Question 1

In 2017, a public university was awarded a federal reimbursement grant of $18 million to carry out research.Of this, $12 million was intended to cover direct costs and $6 million to cover overhead.In a particular year, the university incurred $4 million in allowable direct costs and received $3.4 million from the federal government.It expected to incur the remaining costs and collect the remaining balance in 2018.For 2017 it should recognize revenues from the grant of

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Question 2

In the current year, Generous University awarded scholarships to graduate students in the amount of $5,000,000.The recipients are not required to provide any services in return for the scholarships.How should the university record the award?

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Question 3

Which of the following criteria must be met for a public university to report affiliated organizations as component units? I.The university is entitled to access the resources
II)The economic resources are significant to the component
III)The economic resources received or held are almost entirely for the direct benefit of the university

Accepted Answer

All three criteria must be met for a public university to report affiliated organizations as component units. The first criterion (I) is that the university is entitled to access the resources, the second criterion (II) is that the economic resources are significant to the component, and the third criterion (III) is that the economic resources received or held are almost entirely for the direct benefit of the university. Only when all three criteria are met, the affiliated organizations can be reported as component units.

Question 4

Although it no longer is required for external financial reporting, the AICPA's 1973 Audits of Colleges and Universities provides for which of the following in its guidance on fund structure?

Accepted Answer

The AICPA's 1973 Audits of Colleges and Universities provides guidance on all three types of fund structures including plant funds, loan funds, and annuity funds. While these funds may no longer be required for external financial reporting, they are still relevant for internal management and accounting purposes.

Question 5

An accountant has encountered a perplexing financial reporting issue related to the private college for which he is preparing financial statements.The issue is not specifically addressed by FASB Statements.To what standards would the accountant first look for guidance?

Accepted Answer

The accountant should first look to the AICPA accounting and auditing guide, Audits of Colleges and Universities and/or AICPA SOP 74-8, as these provide specific guidance for financial accounting and reporting by colleges and universities.

Question 6

Declines in the stock market can affect the fiscal health of colleges and universities.Which of the following is the least likely reason for that?

Accepted Answer

Declines in the stock market may lead to reduction in endowment income, reduced ability of parents and students to pay tuition, and decrease in donors' willingness and ability to make contributions. However, a decrease in demand for university scholarship funds is unlikely to be directly affected by stock market declines. In fact, it may see an increase in demand as more students seek financial assistance due to economic hardship caused by the stock market decline.

Question 7

During the year, Goodman College received the following: 
-An unrestricted $280,000 pledge to be paid the following year
-A $140,000 cash gift restricted for study-abroad scholarships
-A notice from a recent business school graduate that he has named the college as a beneficiary of $60,000 in his will
What amount of contribution revenue should Goodman College report in its statement of activities?

Accepted Answer

- The unrestricted pledge of $280,000 is not considered contribution revenue until it is actually received, so it is not included in this calculation.
- The $140,000 restricted cash gift is considered contribution revenue because it was received during the year for a specific purpose.
- The $60,000 bequest from the graduate is also considered contribution revenue because it is a promise of future payment to the college.
Therefore, the total contribution revenue is $140,000 + $60,000 = $200,000.

Question 8

A public university had tuition and fees for the year ended June 30, 2015, in the amount of $27,000,000.Scholarships, for which no services were required, amounted to $2,100,000.Graduate assistantships, for which services were required, amounted to $1,950,000.The amount to be reported by the university as net tuition and fee revenue would be

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Question 9

What are the key reporting options available to public colleges and universities?

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Question 10

In what ways can declines in the stock market affect the fiscal health of colleges and universities?

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Question 11

Bristol Public School Foundation had available temporarily restricted gifts in excess of $200,000.The foundation decided to invest this money temporarily until it needs the funds for the restricted purpose.The donors had made no specific stipulations regarding investment earnings but the foundation board had voted to use the earnings on the projects for which the gift had originally been restricted.At year-end, the securities had a fair value of $200,500.The appropriate way to recognize the change in fair value is

Accepted Answer

The change in fair value of investments is recognized as unrestricted revenue unless the donor has specified otherwise. Since the donors made no specific stipulations regarding investment earnings, the increase in fair value is recorded as unrestricted revenue.

Question 12

In June 2018, a public university bills and collects $45 million in tuition for the summer semester that runs from June 1 through July 15.In addition, in May and June it bills $300 million for the fall semester that runs from September 1 through December 15.Of this amount it collects only $120 million (expecting to collect the balance prior to September 1).In its statement of revenues, expenses, and changes in net position for the fiscal year ending June 30, 2018 it should recognize as tuition revenue

Accepted Answer

The university should recognize revenue for the portion of the summer semester that falls within the fiscal year ending June 30, 2018. Since the summer semester runs from June 1 to July 15, only the revenue for June should be recognized, which is $30 million (2/3 of $45 million). The fall semester revenue should not be recognized as it pertains to a future period.

Question 13

During the year, Dakota University's board of trustees established a $500,000 fund to be retained and invested for scholarship grants.The fund earned $30,000, which had not been distributed by December 31.What amount should Dakota report in a board-designated (quasi)endowment fund's net position at December 31?

Accepted Answer

The board-designated (quasi)endowment fund's net position should be reported at $530,000, which includes the original $500,000 fund and the $30,000 earnings that have not been distributed.

Question 14

How do the three major financial statements of a public college or university differ from those of a private not-for-profit college or university?

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Question 15

At the time the foundation receives the donation, Lane College should debit Asset $1 million and credit what account for $1 million?

Accepted Answer

The donation should be initially recorded as temporarily restricted revenue since the donor has specified that the funds are to be used for a specific purpose (i.e. to establish an endowment fund). Once the conditions of the restriction have been met, the revenue can be released from restriction and re-classified as unrestricted revenue.

Question 16

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

Accepted Answer

The book-store is operated as an auxiliary enterprise, which means it is a self-supporting activity of the university. Therefore, its revenues and expenses are reported within the university's operating activities. The total operating revenues of the book-store are $30 million, which should be reported in the statement of activities.

Question 17

Current operating expenses of a public college may be classified by which of the following?

Accepted Answer

Current operating expenses of a public college can be classified by object classes, organizational units, and program functions, making all the options applicable.

Question 18

Austin Community College, a public institution, issues stand-alone financial statements.Although the college maintains its accounts on a fund basis, it does not include a combined fund statement of net position or statement of revenues, expenses, and changes in net position in its financial statements.Can such a practice be consistent with generally accepted accounting principles? Explain, citing specific GASB provisions or pronouncements.

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Question 19

A not-for-profit university maintained as endowment of $800,000, the income of which was restricted for an annual conference on international relations.In a particular year, the market value of the endowment increased by $80,000.The university held a conference on international relations at a cost of $86,000.The university should report

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Quiz 13: Colleges and Universities