Deck 11: College and University Accounting Private Institutions

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

FASB standards require private college and universities to use encumbrances.

Answer 3

False

Question 4

A Charitable gift annuity is a split-interest agreement.

Question 5

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

Question 6

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

Question 7

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.

Question 8

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

Question 9

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

Question 10

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

Question 11

Private colleges and universities are required to present a Statement of Cash Flows.

Question 12

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

Question 13

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

Question 14

Private colleges and universities record depreciation expense.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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.

Question 20

With respect to colleges and universities, academic or athletic tuition waivers are accounted for as reductions in revenue.

Question 21

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

Question 22

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

Question 23

Not-for- profit organizations must recognize revenue from a pledge in the year in which the money is received.

Question 24

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.

Question 25

Not-for- profit organizations must recognize revenue in the year in which the unconditional pledge is made.

Question 26

A Research grant program is a split-interest agreement.

Question 27

Universities treat athletic scholarships as a reduction in revenue.

Question 28

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

Question 29

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

Question 30

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

Question 31

Universities treat athletic scholarships as a charge to the athletic department who must pay for the scholarship out of its net revenues.

Question 32

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.

Question 33

College and universities treat uncollectible accounts as bad debt expense.

Question 34

A contribution is recorded as revenue when the promise to give is unconditional.

Question 35

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

Question 36

Plant acquired with either unrestricted or restricted sources must be recorded initially as temporarily restricted and then reclassified in accordance with the depreciation schedule.

Question 37

Plant acquired 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.

Question 38

A Charitable lead trust is a split-interest agreement.

Question 39

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.

Question 40

Only not-for-profit organizations follow FASB guidelines AND report the equity as unrestricted, temporarily restricted or permanently restricted.

Question 41

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?

A) Unrestricted
B) Temporarily restricted
C) Permanently restricted
D) Either temporarily or permanently restricted

Question 42

Investment income on Endowments held by private colleges and classified as permanently restricted net assets should be recorded as an increase in:

A) Unrestricted net assets
B) Temporarily restricted net assets
C) Permanently restricted net assets
D) Any of the above, depending on the terms of the trust agreement

Question 43

Which of the following is true of a Statement of Activities prepared for a private college or university?

A) All expenses are shown as unrestricted
B) Reclassifications from unrestricted to permanently restricted net assets are reported when the governing board designates unrestricted funds for permanent investment in the endowment
C) Only realized gains or losses on investments are reported
D) All of the above are true

Question 44

The FASB has the authority to set accounting standards for all of the following organizations except:

A) Public colleges
B) Private colleges
C) For profit proprietary schools
D) Educational foundations established to support a private college or university

Question 45

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

Question 46

Which of the following is true regarding the investments of private colleges in securities with determinable fair values?

A) Investments are to be carried at the lower of cost or market
B) Investments are to be carried at fair value or amortized cost, depending upon whether the investments are in equity or debt securities
C) 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
D) None of the above

Question 47

In addition to a Statement of Financial Position and a Statement of Activities, a private college or university is required to present:

A) A Statement of Functional Expense
B) A Statement of Cash Flows
C) Both (a) and (c)
D) Neither (a) nor (c)

Question 48

Which of the following is a required statement for a private college?

A) Statement of Changes in Fund Balance
B) Statement of Revenues and Expenditures
C) Budgetary Comparison Statement
D) None of the above is a required statement

Question 49

Public Colleges and Universities are subject to standards issued by the GASB.

Question 50

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

Question 51

Which of the following is true of a Statement of Cash Flows for a private sector college or university?

A) Four categories are used: Operating, Capital Related Financing, Non-capital Related Financing and Investing
B) Either the direct or indirect method is acceptable
C) Cash flows must be presented separately for Unrestricted, Temporarily Restricted and Permanently Restricted categories
D) All of the above are true

Question 52

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?

A) Recognize the entire amount of revenues and expenses in the year in which the term is predominantly conducted
B) Recognize the entire amount of revenues and expenses in the year in which the term began
C) Recognize expenses in the year in which they were billed and the expenses in the year in which they were incurred
D) Apportion the revenues and expenses to the two fiscal years, following accrual accounting practices similar to those employed by commercial enterprises

Question 53

A donor gave a gift of $50,000 cash to a private college in 2008 with instructions that the funds be expended for psychology research. The funds were expended in 2009. The private college would recognize the $50,000 as:

A) Revenue in 2008 increasing temporarily restricted net assets; recognize the expense in 2009 and reclassify the resources from temporarily restricted net assets to unrestricted net assets in 2009
B) Deferred revenue in 2008 and as revenue in 2009, increasing unrestricted net assets. The expense would be recognized in 2009
C) Deferred revenue in 2008 and as revenue in 2009, increasing temporarily restricted net assets. The expense would be recognized also in 2009 and the resources would be reclassified from temporarily restricted net assets to unrestricted net assets in 2009
D) Either (b) or (c), depending upon the policy of the private college

Question 54

The three classes of net assets required to be presented by a private college or university are:

A) Permanently Restricted, Temporarily Restricted and Unrestricted
B) Reserved, Unreserved and Undesignated
C) Invested in Capital Assets net of Related Debt, Restricted and Unrestricted
D) Educational and General and Auxiliary Enterprises

Question 55

Which of the following would not be considered a split-interest agreement, according to the Not-for-Profit Guide?

A) Charitable remainder trusts
B) Permanent income-sharing agreements
C) Charitable gift annuities
D) Pooled (life) income funds

Question 56

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

Question 57

The Financial Accounting Standards Board is responsible for the standards setting for all privately owned universities.

Question 58

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

A) For satisfaction of purpose restrictions
B) When time restrictions expire
C) If the resources donated for fixed assets have been expended on such assets
D) All of the above

Question 59

Which of the following is true regarding accounting and financial reporting for private colleges and universities?

A) Expenses may be unrestricted or temporarily restricted depending on donor intent
B) 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
C) The Statement of Cash Flows must use the direct method
D) None of the above is true

Question 60

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 $1,200,000. Scholarships, for which no services were required, were awarded in the amount of $1,400,000. 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

Question 61

A donor made a gift of cash to a private college or university in 2009 with an expressed purpose restriction. All of the funds were expended in 2009. The private college or university must:

A) Record the gift as a temporarily restricted revenue, reclassify the funds to unrestricted and then report the expense as unrestricted
B) Record the gift and expense as unrestricted
C) Record the gift and expense as temporarily restricted
D) Use either of the methods described in (a) or (b)

Question 62

If the receivable for a student is $8,000 and the student pays only $500 as the result of receiving an assistantship from the school, what would be the appropriate debits.

A) Debit Cash and Debit Discount on Revenue
B) Debit Cash and Debit Expense
C) Debit Cash and Debit accounts receivable
D) Debit Cash

Question 63

If Jimmy commits to pledging $10,000 to Greystone College in 2008 and then pays in 2009, how much revenue will Greystone College recognize in 2008?.

A) $10,000
B) $0
C) $9,000
D) $7,000

Question 64

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

A) Graduate Assistantships
B) Athletic or Academic Scholarships
C) Work-Study Programs
D) None of the Above

Question 65

Inflows from self-supporting university operations, known as auxiliary enterprises, are classified as

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

Question 66

The private college would:

A) Record contribution revenue in the amount of $10,000 in each of the years 2009, 2010, 2011, 2012 and 2013
B) Record contribution revenue in the amount of $42,124 in 2008
C) Record contribution revenue in the amount of $42,124 in 2009
D) None of the above

Question 67

Under NACUBO guidelines, tuition waivers associated with athletic or academic scholarships should be reported as:

A) Expenses
B) Reductions in revenue
C) Transfers
D) None of the above

Question 68

Under NACUBO guidelines, tuition waivers associated with student work study programs should be reported as:

A) Expenses
B) Reductions in revenue
C) Transfers
D) None of the above

Question 69

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

A) Debit Cash
B) Debit Cash and Debit Expense
C) Debit Expense
D) Debit Cash and Debit Tuition Discount on Accounts Receivable

Question 70

The equity section of the balance sheet for private, not-for-profit colleges and universities includes which of the following designations?

A) Unrestricted Net Assets, Temporarily Restricted Net Assets and Permanently Restricted Net Assets
B) Paid in Capital and Retained Earnings
C) Net Assets Invested in Capital Assets, net of related Debt; Restricted Net Assets; and Unrestricted Net Assets
D) None of the above

Question 71

In 2009, 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 2009. The college was to receive $4,000 per individual test. In 2009, the college completed 100 tests. How much revenue should the college report for 2009?

A) $ - 0 -
B) $ 400,000
C) $ 700,000
D) $1,700,000

Question 72

Under NACUBO guidelines, the current period provision for uncollectible accounts should be reported as:

A) Bad debt expense
B) A reductions in revenue
C) Transfers
D) None of the above

Question 73

If a donor contributes funds to be invested for a set number of years and then become available for expenditure, the funds would be considered as a(n)

A) Quasi-endowment
B) Term endowment
C) Endowment
D) None of the above

Question 74

The private college would:

A) Record interest revenue of $2,527 in 2008
B) Record interest revenue of $2,527 in 2009
C) Record contribution revenue of $2,527 in 2008
D) Record contribution revenue of $2,527 in 2009

Question 75

As of December 31, 2009, the contribution revenue would be classified as:

A) Unrestricted
B) Temporarily restricted
C) Permanently restricted
D) Neither of the above

Question 76

A private college received a grant of $40,000 with purpose restrictions in 2008. In 2009 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:

A) The restricted funds would have been used first
B) The unrestricted funds would have been used first
C) The restricted funds and unrestricted funds would have been used equally
D) The restricted funds and unrestricted funds would have been used, based on a weighted average of the amounts

Question 77

A donor made a cash contribution of $50,000 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:

A) Record the building as permanently restricted
B) Record the building as unrestricted
C) 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
D) Record the plant as either unrestricted or temporarily restricted, as long as a consistent policy is followed

Question 78

Tuition waivers associated with graduate assistantships or work-study programs are accounted for as

A) Reductions in revenue
B) Bad debt expense
C) Compensation expense
D) Discounts

Question 79

Which of the following types of college/university would have these components of the Financial Report? • Statement of Financial Position/ Balance Sheet.
• Statement of Activities.
• Statement of Cash Flows.
• Notes to the Financial Statements.

A) Investor Owned
B) Public University
C) Private Not-for-Profit
D) None of the above

Question 80

In 2008 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 $350,000. Expenses associated with the grant totaled $225,000 in 2009. In the Statement of Activities for 2009, the college should show:

A) Revenues of $350,000 and expenses of $225,000 in Temporarily Restricted Net Assets
B) Revenues of $225,000 and expenses of $225,000 in Temporarily Restricted Net Assets
C) Revenues of $225,000 and expenses of $225,000 in Unrestricted Net Assets
D) Expenses of $ 225,000 in Unrestricted Net Assets and a decrease in Temporarily Restricted Net Assets of $ 225,000