Deck 17: Accounting for Colleges and Universities

Question 1

Which type of gifts would normally not be reported by a government university?

A) Split-interest annuity gifts.
B) Split-interest life income gifts.
C) Trust held by others.
D) Endowment gifts.

Answer 1

C

Question 2

Which fund used by colleges and universities is most like a local government's general fund?

A) Unrestricted current fund.
B) Restricted current fund.
C) Unexpended plant fund.
D) Agency funds.

Answer 2

A

Question 3

Purchase of capital assets by government colleges and universities engaged only in business would be reported as

A) Expenditures.
B) Transfers to capital assets.
C) Reclassifications.
D) Increases in capital assets.

Answer 3

D

Question 4

Which measurement focus is used by governmental universities that report as a business-type special purpose government?

A) Cash measurement focus.
B) Current financial resources measurement focus.
C) Economic resources measurement focus.
D) Accrual measurement focus.

Question 5

Tuition revenues of government colleges and universities are reported

A) Net of bad debts, scholarships and fellowships.
B) Net of bad debts.
C) Net of scholarships and fellowships.
D) At the gross amount of the standard tuition and fees.

Question 6

Which of the following statements are true regarding life income gifts?

A) Require the amount of the payment to the beneficiary to vary based on the earnings of the trust.
B) Require a fixed-dollar payment to be made annually to a designated recipient.
C) Assets are recorded at historical cost when donated.
D) Life income gifts are no longer allowed by governmental colleges and universities.

Question 7

Selected transactions of Shelbyville State University are listed below. The university reports as a special purpose government engaged in only business-type activities. All amounts are in thousands of dollars.
Transactions:
1. Tuition and fees assessed total $4,500; 70% is collected immediately; scholarships allowances are granted for $120; and $45 is expected to prove uncollectible.
2. Revenues collected from sales and services of the university bookstore, an auxiliary enterprise, were $275.
3. Salaries and wages paid, $1,500; $62 of this was for employees of the university bookstore.
4. Tuition remissions were granted in the amount of $35 for employees.
5. Mortgage payments totaled $520; $290 of this was for interest.
6. Restricted contributions for the Master of Accountancy MAcc program were received, $250.
7. Expenditures for the MAcc program were incurred and paid, $230.
8. Equipment was purchased from unrestricted resources, $34.
Requirement: Prepare the necessary journal entries to record these transactions.

Question 8

A public college was the recipient of an annuity gift. The elderly alumnus donated cash of $110,000 and investments of $610,000 with the restriction that the college pays them a sum of $50,000 per year for five years. If the annuity payable has been actuarially valued at $305,000, the college should report revenues upon receipt of the gift in the amount of

A) $120,000.
B) $370,000.
C) $415,000.
D) $720,000.

Question 9

Governmental universities typically report as

A) General purpose governments.
B) Special purpose governments engaged in only business-type activities.
C) Special purpose governments engaged in only governmental activities.
D) Private sector entities.

Question 10

Jim Catlett establishes a trust that is administered by Mansfield National Bank in the amount of $750,000. Jim has promised that he will donate an additional $50,000 a year to the trust in each of the next 5 years. The income from the trust will go to the state university. How much should the university record as income in the year that the trust is established?

A) $1,000,000.
B) $750,000 plus the present value of the five $50,000 donations.
C) $750,000.
D) $0.

Question 11

Dogwood State University is a government university that reports as a special government engaged only in business-type activities. Listed below are selected transactions that affect its annuity gifts. All amounts are in thousands of dollars.
Transactions:
1. At the beginning of the year, the college receives cash of $200 with a stipulation that the donor be paid $25 a year for 10 years. The present value of the payment to the donor is $175.
2. Investments in the amount of $195 are purchased.
3. Payments of $25 are made to the donor at year end.
4. Investment income of $13 is received during the year.
5. The present value of the annuity payable to the donor at year end was $162.
Requirement: Prepare the necessary journal entries to record these transactions.

Question 12

Which of the following statements are true?

A) All colleges and universities report under the same GAAP guidelines.
B) Private colleges and universities must report using FASB guidance. Public colleges and universities are permitted to follow that guidance or the guidance in the AICPA's college and university audit guide.
C) Private colleges and universities must report using the FASB guidance. Public colleges and universities must report using GASB guidance.
D) Public colleges and universities must report as special purpose governments engaged only in business-type activities.

Question 13

If actuarial assumptions change such that the annuity payable is actually less than originally recorded, the change should be reported

A) Immediately as a reduction in the annuity payable.
B) Immediately as an expense.
C) As an expense at the time the annuity obligations are fulfilled.
D) As a reduction of annuity payable at the time the annuity obligations are fulfilled.

Question 14

Government colleges and universities must recognize donations received with purpose restrictions as

A) Deferred revenue until the restrictions are met.
B) Operating revenues.
C) Nonoperating revenues.
D) None of the above.

Question 15

The following information was derived from the accounts and records of Mockingbird State University for 20X3. All amounts are in thousands of dollars.
$\begin{array}{llr} \text { Tuition and fees} &\\ \text { Total assessed} &\$4,000\\ \text { Expected uncollectible} &80\\ \text { Appropriations} &\\ \text { State.} &800\\ \text { Auxiliary enterprises } &\\ \text { Sales. } &500\\ \text { Salaries} &280\\ \text { Other expenses } &140\\ \text { Endowment income} &\\ \text { Restricted to research} &370\\ \text { Private gifts and grants } &\\ \text { Restricted to student scholarships } &200\\ \text { Restricted to plant expansion} &2,000\\ \text { Unrestricted } &180\\ \text { Expenses: } &\\ \text {Instruction } &3,100\\ \text {Research } &600\\ \text { Student services } &220\\ \text { Institutional support } &190\\ \text { Operation of plant } &180\\ \text { Mortgage payment \( \$ 10,000 \) interest } &15\\ \text {Scholarships allowances } &200\\ \text { Net positon, January 1, \( 20 \times 3 \)} &3,827\\\end{array}$
Mockingbird State University reports as a special purpose government engaged only in business-type activities.
Requirement: Prepare a statement of revenues, expenses, and changes in net position for Mockingbird State University for 20X3.

Question 16

A government university's tuition and fees at the standard rates are $20 million. Scholarship allowances of $1,500,000 are granted to students by the university and tuition waivers for employees granted under the university's tuition waiver policy are $100,000. Uncollectible accounts are expected to equal $150,000. The amount of tuition and fees revenues that the university should report is:

A) $18,250,000.
B) $18,350,000.
C) $18,500,000.
D) $20,000,000.

Question 17

A college has a June 30 fiscal year end. Assume that tuition revenue for the summer session that begins June 1, 20X8, and ends August 31, 20X8 totals $270,000. Tuition is billed and is due at the beginning of the session term. How much revenue should be reported as of the fiscal year ended June 30, 20X8?

A) $270,000.
B) $180,000.
C) $135,000.
D) $90,000.

Question 18

Charges for tuition for the current semester of a local college totaled $300,000. Academic scholarships were awarded to students in the amount of $25,000 and tuition waivers were given to children of employees in the amount of $10,000. The college should report

A) Revenues of $265,000 and Expenses of $35,000
B) Revenues of $275,000, net of $25,000 in allowances, and $10,000 in Expenses.
C) Revenues of $290,000, net of $10,000 in Allowances, and $25,000 in Expenses.
D) Revenues of $300,000 and Expenses of $35,000.

Question 19

A government university that chooses to report as a business-type special purpose government, purchases land for a planned dormitory by securing a ten year bank loan. The entry to record the purchase and procurement of funding would include

A) A debit to assets.
B) A credit to fund balance.
C) A debit to expenditures.
D) A credit to other financing sources.

Question 20

Below are selected transactions for the Lake County Community College LCCC. LCCC reports as a special government engaged only in business-type activities. All amounts are in thousands of dollars.
Transactions:
1. Tuition and fees charged for the fall 20X3 semester totaled $2,800. Of this, $98 was waived as a result of scholarship allowances, and another $15 is expected to be uncollectible.
2. For the winter 20X4 semester LCCC collected a general student fee of $18. The full amount of this fee is restricted for the purchase of computer equipment and software needed to establish computer labs at the college.
3. The college received a reimbursement grant restricted to research on composite materials, $300.
4. Salaries paid to researchers in the Composite Materials Lab of $40 qualified under the research grant received.
5. The college purchased equipment for use in its building and grounds maintenance department at a cost of $35. Unrestricted resources were used for this purpose.
6. The college paid $30 interest and $15 principal on one of its mortgages.
Requirement: Prepare the necessary journal entries to record these transactions.

Question 21

Stock valued at $15,000 was donated to a college. The donor stipulated that the stock was to be immediately sold and the proceeds used toward college's capital campaign. The entry to record the receipt of the gift would be $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\begin{array}{lrr}&\text { Debit } & \text { Credit }\end{array}$

A)
$\begin{array}{lrr}\text { Restricted Assets - Capital Campaign }& \$ 15,000 \\\text { Revenue } & &\$ 15,000 \\\end{array}$


B)
$\begin{array}{lrr}\text { Restricted Assets - Capital Campaign } & \$ 15,000 \\\text { Deferred Revenue }&& \$ 15,000 \\\end{array}$

C)
$\begin{array}{lrr}\text { Investments } &\quad \quad \quad \quad \quad \quad \quad \quad \$ 15,000 \\\text { Deferred Revenue }& & \$ 15,000 \\\end{array}$

D)
$\begin{array}{lrr}\text { Investments }&\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \$ 15,000 \\\text { Special Item } && \$ 15,000 \\\end{array}$

Question 22

A public university received a restricted donation from one of their trustees. The donation was to be used to pay debt service costs for one year on the new athletic field. When received, the donation will be reported on the statement of cash flows as

A) Operating activities.
B) Noncapital financing activities.
C) Capital and related financing activities.
D) Investing activities.

Question 23

Government colleges and universities engaged only in business-type activities would report state appropriation as

A) Operating revenues.
B) Special items.
C) Other financing sources.
D) Nonoperating revenues.

Question 24

A state university receives an appropriation for from the state for capital projects of $5 million and a state appropriation for other purposes of $20 million. How should the amounts received be reported in the university's statement of revenues, expenses, and changes in net position?

A) Operating revenues of $20 million and nonoperating revenues of $5 million.
B) Operating revenues of $20 million and capital contributions of $5 million.
C) Nonoperating revenues of $20 million and capital contributions of $5 million.
D) Nonoperating revenues of $25 million.

Question 25

If a government university provides loans to qualifying students for tuition and fees, the loans should be reported on the statement of cash flows as

A) Operating activities.
B) Noncapital financing activities.
C) Capital and related financing activities.
D) Investing activities.

Question 26

A government university received a cash donation $1,000,000 to create an endowment. The income of the endowment can be used to support any activity of the university. In the balance sheet, the $1,000,000 endowment should be included in which component of net position?

A) Unrestricted net position.
B) Restricted - nonexpendable net position.
C) Nonspendable net position.
D) Permanently restricted net position.

Question 27

A government college received a $2 million grant restricted to research on developing a process for synthesizing a stable triple helix. $500,000 of qualifying research costs were incurred during the year. The college should report:

A) Grant revenues of $2 million.
B) Grant revenues of $500,000 and a liability for unearned grant revenues of $1.5 million.
C) Grant revenues of $500,000 and deferred inflows of $1.5 million.
D) Unearned grant revenues of $2 million until the research is completed.

Question 28

The balance sheet of nongovernment, not-for-profit colleges and universities would report which component of net assets?

A) Unrestricted net assets.
B) Restricted net position.
C) Net investment in capital assets.
D) Nonspendable net assets.

Question 29

Which financial statements are required for government colleges and universities engaged only in business-type activities?

A) Statement of net position, statement of revenues, expenditures, and other changes, and statement of cash flows.
B) Statement of net position, statement of revenues, expenses, and changes in net position, and statement of cash flows.
C) Statement of net position, statement of revenues, expenses, and changes in net position, and statement of changes in net position.
D) Statement of net position, statement of activities, and statement of cash flows.

Question 30

Which of the following classifications of net position likely would be found on the statement of net position of a governmental university that reports as a business-type activity?

A) Temporarily restricted net position.
B) Unrestricted net position.
C) Permanently restricted net position.
D) Nonspendable net position.

Question 31

Chase Foundation establishes a $1,000,000 trust for a government university. The local bank is appointed as trustee of the fund. The income of the trust can be used to support any activity of the university. In the university's statement of net position, the $1,000,000 trust should be included in which component of net position?

A) Not reported.
B) Unrestricted net position.
C) Restricted - nonexpendable net position.
D) Permanently restricted net position.

Question 32

Cash collected by a government university from tuition and fees should be reported in the statement of cash flows as

A) Operating activities.
B) Noncapital financing activities.
C) Capital and related financing activities.
D) Investing activities.

Question 33

The statement of net position of government colleges and universities engaged only in business-type activities would not report which component of net position?

A) Unrestricted net position.
B) Temporarily restricted net position.
C) Net investment in capital assets.
D) Restricted net position.

Question 34

A state college receives an annuity gift of $200,000 from an individual. The individual is to receive $18,000 a year for 10 years. The present value of the payments to the individual is $150,000. How much revenues should the college report from this transaction?

A) $0.
B) $20,000.
C) $50,000.
D) $200,000.

Question 35

The statement of cash flows of government colleges and universities engaged only in business-type activities would report all of the following sections except:

A) Investing.
B) Noncapital financing.
C) Capital and related financing.
D) Financing.

Question 36

A wealthy alumnus donated land to be used for a new arts and sciences building at the local state university. The land has a fair market value of $250,000. The donor purchased the land ten years ago at a cost of $75,000. The entry to record the receipt of the donation would be $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\begin{array}{lrr}&\text { Debit } & \text { Credit }\end{array}$

A)
$\begin{array}{lrr}\text { Land } &\quad \$ 250,000 & \\\quad \text { Capital Contributions } & & \$ 250,000 \\\end{array}$

B)
$\begin{array}{lrr}\text { Land } &\quad \quad \$ 75,000 \\\text { Capital Contributions }& & \$ 75,000 \\\end{array}$

C)
$\begin{array}{lrr}\text { Land }&\quad \quad \quad \quad \quad \quad \$ 250,000 \\\text { Special Item }&& \$ 250,000 \\\end{array}$

D)
$\begin{array}{lrr}\text { Land }&\quad \quad \quad \quad \quad \quad \$ 75,000 \\\text { Special Item }& & \$ 75,000 \\\end{array}$

Question 37

A university's endowment fund has investments that were purchased for $400,000. As of the end of the fiscal year, the fair value of the investments decreased by $33,000. What journal entry is required to reflect the change in the fair market value of the investments? $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\begin{array}{lrr}&\text { Debit } & \text { Credit }\end{array}$

A)
$\begin{array}{lrr}\text { Loss on Endowment Investments } & \$ 33,000 \\\text { Endowment Investments } && \$ 33,000 \\\end{array}$


B)
$\begin{array}{lrr}\text { Interest Expense } &\quad\quad\quad \$ 33,000 \\\text { Endowment Investments } && \$ 33,000 \\\end{array}$

C)
$\begin{array}{lrr}\text { Revenues-Investment Income } & \$ 33,000\\\text { Endowment Investments }&& \$ 33,000 \\\end{array}$


D)
$\begin{array}{lrr}\text { Interest Expense }&\quad\quad\quad\quad \$ 33,000 \\\text { Deferred Revenue }& & \$ 33,000 \\\end{array}$

Question 38

A government university collected unrestricted student fees of $200,000 and fees restricted for technology of $400,000 in the current academic year.

A) The full $600,000 should be reported as revenues for the academic year.
B) $200,000 should be reported as revenues and $400,000 should be reported as unearned revenues
C) $200,000 should be reported as revenues and $200,000 as deferred revenues.
D) $400,000 should be reported as unearned revenues and $200,000 as deferred revenues.

Question 39

Fees collected from students but restricted to finance construction of a student recreation facility should be reported in the statement of cash flows as:

A) Operating activities.
B) Noncapital financing activities.
C) Capital and related financing activities.
D) Investing activities.

Question 40

A state university assessed its students $2,000,000 of tuition and fees. However, only $1,500,000 was expected to be collected because of an estimated uncollectible amount of $25,000, scholarship allowances of $400,000, and tuition waivers to staff of $75,000. What amount of net tuition and fees revenue should be reported in the statement of revenues, expenses and changes in net position?

A) $1,500,000.
B) $1,575,000.
C) $1,600,000.
D) $2,000,000.

Question 41

The statement of cash flows of nongovernment, not-for-profit colleges and universities would report which category of cash flows?

A) Investing.
B) Noncapital financing.
C) Capital and related financing.
D) Nonoperating financing.

Question 42

Which financial statements are required for nongovernment, not-for-profit colleges and universities?

A) Balance sheet, statement of revenues, expenditures, and other changes, and statement of cash flows.
B) Balance sheet, statement of revenues, expenses, and changes in net assets, and statement of cash flows.
C) Balance sheet, statement of revenues, expenses, and changes in net assets, and statement of changes in net assets.
D) Balance sheet, statement of activities, and statement of cash flows.

Question 43

Management's discussion and analysis must be reported by

A) All colleges and universities.
B) Nongovernment not-for-profit colleges and universities.
C) All government colleges and universities.
D) Only government colleges and universities that report as special purpose governments engaged only in business-type activities.