A not-for-profit university operates its college book-store as an auxiliary enterprise.During the year the store has revenues of $30 million and expenses of $27 million.In its statement of activities the university should report
A)operating revenues of $3 million
B)operating revenues of $30 million
C)nonoperating revenues of $3 million
D)nonoperating revenues of $30 million

Question

Quizplus · Accepted Answer

The book-store is an auxiliary enterprise, which means it is directly related to the university's mission and is intended to generate revenue. Therefore, the revenues and expenses of the book-store should be included as operating revenues and expenses in the university's statement of activities. The difference between the revenues and expenses ($3 million) represents the net income of the book-store, which is also an operating income for the university. Therefore, the university should report operating revenues of $30 million.

A Not-For-Profit University Operates Its College Book-Store as an Auxiliary