Trenholm School has been approached by its parents' association with a proposal for the coming school year. As the school is committed to accepting students with varying financial ability, parents have begun to notice that many students cannot afford the cost of the school uniform. The association is proposing starting a "gently used" uniform store. The parents are proposing to take over a supply closet on the third floor of the school and having it staffed by volunteers. The plan is to ask graduating students to donate their uniforms to the school. These uniforms would then be sold to parents at a significantly discounted price. The association would have minimal costs associated with the project.
They would have to do some renovation to the supply closet to make it look like a store. They would have to employ a seamstress to mend some of the uniforms and they would need some advertising. They have also indicated that any funds that they make should be used to provide financial aid to students.
The bookkeeper for Trenholm School has approached you, the auditor for the school, for some guidance as to how she should account for this new venture. Specifically she is unsure whether to set up a separate fund for the store and how to report the uniforms that are being donated. Trenholm School uses the restricted fund method of accounting.
Required
Respond to the bookkeeper's request.