Assume that a private university collects tuition and fees at the beginning of summer school,in which two weeks are offered in the first fiscal year and the remaining six weeks are offered in the second fiscal year.According to the approach recommended by the National Association of College and University Business Officers (NACUBO),the university would:
A)record the collections as a debit to Cash and a credit to Deferred Revenue for the entire amount of the collections.
B)record the collections as a debit to Cash and a credit to Restricted current revenue for the entire amount of the collections.
C)account for the entire tuition and fees as revenue in the first fiscal period.
D)recognize revenue in the first fiscal period for two-eighths of the tuition and fees and record six-eighths of the collections as a deferred revenue.

Question

Quizplus · Accepted Answer

According to the NACUBO approach, revenue recognition should be tied to the period in which the service is provided. Since only two weeks of the summer school fall in the first fiscal year, only 2/8 or 1/4 of the tuition and fees collected should be recognized as revenue in that period. The remaining six weeks of summer school fall in the second fiscal year, so the university should record 6/8 or 3/4 of the collections as deferred revenue to be recognized as revenue in that fiscal year. Therefore, Choice D is the best choice.

Assume That a Private University Collects Tuition and Fees at the Beginning