Question

It is the policy of St. David's Hospital, a not-for-profit business oriented hospital, is to record all gifts, bequests, and investment income as Nonoperating Income. Nonoperating revenues related to undesignated resources amounted during the year is as follows: 25,000 in unrestricted gifts and bequests, $18,000 in unrestricted income on endowment investments and $3,800 from income on investments other than endowment. What is the correct journal entry to record this event?

A. Cash 46,800
Nonoperating Income-Unrestricted-Gifts and Bequests 25,000
Nonoperating Income-Unrestricted-Investment Income 21,800

B. Cash 46,800
Nonoperating Income-Unrestricted-Gifts and Bequests 25,000
Nonoperating Income-Unrestricted-Income on Investments Of Endowment Funds 18,000
Nonoperating Income-Unrestricted-Investment Income 3,800

C. Cash 46,800
Nonoperating Income-Unrestricted 28,800
Nonoperating Income-Restricted-Investment Income 18,000

D. Cash 46,800
Nonoperating Income-Unrestricted-Gifts and Bequests 25,000
Nonoperating Income-Restricted-Income on Investments 21,800

Answer 1

The correct journal entry to record the event is Option B. This entry properly classifies the gifts, bequests, and investment income as Nonoperating Income in St. David's Hospital's financial records.

Step-by-step explanation:

The correct journal entry to record the event in question is Option B:

Cash 46,800
Nonoperating Income-Unrestricted-Gifts and Bequests 25,000
Nonoperating Income-Unrestricted-Income on Investments Of Endowment Funds 18,000
Nonoperating Income-Unrestricted-Investment Income 3,800

This entry correctly classifies the $25,000 in unrestricted gifts and bequests as Nonoperating Income-Unrestricted-Gifts and Bequests. It also records the $18,000 income on investments of endowment funds and the $3,800 income on investments other than endowment as Nonoperating Income-Unrestricted-Income on Investments Of Endowment Funds and Nonoperating Income-Unrestricted-Investment Income, respectively.