Mr. Griffin Smith donated $3,500,000 to the University of Baton Rouge (a government university) with the stipulation that earnings of the first 10 years be used to provide scholarship for social entrepreneurship program in the university's College of Social Work.

At the end of the 10-year period the principal of the gift will become available for unrestricted use. The resources were used immediately to purchase investments.

Prepare the entries to record the gift. What impact would the expiration of the term of the endowment have on the university's financial statements?

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