Richmond Street Residences (RSR) is a new seniors' residence which has been incorporated under the BC Society Act as a not-for-profit organization. During 2014, RSR constructed a new recreation building on its property at a cost of $1,200,000. The recreation building was financed with $600,000 of donations from businesses and individuals and grants of $300,000 each from the city in which it was located and the provincial government. These donations and grants were contributed specifically for the cost of the new building. The donations and grants were all received early in the year, before the commencement of construction of the building. Investment income from these funds amounted to $20,000. The building has an estimated useful life of thirty years, with no expected residual value after that time. (Any surplus of funds for the building will be used for future building improvements.)
In addition, a donation of $500,000 was received for the costs of future maintenance of the building. This donation was to be invested with the investment income to be used solely for the maintenance of the new recreation building. Interest received from this endowment amounted to $25,000 in 2014. The building was opened on October 1, 2014, and maintenance costs for the balance of the year amounted to $15,000.
Required:
Prepare journal entries to record all these transactions, including any necessary year-end adjustments, if RSR uses the deferred contribution method of accounting.
Prepare journal entries to record all these transactions, including any necessary year-end adjustments, if RSR uses the restricted fund method and has an operating fund, a capital fund and an endowment fund. The capital fund is for the costs of construction of the new recreation building. (Be sure to indicate to which fund each entry will be posted.)