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Homework answers / question archive / Westmoreland County Community College ACCOUNTING 2265 Chapter 11 College and University Accounting–Private Institutions True/False Questions 1)Private colleges and universities use the same accounting and reporting standards as public colleges and universities

Westmoreland County Community College ACCOUNTING 2265 Chapter 11 College and University Accounting–Private Institutions True/False Questions 1)Private colleges and universities use the same accounting and reporting standards as public colleges and universities

Accounting

Westmoreland County Community College

ACCOUNTING 2265

Chapter 11 College and University Accounting–Private Institutions

True/False Questions

1)Private colleges and universities use the same accounting and reporting standards as public colleges and universities.

 

 

 

  1. The AICPA Audit Guide: Not-for-Profit Organizations applies to private colleges and universities.

 

 

 

  1. Private, Not-for-profit Colleges and Universities and Investor-owned Schools follow FASB standards and adhere to the accrual basis of accounting.

 

 

 

  1. Private colleges and universities are subject to the standards issued by the GASB
  2. Public colleges and universities are subject to the standards issued by the GASB
  3. Investor-owned proprietary schools are subject to the standards issued by the FASB
  4. Private colleges and universities and investor-owned proprietary schools report the same categories of net assets.

 

 

 

  1. Private colleges and universities use the same accounting and reporting standards as other private not-for-profit organizations.

 

 

 

  1. Private colleges and universities are required to report net assets within the categories of unrestricted, temporarily restricted and permanently restricted.

 

 

 

 

 

  1. Private colleges and universities are required to report net assets within the categories of unrestricted, restricted and invested in capital assets net of related debt.

 

 

 

  1. Private colleges and universities use encumbrances and report using the modified accrual basis of accounting.

 

 

 

  1. According to the rules for accounting for colleges and universities under the jurisdiction of the FASB, if both unrestricted and restricted resources are available for a restricted purpose, the FASB requires that the institution recognize the use of restricted resources first.

 

 

 

  1. According to the rules for accounting for colleges and universities under the jurisdiction of the FASB, revenues and expenses are reported at gross amounts and gains and losses are reported net.

 

 

 

  1. According to the rules for accounting for colleges and universities under the jurisdiction of the FASB, expenses are reported by function, either in the statements or in the notes.

 

 

 

  1. According to the rules for accounting for colleges and universities under the jurisdiction of the FASB, an institution may decide not to capitalize museum and other inexhaustible collections.

 

 

 

  1. According to the rules for accounting for colleges and universities under the jurisdiction of the FASB, contributed services should be recognized when the services create or enhance nonfinancial assets or require specialized skills, are provided by an individual possessing those skills, and would typically be purchased if not provided by donation.

 

 

 

 

  1. According to the rules for accounting for colleges and universities under the jurisdiction of the FASB, multiyear pledges are recorded as restricted revenue for the present value pledge (net of estimates for uncollectible amounts) when the pledge is made.

 

 

 

  1. Private colleges and universities do not record depreciation expense.

 

 

 

  1. Private colleges and universities are required to present a Statement of Cash Flows using the direct method.

 

 

 

  1. According to the rules for accounting for colleges and universities under the jurisdiction of the FASB, depreciation is recorded. When reporting by function, depreciation is allocated to functional categories.

 

 

 

  1. According to the rules for accounting for colleges and universities under the jurisdiction of the FASB, investments in stock with determinable fair values and all debt securities are reported at market value.

 

 

 

  1. Under FASB standards, true endowments are classified as Permanently Restricted Net Assets.

 

 

 

  1. Under FASB standards, quasi-endowments are classified as Temporarily Restricted Net Assets.

 

 

 

  1. FASB standards require private colleges and universities to present a Statement of Cash Flows.

 

 

 

 

  1. FASB standards require private colleges and universities to present a Statement of Functional Expense.

 

 

 

  1. When a private college is the recipient of a perpetual trust held by a third party, the initial contribution revenue is recorded in the permanently restricted net asset class, and income received from the trust is recorded as either unrestricted or temporarily restricted investment income, depending on the trust agreement.

 

 

 

  1. Financial statements prepared for private colleges and universities present net assets as: unrestricted, restricted, or invested in capital assets net of related debt.

 

 

 

  1. A charitable remainder trust and a charitable gift annuity differ in that no formal trust agreement exists for a charitable gift annuity.

 

 

 

  1. An acceptable alternative to the Statement of Activities for a private college or university is to present a Statement of Unrestricted Revenues, Expenses and Other Changes in Unrestricted Net Assets and a Statement of Changes in Net Assets.

 

 

 

  1. Under NACUBO guidelines, tuition waivers resulting from work-study programs are deducted from revenue.

 

 

 

  1. With respect to colleges and universities, if a tuition or fee reduction is an employee benefit it should be treated as a compensation expense, rather than a discount.

 

 

 

  1. With respect to colleges and universities, academic or athletic tuition waivers are accounted for as expenses.

 

 

 

 

  1. With respect to colleges and universities, estimates of uncollectible accounts are accounted for as reductions in revenue rather than bad debt expense.

 

 

 

  1. A tuition waiver for a student who works as a graduate assistant is treated as compensation expense.

 

 

 

  1. A tuition waiver for a student who works as a graduate assistant is treated as a reduction in revenue.

 

 

 

  1. A Charitable gift annuity is a type of split-interest agreement.

 

 

 

  1. A Charitable lead trust is a type of split-interest agreement.

 

 

 

  1. A Pooled life income fund is a type of split-interest agreement.

 

 

 

  1. A Research grant program is a type of split-interest agreement.

 

 

 

  1. Academic or athletic scholarships that do not require service to the college or university are considered scholarship allowances and treated as reductions in revenue.

 

 

 

  1. An unconditional pledge of support received by a private college is recorded as revenue when the promise to give is unconditional.

 

 

 

  1. Unless acquired with restricted funds, plant acquired by a private college must be recorded as unrestricted.

 

 

 

 

  1. Museum and other inexhaustible collections held by a private college may or may not be capitalized and recorded in the accounts of a private college.

 

 

 

  1. Plant acquired by a private college with either unrestricted or restricted resources may be
    1. recorded initially as unrestricted OR (2) recorded initially as temporarily restricted and then classified in accordance with the depreciation schedule.

 

 

 

  1. Private, Not-for-Profit Colleges and Universities must have Statement of Financial Position, Statement of Activities, Statement of Cash Flows, and Notes to the Financial Statements included in their financial report.

 

 

 

  1. Funds that are restricted for a certain number of years and then released are considered to be term endowments and are classified as temporarily restricted funds by private colleges and universities.

 

.

 

  1. Funds that are restricted for a certain number of years and then released are considered to be quasi-endowments and are classified as temporarily restricted funds by private colleges and universities.

 

.

 

  1. Inflows from self-supporting university operations, known as auxiliary enterprises, are restricted as to use.

 

 

 

  1. Private colleges and universities recognize contribution revenue in the year in which the unconditional pledge is made.

 

 

 

  1. Private colleges and universities recognize contribution revenue in the year in which the payment is received.

 

 

 

 

  1. Universities treat athletic scholarships as a reduction in revenue.

 

 

 

  1. College and universities treat uncollectible student accounts as reductions in revenue, rather than bad debt expense.

 

 

 

  1. College and universities treat uncollectible student accounts as bad debt expense.

 

 

 

  1. Public Colleges and Universities are subject to standards issued by the GASB and most commonly report as special-purpose governments engaged in business-type activities.

 

 

 

  1. Tuition revenue for summer classes spanning two fiscal periods must be recorded in the period when the drop date passes and refunds are no longer an option.

 

 

 

  1. Tuition revenue for summer classes spanning two fiscal periods must be allocated on a pro-rata basis.

 

 

 

  1. NACUBO guidelines require both revenues and expenses for split summer sessions to be apportioned to the two fiscal years.

 

 

 

  1. NACUBO guidelines treat estimates of uncollectible accounts as reductions in revenue.

 

 

 

Multiple Choice Questions

 

  1. Private colleges and universities are (primarily) subject to financial reporting standards issued by?
  1. GASB.
  2. FASB.
  3. AICPA.
  4. None of the above.

 

 

 

  1. Public colleges and universities are (primarily) subject to financial reporting standards issued by:
  1. GASB.
  2. FASB.
  3. AICPA.
  4. None of the above.

 

 

 

  1. Private universities follow the authoritative standards of                      and use the                basis of accounting.
  1. FASB,             Accrual.
  2. FASB,              Modified-accrual.
  3. GASB,             Accrual.
  4. GASB,            Modified-accrual.

 

 

 

  1. A government owned college follows whose standards?
  1. FASB because GASB doesn’t have standards for universities.
  2. GASB.
  3. AICPA
  4. None of the above.

 

 

 

  1. In addition to a Statement of Financial Position and a Statement of Activities, a private college or university is required to present:
  1. A Statement of Functional Expense.
  2. A Statement of Cash Flows.
  3. Both (a) and (b).
  4. Neither (a) nor (b).

 

 

 

 

  1. Private colleges are required to report net assets in the following categories:
  1. Unrestricted and Restricted
  2. Temporarily Restricted , Permanently Restricted and Unrestricted
  3. Unrestricted, Temporarily Restricted and board designated
  4. Restricted, Unrestricted and Temporarily Restricted
  1. The three classes of net assets required to be presented by a private college or university are:
  1. Permanently Restricted, Temporarily Restricted, and Unrestricted.
  2. Reserved, Unreserved, and Undesignated.
  3. Invested in Capital Assets net of Related Debt, Restricted, and Unrestricted.
  4. Educational and General, and Auxiliary Enterprises
  1. If a donor were to contribute money with instructions that the funds be invested for a period of time and then released to be used for any purpose, this would be called a(n):
  1. Permanent endowment
  2. Term endowment
  3. Quasi-endowment
  4. Unrestricted endowment
  1. Which of the following would not be correct with respect to accounting for colleges and universities under the jurisdiction of the FASB?
  1. If both unrestricted and restricted resources are available for a restricted purpose, the FASB requires that the institution recognize the use of unrestricted resources first
  2. Accrual accounting is used. Revenues and expenses are reported at gross amounts and gains and losses are reported net.
  3. Expenses are reported by function, either in the statements or in the notes
  4. If an institution decides not to capitalize museum and other inexhaustible collections, note disclosures are required regarding the collections

 

 

 

 

  1. Which of the following would not be correct with respect to accounting for colleges and universities under the jurisdiction of the FASB?
  1. Contributed services should be recognized only when the services create or enhance nonfinancial assets or require specialized skills, are provided by an individual possessing those skills, and would typically be purchased if not provided by donation
  2. Multiyear pledges are recorded as restricted revenue and receivable for the gross amount of the pledge when the pledge is made
  3. Depreciation is recorded
  4. Investments in stock with determinable fair values and all debt securities are reported at market value

 

 

 

  1. According to the FASB, plant acquired by colleges and universities with either unrestricted or restricted resources are recorded as:
  1. Restricted
  2. Unrestricted
  3. Initially as temporarily restricted and reclassified as unrestricted in accordance with the depreciation schedule
  4. Either B or C
  1. When a private college or university has a foundation, and that foundation receives contributions specifically directed for the benefit of the college or university,
  1. The college or university records no revenue until monies are received from the foundation
  2. At the time of the contribution to the foundation, the college or university records an increase in net assets and unearned revenue. When the money is received the unearned revenue is reduced and revenue is recorded.
  3. The college or university must recognize its interest in the contribution as an asset and revenue at the same time as the foundation.
  4. None of the above

 

 

  1. How should the following revenues be reported by a private college?
  • $1,500 state appropriations,
  • $5,600 in unrestricted contributions,
  • $600 unrestricted investment income on endowment investments,
  • $11,600 sales of services by auxiliary enterprises.

 

Unrestricted

Restricted

A)       19,300

0

B)        17,800

1,500

C)        17,200

2,100

D)          5,600

13,700

 

 

 

  1. The FASB has the authority to set accounting standards for all of the following organizations except:
  1. Public colleges.
  2. Private colleges.
  3. For profit proprietary schools.
  4. Educational foundations established to support a private college or university.

 

 

 

  1. Which of the following is a required statement for a private college?
  1. Statement of Changes in Fund Balance.
  2. Statement of Revenues and Expenditures.
  3. Budgetary Comparison Statement.
  4. None of the above is a required statement.

 

 

 

 

  1. On December 1, 2014 St. Sebastian University, a private college, received cash of $ 2,000 and a pledge for another $ 5,000 to be paid in January 2015. The amounts are to establish an endowment to provide scholarships for music majors. How should this event be recorded on December 1, 2014?

A) Cash

2,000

 

Contributions receivable

5,000

Revenues: Temporarily restricted contributions

 

7,000

B) Cash

2,000

 

Contributions receivable

5,000

 

Revenues: Permanently restricted contributions

 

7,000

C) Cash

2,000

 

Revenues: Permanently restricted contributions

 

2,000

D) Cash

2,000

 

Contributions receivable

5,000

 

Revenues: Permanently restricted contributions

 

2,000

Deferred Revenues

 

5,000

 

 

 

  1. Which of the following is true of a Statement of Activities prepared for a private college or university?
  1. All expenses are shown as unrestricted.
  2. Reclassifications from unrestricted to permanently restricted net assets are reported when the governing board designates unrestricted funds for permanent investment in the endowment.
  3. Only realized gains or losses on investments are reported.
  4. All of the above are true.

 

 

 

  1. Which of the following types of college/university would have these components of the Financial Report?
  • Statement of Financial Position..
  • Statement of Activities.
  • Statement of Cash Flows.
  • Notes to the Financial Statements.
  1. Investor Owned.
  2. Public University.
  3. Private Not-for-Profit.
  4. None of the above.

 

 

 

 

  1. For private colleges and universities, reclassifications of temporarily restricted and unrestricted net assets could be made:
  1. For satisfaction of purpose restrictions.
  2. When time restrictions expire.
  3. If the resources donated for fixed assets have been expended on such assets.
  4. All of the above.

 

 

 

  1. Which of the following is true regarding accounting and financial reporting for private colleges and universities?
  1. Expenses may be unrestricted or temporarily restricted depending on donor intent.
  2. The Statement of Cash Flows must use the direct method.
  3. A Statement of Unrestricted Revenues, Expenses and Other Changes in Unrestricted Net Assets and a Statement of Changes in Net Assets may be presented instead of a Statement of Activities.
  4. None of the above are true.

 

 

 

  1. Investment income on Endowments held by private colleges and classified as permanently restricted net assets should be recorded as an increase in:
  1. Unrestricted net assets.
  2. Temporarily restricted net assets.
  3. Permanently restricted net assets.
  4. Any of the above, depending on the terms of the trust agreement.

 

 

 

  1. Which of the following is true regarding the investments of private colleges in securities with determinable fair values?
  1. Investments are to be carried at fair value; unrealized gains and losses are to be reported in the Statement of Activities along with realized gains and losses.
  2. Investments are to be carried at fair value or amortized cost, depending upon whether the investments are in equity or debt securities.
  3. Investments are to be carried at the lower of cost or market with unrealized losses reported in the Statement of Activities along with realized gains and losses.
  4. None of the above.

 

 

 

 

  1. According to NACUBO guidelines, what is the correct treatment for recognizing summer school revenues and expenses when a college’s fiscal year ends on June 30?
  1. Recognize the entire amount of revenues and expenses in the year in which the summer term is predominantly conducted.
  2. Recognize the entire amount of revenues and expenses in the year in which the summer term began.
  3. Apportion the revenues and expenses to the two fiscal years, following accrual accounting practices similar to those employed by commercial enterprises.
  4. Recognize expenses in the year in which they were billed and the expenses in the year in which they were incurred.

 

 

 

  1. Which of the following would not be considered a split-interest agreement, according to the Not-for-Profit Guide?
  1. Charitable remainder trusts.
  2. Permanent income-sharing agreements.
  3. Charitable gift annuities.
  4. Pooled (life) income funds.

 

 

 

  1. A private university received $18,000,000 in tuition and fees during an academic year. Graduate assistantships, for which services were required, were awarded in the amount of

$1,400,000. Scholarships, for which no services were required, were awarded in the amount of $1,200,000. The net tuition and fees that would be reported in the Statement of Activities would be:

A) $18,000,000.

B) $16,800,000.

C) $16,600,000.

D) $15,400,000.

 

 

 

 

  1. A donor gave a gift of $40,000 cash to a private college in 2013 to support basic psychology research. The funds were expended in 2014. The private college would recognize the $40,000 as:
  1. Revenue in 2013 increasing temporarily restricted net assets; recognize the expense in 2014, and reclassify the resources from temporarily restricted net assets to unrestricted net assets in 2014.
  2. Deferred revenue in 2013 and as revenue in 2014, increasing temporarily restricted net assets. The expense would be recognized also in 2014, and the resources would be reclassified from temporarily restricted net assets to unrestricted net assets in 2014.
  3. Deferred revenue in 2013 and as revenue in 2014, increasing unrestricted net assets. The expense would be recognized in 2014.
  4. Either (b) or (c), depending upon the policy of the private college.

 

 

 

  1. Which of the following is true of a Statement of Cash Flows for a private college or university?
  1. Either the direct or indirect method is acceptable.
  2. Four categories are used: Operating, Capital Related Financing, Non-capital Related Financing, and Investing.
  3. Cash flows must be presented separately for Unrestricted, Temporarily Restricted, and Permanently Restricted categories.
  4. All of the above are true.

 

 

 

  1. A private college received a $2,000,000 gift from a donor. The college’s governing board voted to use the $2,000,000 to establish an endowment, with the intent to keep the principal intact forever. The income from the endowment was to be used to fund research in the biology department. How should the college classify the $2,000,000 gift?
  1. Unrestricted.
  2. Temporarily restricted.
  3. Permanently restricted.
  4. Either temporarily or permanently restricted.

 

 

 

 

  1. The NACUBO Financial Accounting and Reporting Manual treats estimates of uncollectible student accounts as:
  1. Bad debt expense
  2. A reduction in tuition and fee revenue
  3. Either bad debt expense or a reduction in tuition and fee revenue as long as the policy is consistently applied
  4. None of the above; colleges and universities must use the direct write off method
  1. In 2014, a major drug company agreed to give a not-for-profit private college $1,700,000 to perform testing of a new drug.  An advance payment of $700,000 was received in 2014. The college was to receive $4,000 per individual test. In 2014, the college completed 100 tests. How much revenue should the college report for 2014?

A) $        - 0 - .

B) $ 400,000.

C) $ 700,000.

D) $1,700,000.

 

 

 

The following information applies to the next three questions:

 

A private foundation made a multi-year pledge to a private college on December 31, 2013, the last day of the fiscal year. The pledge was to pay $12,000 per year each year for five years, beginning on December 31, 2014. The discount rate is 6%. The present value of five payments of $12,000 is $50,548. The present value of four payments of

$12,000 is $41,581. No purpose or plant restrictions were involved.

 

  1. The private college would:
  1. Record contribution revenue in the amount of $12,000 in each of the years 2014, 2015, 2014, 2015 and 2016.
  2. Record contribution revenue in the amount of $50,548 in 2013.
  3. Record contribution revenue in the amount of $50,548 in 2014.
  4. None of the above
  1. The private college would:
  1. Record interest revenue of $3,033 in 2013.
  2. Record interest revenue of $3,033 in 2014.
  3. Record contribution revenue of $3,033 in 2013.
  4. Record contribution revenue of $3,033 in 2014.

 

 

 

 

  1. As of December 31, 2013, the contribution revenue would be classified as:
  1. Unrestricted.
  2. Temporarily restricted.
  3. Permanently restricted
  4. None of the above.

 

 

 

  1. In 2013 a faculty member at a private college received a grant from the National Science Foundation to conduct basic research on tree frogs in the amount of $500,000. Expenses associated with the grant totaled $290,000 in 2014. In the Statement of Activities for 2014, the college should show:
  1. Temporarily Restricted Revenues of $500,000 and Unrestricted expenses of

$290,000.

  1. Temporarily Restricted Revenues of $290,000 and Unrestricted expenses of

$290,000.

  1. Revenues of $290,000 and expenses of $290,000 in Unrestricted Net Assets.
  2. Expenses of $ 290,000 in Unrestricted Net Assets and a decrease in Temporarily Restricted Net Assets of $ 290,000

 

 

 

  1. A donor made a cash contribution of $75,000 to a private college for the purpose of acquiring a building. The private college properly recorded the gift of cash as a temporarily restricted revenue. When the building is acquired, the college should:
  1. Record the building as unrestricted.
  2. Show an expense equivalent to the amount paid for the building in unrestricted net assets and reclassify the same amount from temporarily restricted to unrestricted net assets.
  3. Record the plant as either unrestricted or temporarily restricted, as long as a consistent policy is followed.
  4. Record the building as permanently restricted.

 

 

 

  1. A donor made a gift of cash to a private college or university in 2014 with an expressed purpose restriction. All of the funds were expended in 2014. The private college or university must:
  1. Record the gift as a temporarily restricted revenue, reclassify the funds to unrestricted, and then report the expense as unrestricted.
  2. Record the gift and expense as unrestricted.
  3. Record the gift and expense as temporarily restricted.
  4. Use either of the methods described in (a) or (b).

 

 

 

 

  1. In 2013, a private college received a grant of $70,000 with purpose restrictions. In 2014 funds were expended for the purpose outlined in the gift; however, it was not possible to determine whether the restricted funds or unrestricted funds were used. The presumption should be:
  1. The restricted funds would have been used first.
  2. The unrestricted funds would have been used first.
  3. The restricted funds and unrestricted funds would have been used equally.
  4. The restricted funds and unrestricted funds would have been used, based on a weighted average of the amounts.

 

 

 

  1. Under NACUBO guidelines, tuition waivers associated with athletic or academic scholarships should be reported as:
  1. Expenses.
  2. Decreases in Temporarily Restricted Net Assets.
  3. Transfers.
  4. Reductions in revenue.

 

 

 

  1. Under NACUBO guidelines, tuition waivers associated with student work study programs should be reported as:
  1. Expenses.
  2. Decreases in Temporarily Restricted Net Assets.
  3. Transfers.
  4. Reductions in revenue.

 

 

 

  1. Under NACUBO guidelines, the current period provision for uncollectible accounts should be reported as:
  1. Bad debt expense.
  2. Decreases in Temporarily Restricted Net Assets.
  3. Transfers.
  4. Reductions in revenue.

 

 

 

 

  1. Which of the following student tuition or fee reductions should be listed as a reduction in revenue?
  1. Graduate Assistantships.
  2. Athletic or Academic Scholarships.
  3. Work-Study Programs.
  4. None of the Above.

 

 

 

  1. Inflows from self-supporting university operations, known as auxiliary enterprises, are classified as
  1. Unrestricted.
  2. Temporarily Restricted.
  3. Permanently Restricted.
  4. Either A or B.

 

 

 

  1. An alum pledges $10,000 to Greystone College in 2013 on the condition that matching funds are raised. The matching funds are raised 2014, how much revenue will Greystone College recognize in 2013?.

A) $10,000.

B) $9,000.

C) $7,000.

D) $ 0.

 

 

 

  1. If the receivable for a student is $9,000 and the student pays only $1,000 as the result of receiving a work study appointment from the school, what would be the appropriate debits.
  1. Debit Cash and Debit Discount on Revenue.
  2. Debit Cash and Debit Expense.
  3. Debit Cash and Debit accounts receivable.
  4. Debit Cash.

 

 

 

 

  1. If the receivable for a student is $8,000 and the student pays only $500 as the result of receiving an athletic scholarship from the school, what would be the appropriate debits
  1. Debit Cash.
  2. Debit Cash and Debit Expense.
  3. Debit Expense.
  4. Debit Cash and Debit Tuition Discount on Accounts Receivable.

 

 

 

  1. The equity section of the balance sheet for private, not-for-profit colleges and universities includes which of the following designations?
  1. Unrestricted Net Assets, Temporarily Restricted Net Assets, and Permanently Restricted Net Assets.
  2. Paid in Capital and Retained Earnings.
  3. Net Assets Invested in Capital Assets, net of related Debt; Restricted Net Assets; and Unrestricted Net Assets.
  4. None of the above.

 

 

 

  1. The NACUBO Financial Accounting and Reporting Manual treats estimates of uncollectible student accounts as:
  1. Bad debt expense.
  2. Reduction in revenue.
  3. Other financing uses.
  4. None of the above.

 

 

 

  1. When summer school classes at a university cover parts of two fiscal years, the revenues and expenses are
  1. All recognized in the second of the two years.
  2. Apportioned to the two fiscal years.
  3. Recognized in the year in which the term was predominantly conducted.
  4. All recognized in the first of the two years.

 

 

 

  1. Which of the following is an example of a temporarily restricted revenue?
  1. Tuition and fees.
  2. Auxiliary enterprises.
  3. Contribution for plant acquisition.
  4. Quasi- Endowment.

 

 

 

 

  1. Student scholarships for which no service was required were applied to student accounts in the amount of $3,000. What is the journal entry to record this event?
  1. Debit: Tuition discount-Unrestricted-Student aid $3,000 Credit: Accounts Receivable $3,000.
  2. Debit: Scholarship Expense $3,000 Credit: Accounts Receivable $3,000.
  3. Debit: Tuition waiver $3,000 Credit: Loan to student $3,000.
  4. None of the above.

 

 

 

Short Answer Questions

 

  1. Give 2 examples of unrestricted inflows, restricted inflows and permanently restricted inflows for a private college or university.

 

 

  1. What is the distinction between discounts and expenses for private colleges and universities?

 

 

 

  1. NACUBO has issued a position paper titled “Accounting and Reporting Scholarship Allowances to Tuition and Other Revenues by Higher Education” to address the issue of scholarship allowances. How are scholarships and allowances treated in the financial statements by private colleges and universities?

 

 

  1. What are the reporting options for the Statement of Financial Position of institutions of higher education as outlined by the NACUBO Financial Accounting and Reporting Manual for Higher Education?

 

 

 

  1. Match the Type of Entity with the Equity sections of the Balance Sheet/ Statement of Net Assets (Match the Letter and Number)

 

  1. Investor Owned
  2. Public University
  3. Private Not for Profit

 

    1. Unrestricted, Temporary Restricted net assets and Permanently Restricted net assets
    2. Paid in Capital, Retained Earnings
    3. Net Assets Invested in Capital Assets, Net of Related Debt, Restricted Net Assets, Unrestricted Net Assets.

 

 

  1. What is the basis of accounting for a private college or university and what are the principal sources of reporting standards?

 

 

  1. With respect to private colleges and universities, why are quasi-endowments not classified as permanently restricted net assets while true endowments are?

 

 

  1. Distinguish between (a) true endowments, (b) term endowments, and (c) quasi- endowments. Explain how the net assets of each is classified by a private college or university.

 

 

 

  1. How should the income earned by a private college's endowment be classified?

 

 

 

 

  1. Identify three types of restrictions placed on temporarily restricted net assets of a private sector college or university and outline the accounting requirements for each type.

 

 

 

  1. What accounts appear in the equity section of the balance sheet for a college, assuming the college is:
  1. Public – government owned
  2. Private not-for-profit
  3. For Profit - Investor owned business

 

 

 

  1. Identify the primary financial reporting body for each of the following forms of college or university
  1. Private not-for-profit
  2. For Profit - Investor owned
  3. Public – government owned

 

 

 

 

Exercises

 

  1. On January 1, 2014, Antioch College, a private not-for-profit college, received

$8,000,000 in cash to purchase an electron microscope. The microscope was delivered on July 1, 2014 and payment was made. The microscope is expected to last 10 years and has no salvage value at the end of that time. The fiscal year end is December 31.

  1. Record the journal entries required on January 1, July 1, and December 31, 2014 to record the receipt of the cash, the purchase of equipment, and one half year's depreciation, assuming the plant assets are recorded as unrestricted assets at the time of purchase.
  2. Record the journal entries required on January 1, July 1, and December 31, 2014 to record the receipt of the cash, the purchase of equipment, and one half year's depreciation, assuming the plant assets are recorded as temporarily restricted assets at the time of purchase.

 

 

 

  1. Record the following transactions on the books of Franklin College, a private college. All of the transactions are for the year 2014.
  1. The College received $312,000 in funds that were pledged in 2013, to be used for unrestricted purposes in 2014.
  2. The College was awarded $750,000 in grants that are to be used for restricted research purposes. $510,000 in cash was received, and $620,000 was expended on these projects.
  3. On Dec. 1, the College received a pledge of $5,000,000 to build a new basketball arena. The funds were not expended or received in 2014, but are expected to be received early in 2015.
  4. The College had received cash of $200,000 in 2013 to be used to purchase computer equipment for the student labs. The equipment was purchased and put into service in early January 2014. The equipment has a five-year life and the College follows the practice of maintaining the balance of fixed assets (net of depreciation) in the temporarily restricted net asset category.
  5. On Dec. 31, the College received an unrestricted pledge to receive $20,000 per year each year for six years, beginning on December 31, 2014. The first installment of $ 20,000 was received on that date.  The discount rate is 6%. The present value of six payments of $20,000 is $104,248.

 

 

 

 

 

 

 

 

  1. Ballard University, a private not-for-profit, billed four students for tuition and fees each in the amount of $ 8,400 each for fall semester. The University estimates 25% of tuition and fees will prove to be uncollectible. The University collected $ 10,010 as follows:

Student A paid the full amount billed                                                                              $ 8,400 Student B was on an assistantship and received a tuition

and fee waiver. He is required to work 14 hours a week

for one of the University’s faculty.                                                                                            805

Student C received a scholarship through the Graduate School based on her high test scores. The scholarship waives most tuition and fees and does not require the

student to work.                                                                                                                               805

Student D paid repeatedly with checks that later proved to be without sufficient funds. After the end of the semester, the student reportedly joined a circus and the

University could find no forwarding address.                                                                            0

Total                               $ 10,010

 

Required: Prepare the journal entries to record the billing and subsequent collection or write-off for the transactions listed above.

 

 

 

  1. Ethan Allen University is a private university following FASB standards for reporting. The following transactions took place during the year ended June 30, 2014.

 

    1.                 EAU had received $600,000 in tuition in June 2014 for the summer session that runs from June 16 to August 14, 2013 and had deferred $ 390,000 (65%) at June 30, 2013.
    2. EAU received in cash tuition of $3,320,000; unrestricted contributions of

$320,000; contributions permanently restricted by donor agreement for the endowment of $ 910,000, unrestricted interest income on endowments of

$250,000; and auxiliary enterprise revenue of $2,200,000.

    1. Contributions for student scholarships were received in the amount of

$425,000. $380,000 was awarded to students during the year. Students receiving these scholarships are required to work 10 hours a week (institutional support).

    1. Expenses amounted to $1,400,000 for instruction, $800,000 for research,

$600,000 for public service, $2,000,000 for auxiliary enterprises, $300,000 for student services, and $890,000 for institutional support. Included in these amounts is $460,000 of depreciation. All other expenses ($ 5,530,000) were paid in cash.

Plant assets are classified as unrestricted.

    1.                 EAU received $400,000 in tuition in mid June 2014 for the summer session ending in mid August 2014. (65% relates to the next fiscal year)
    2.                 At year-end, endowment investments were determined to have a fair value of $14,000 in excess of their recorded amounts. No restrictions apply to this income.

 

Required:

  1.                                     Prepare journal entries to record these events including closing entries.
  2.                                     Prepare a Statement of Unrestricted Revenues, Expenses and Other Changes in Unrestricted Net Assets.
  3.                                     Prepare a Statement of Activities for the year ending June 30, 2014, assuming the June 30, 2013 balances in net assets are: $1,020,000 unrestricted, $30,000 temporarily restricted, and $8,000,000 permanently restricted.

 

 

 

  1. Union Seminary uses the fund basis of accounting for internal record keeping. Presented below is the fully adjusted 12/31/2014 balance sheet for Union, prepared using funds and account groups. The following are fund descriptions:
  •                 Operating Fund - the fund used for transactions not falling within the definition of other funds.  There are no restrictions on these resources.
  •                 Memorial Fund - Used to account for resources donated from outside parties for specific capital additions
  •                 Endowment Fund - Assets received from an outside donor for permanent investment, only the earnings may be expended.
  •                 Scholarship Fund - Cash set aside by the Seminary's governing board for use as scholarships and student aid.
  •                 Fixed Assets Account Group - A record of the Seminary's fixed assets and long-term debt.

 

Required: Prepare a Statement of Financial Position following the guidelines provided in FASB Statements 116 and 117 for private not-for-profits and assuming Union does not classify plant assets as temporarily restricted.

 

 

 

Operating

Fund

 

Memorial Fund

Fixed Assets Account

Group

 

Endowment Fund

 

Scholarship Fund

 

 

Total

Assets

 

 

 

 

 

 

 

Cash

 

60,000

4,500

 

 

15,900

80,400

Pledges Rec. (net)

 

252,000

18,000

 

 

 

270,000

Investments

 

 

 

 

220,000

 

220,000

Land & Bldg

 

 

 

610,000

 

 

610,000

Accum. Depr.

 

 

 

(290,000)

 

 

(290,000)

Total Assets

 

312,000

22,500

320,000

220,000

15,900

890,400

 

Liabilities

 

 

 

 

 

 

 

Payroll Taxes

Payable Mortgage

 

12,000

 

 

 

230,000

 

 

12,000

 

230,000

Total Liabilities

 

12,000

 

230,000

 

 

242,000

 

Operating Fund

 

 

300,000

 

 

 

 

 

300,000

Memorial Fund

 

 

22,500

 

 

 

22,500

Endowment Fund

 

 

 

 

220,000

 

210,000

Scholarship Fund

 

 

 

 

 

15,900

15,900

Net Investment in

PPEq

 

 

 

90,000

 

 

90,000

Total Fund Balances

 

                                                                                                                                                                

300,000

22,500

90,000

220,000

15,900

648,400

Total Liab & Fund

312,000

22,500

320,000

220,000

15,900

890,400

Bal

                                                                                                                                                                

 

 

 

 

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