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Exam 11: College and University Accounting

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Question 1

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Inflows from self-supporting operations by a private college are known as auxiliary enterprises and are classified as

A) Unrestricted Revenue
B) Temporarily Restricted Revenue
C) Permanently Restricted Revenue
D) Either A or B

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Question 2

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Ethan Allen University is a private university following FASB standards for reporting. The following transactions took place during the year ended June 30, 2017. 1) EAU had received $550,000 in tuition in June 2017 for the summer session that runs from June 16 to August 14, 2016 and had deferred $ 357,500 65%) at June 30, 2016. 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 2017 for the summer session ending in mid-August 2017. 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 Activities for the year ending June 30, 2017, assuming the June 30, 2016 balances in net assets are: $1,020,000 unrestricted, $30,000 temporarily restricted, and $8,000,000 permanently restricted.

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Question 3

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

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

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

Public colleges and universities record contributed services as revenue if 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.

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

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

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

Ballard University, a private not-for-profit, billed four students for tuition and fees each in the amount of $ 8,000 each for fall semester. The University estimates 25% of tuition and fees will prove to be uncollectible. The University collected $ 10,000 as follows: Required: Prepare the journal entries to record the billing and subsequent collection or write-off for the transactions listed above.

Investor-owned proprietary schools are subject to the standards issued by the FASB

Eastern State University, a public university, had the following account balances as of June 30, 2017. Debits are not distinguished from credits, so assume all accounts have a "normal" balance i.e. cash is a debit and accounts payable a credit) $\begin{array} { l r } \text { Accounts payable } & 535,000 \\\text { Accounts receivable net) } & 435,000 \\\text { Capital assets, net of depreciation } & 7,410,000 \\\text { Cash ard cash equivalents } & 215,000 \\\text { Cash and cash equivalents - restricted noncurrent) } & 240,000 \\\text { Deferred revenue-current } & 325,000 \\\text { General obligation bonds payable - current portion related to } & \\\text { capital acquisition) } & 390,000 \\\text { General obligation bonds payable related to capital acquisition) } & 2,500,000 \\\text { Irvertories } & 700,000 \\\text { Irvestments - Endownent } & 4,200,000 \\\text { Irvestments Long-term } & 1,500,000 \\\text { Irvestments Short-term -urirestricted } & 900,000 \\\text { Net Position--restricted-expendable } & 1,300,000 \\\text { Net Position--restricted-nonexpendable } & 4,440,000 \\\text { Revenue bonds payable related to capital acquisition) } & 2,900,000 \\\text { Net Position } &?????????\end{array}$ Required: Prepare, in good form, a Statement of Net Position for Eastern State University as of June 30, 2017.

A college receives $ 500,000 of Pell Grants to be applied to current year student accounts for tuition and fees. What account should be credited upon receipt of the $ 500,000, assuming:

Public colleges may be included as component units in the state government's CAFR.

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. $\begin{array}{lrr}~~~~~~~\text { Unrestricted }&\text { Restricted }\\\hline\text { A) }~~~32,800 & 0 \\\text { B) } ~~~17,800 & 15,000 \\\text { C) }~~~ 17,200 & 15,600 \\\text { D) }~~~ 5,600 & 27,200\end{array}$

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

On December 1, 2016, a college received a pledge to support a program in the following two years. Which of the following is true with respect to this pledge?

Public higher education institutions typically report as special-purpose entities engaged in governmental and business-type activities or in governmental-type activities only.

Private universities follow the authoritative standards of _____ and use the _____ basis of accounting.

Public colleges typically report as special-purpose entities engaged only in business-type activities.