1)When universities experience a tightening in their budgets, should they cut funding to all departments or pick and choose which departments get cut? Why? 2)Lauder Company has found itself in financial difficulty and has?decided to enter into an agreement with a creditor to transfer a piece of land to the creditor in exchange for a $200,000 note payable with $10,000 accrued interest

1)

Answer :

A university conducts service. A university should create an environment where faculty can help students, help university governance, help professional organizations, help government, and help industry to make them all run better. Service can also be conducted to help the wider community to interface with all arts and sciences. Moreover, the faculty at a given university should be allowed to give regional specific teaching, regional specific research, and regional specific service, in all lines of expertise, which can add much value to the local community.

Nevertheless, as great as all this can be and as important as it is, there are limits to the resources that society can provide to a university and as such the business side of a university must be taken into account. Every institution, from research facilities to governments, and to households are beholden to a budget. When severe budget cuts are needed due to financial crises, then all institutions are forced to cut back and reduce their scope of work. Such budget cuts, then, require that society question the purpose of institutions, such as universities. In such an instance, a university needs to find out what it stands for and what its most important departments and research agendas are to make the most efficient cuts.

During and after the Financial Crisis of 2008, many institutions of higher learning have had revenue and budgetary reductions, forcing them to make severe university budget cuts and university reductions in force. Often the university cuts are preceded by a process of evaluation of academic programs where institutions determine what they stand for and value. One option, when forced to downsize, is to use a business model, such as Sullivan (2004) explains, where high-value, low-cost programs are kept and low-value, high-cost programs are cut. However, a business model of education does not reflect the true social value of education or the importance of arts, sciences and humanities, where students learn how to struggle with, write about and understand the world. John Henry Cardinal Newman’s (1852) treatise, The Idea of a University, suggests an alternative strategy of cost cutting that has to do with deep knowledge, i.e. keep the oldest programs in existence on a given university. Using the deep knowledge concept, a university will cut young (junior programs) first and retain old (senior) programs until the very last, rather than deciding cuts based on a business model. The deep knowledge concept emphasizes a Socratic ideal where professors and students wrestle over concepts, such as the meaning of “beauty.”

There is no perfect way to make cuts at a university when funds and budgets are limited as Mills (2007) explains. Cutting university faculty pay is not a good option as it makes it difficult to attract the best professors and such pay cuts cause faculty to have to teach extra classes, or work extra jobs to make ends meet which reduces the effectiveness of a vibrant research agenda. Cutting programs along a business model may be more a case of fashion rather than substance. Usually such cuts using a business model look at student numbers to determine vibrant and non-vibrant programs. It is interesting, though, that society would actually decide to base its important university research model on the whims of young students, who do not yet have a lot of life experiences. The deep knowledge criteria of cutting may be the lesser of evils for university cuts. Deep knowledge means cutting the most junior programs first and cutting senior programs last in reverse order of the progression of a university’s evolution. The University keeps the oldest programs and it terminates the youngest programs, which is a more practical method of cutting a university along the lines of seniority of knowledge.

Deep knowledge implies that an old program within a university has a deeper knowledge base, a more extensive academic literature and greater interactions with the surrounding community than any other discipline, even though those connections are not always obvious. As such, it can be argued that senior programs give a university its greatest value. It does not necessarily mean cutting all faculty within a program during a program reduction, as seniority and the ability of faculty to be relocated in other departments will play a role. Nevertheless, if cuts are needed, this is one way to do it. Therefore, first cut the most junior programs or majors. If a university institutes programs simultaneously, then it needs to use regional academic history to determine junior or senior status for a program. Next, move senior faculty based on employment rules, such as not cutting full professors, to other programs. Then other programs can choose to retain some of the cut classes. There are in the economy many employees who took university classes in an age where they had few if any computing classes, few Excel classes, few Word typing classes, or few Power Point classes, and yet they can use thosetechnologies effortlessly. Thus, it is possible to have had no specific learning in these technologies and yet be able to learn how to use them within days. What students need to know, though, is how to write well, how to make reports, how to talk in front of people and how to conduct a philosophical, mathematical and scientific inquiry. With such skills, most students within a few days or hours can learn to write reports with Word, give presentations with Power Point, and run programs and spreadsheets without having had specific classes for those technologies. John Henry’s The Idea of a University should be taken more seriously in academic governance.

Each university should not emphasize the understanding of the latest knowledge but emphasize the development of each student’s mind. Developing students include developing their writing skills, logic skills, and cognitive thinking skills not to mention developing within each student a broad knowledge base in all subject matters. Moreover, most college students in any major must take basic literary arts, science and computer classes that teach basic skills, which allow those students the capacity to learn how to use spreadsheets, word processors, and presentation technologies. Plus, just because a university cuts a “high-tech” academic program does not mean a class or two cannot remain from the program, from which a leading professor can continue to conduct research in the field. There is nothing easy about cutting a university. There are no perfect solutions, only a messy, difficult process.

2)

A.) Journal Entries in the books of lauder to record transfer of the Land: -

Note Payable A/c Dr. $200000

Accrued Interest A/c Dr. $10000

To Land A/c $100000

To Profit And Loss A/c $110000  

(Being Creditors paid off through transfer of Land and Lauder profited $110000 because $100000 Land transferred for a Creditors of $210000).

B.) Journal Entries in the books of lauder to record transfer of the Land (Assuming Land fair Value $250000 : -

There wouldn't be a change in the entry as costing is $100000 only, fair value change doesn't make any difference.