reported as revenue in the endowment fund. The remaining $100,000 should be reported as revenue in the scholarship fund. Any investment income on the $500,000 should be reported in the scholarship fund when it is earned.
The $500,000 should reported as deferred revenue in the endowment fund. The investment income should be reported as revenue in the general fund as received.
$400,000 of the contribution should be reported as deferred revenue in the endowment fund. The remaining $100,000 should be reported as revenue in the scholarship fund. Any investment income on the $500,000 should be reported in the general fund when it is earned.
The $500,000 should reported as revenue in the endowment fund. The investment income should be reported as deferred revenue until the scholarships are paid out.