Reference no: EM132723980

TGF Care Facility (TGF) is a not-for-profit organization (NFPO) that was established on April 1, 20X6. Its mandate is to provide rehabilitation services to people with spinal-cord injuries. A select list of TGF's transactions during its first year of operations follows.

• On June 1, 20X6, the provincial government contributed $1,000,000 to TGF on the condition that the amount be invested in perpetuity. The government did not place any restrictions on the use of the investment income. TGF immediately invested $900,000 of this contribution in a one-year guaranteed investment certificate (GIC). During June 20X6, TGF earned $2,000 of interest on this investment and received a cheque for this amount on June 30, 20X6.
• On June 1, 20X6, TGF received a donation of $200,000 cash for the purchase of land. On June 15, 20X6, TGF paid $210,000 cash to purchase an undeveloped parcel of land.

Problem 1: Assume that TGF uses the restricted fund method to account for contributions. It maintains a general fund, an endowment fund, an equipment fund, and a land fund. Which of the following would be included in the journal entries to record the transactions in June 20X6 related to the $1,000,000 government contribution?

a) A net debit to cash (endowment fund) for $102,000
b) A net credit to contribution revenue (endowment fund) for $1,000,000
c) A net credit to contribution revenue (general fund) for $102,000
d) A net credit to contribution revenue (endowment fund) for $1,002,000