Exam 11: College and University Accounting Private Institutions

Match the Type of Entity with the Equity sections of the Balance Sheet/ Statement of Net Assets/Position (Match the Letter and Number) A.Investor Owned B.Public University C.Private Not for Profit 1.Unrestricted,Temporary Restricted net assets and Permanently Restricted net assets 2.Paid in Capital,Retained Earnings 3.Net Investment in Capital Asset,Restricted Net Position,Unrestricted Net Position.

Record the following transactions on the books of Franklin College,a private college. All of the transactions are for the year 2015. a)The College received $315,000 in funds that were pledged in 2014,to be used for unrestricted purposes in 2015. b)The College was awarded $600,000 in grants that are to be used for restricted research purposes. $410,000 in cash was received,and $450,000 was expended on these projects. c)On Dec.1,the College received a pledge of $6,000,000 to build a new basketball arena. The funds were not expended or received in 2015,but are expected to be received early in 2015. d)The College had received cash of $200,000 in 2014 to be used to purchase computer equipment for the student labs. The equipment was purchased and put into service in early January 2015. 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. e)On Dec.31,the College received an unrestricted pledge to receive $20,000 per year each year for six years,beginning on December 31,2015. 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.

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

Ethan Allen University is a private university following FASB standards for reporting. The following transactions took place during the year ended June 30,2015. (1)EAU had received $600,000 in tuition in June 2015 for the summer session that runs from June 16 to August 14,2014 and had deferred $ 390,000 (65%)at June 30,2014. (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. (3)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). (4)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. (5)EAU received $400,000 in tuition in mid June 2015 for the summer session ending in mid-August 2015.(65% relates to the next fiscal year) (6)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: (a)Prepare journal entries to record these events including closing entries. (b)Prepare a Statement of Unrestricted Revenues,Expenses and Other Changes in Unrestricted Net Assets. (c)Prepare a Statement of Activities for the year ending June 30,2015,assuming the June 30,2014 balances in net assets are: $1,020,000 unrestricted,$30,000 temporarily restricted,and $8,000,000 permanently restricted.

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

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

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

The equity section of the balance sheet for investor-owned colleges and universities includes which of the following designations?

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

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.

Which of the following student tuition or fee reductions should be listed as a reduction in revenue?

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

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

For private colleges and universities,reclassifications of temporarily restricted and unrestricted net assets could be made:

A charitable remainder trust and a charitable gift annuity both require a formal trust agreement.

As of December 31,2014,the contribution revenue would be classified as:

How should the following revenues be reported by a private college? -$15,000 for the improvement of a study lounge, -$5,600 in unrestricted contributions, -$600 unrestricted investment income on endowment investments, -$11,600 sales of services by auxiliary enterprises. Unrestricted Restricted

The NACUBO Financial Accounting and Reporting Manual treats estimates of uncollectible student accounts as:

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.

Sam Smith died,leaving a will that provided that $1,000,000 be transferred to a not-for-profit hospital. The hospital is to invest the funds for 10 years and give $40,000 each year to the granddaughter. At the end of the 10 years,the $1,000,000 can be used for any purpose desired by the hospital. Which of the following is true?