Deck 9: Accounting for Special-Purpose Entities, Including Public Colleges and Universities

Question 1

State appropriations for higher education institutions are to be reported as non operating revenues in the Statement of Revenues, Expenses and Changes in Net Assets.

Answer 1

True

Question 2

GASB Statement 35 extends the provisions of GASB Statement 34 to both public and private colleges and universities.

Answer 2

False

Question 3

GASB clearly defines the criteria when determining whether a government is general-purpose or special-purpose.

Answer 3

False

Question 4

Higher education institutions that report as special purpose entities engaged in business-type activities only should report the same net asset classifications (invested in capital assets, net of related debt, restricted, unrestricted) as are reported in the government-wide statement of net assets.

Question 5

Special-purpose governments generally provide a single or limited set of governmental services or programs.

Question 6

Special-purpose governmental entities that are engaged in a single governmental-type activity only are required to prepare only the statements required for governmental fund basis financial statements.

Question 7

General state appropriations are treated as nonoperating revenue of public colleges and universities.

Question 8

A Township could be either a general-purpose or a special purpose government.

Question 9

Public higher education institutions that report as special-purpose entities engaged in business-type activities only are still required to prepare a Management's Discussion and Analysis.

Question 10

A special-purpose government engaged in business-type activities financed in whole or part by fees charged to external parties are usually reported in enterprise funds.

Question 11

Revenue for reimbursement grants may be recognized before expenditures take place as long as the grant has been received.

Question 12

Governmental health care entities, public school systems and museums are accounted for as special-purpose governments.

Question 13

Tuition waived for work-study and graduate assistants is deducted from student fee income when preparing a Statement of Revenues, Expenses and Changes in Net Assets.

Question 14

Public higher education institutions are allowed to report as special-purpose entities engaged in governmental and business-type activities or in governmental-type activities only.

Question 15

General-purpose governments are those that offer more than one type of basic governmental service, while special-purpose entities generally provide a limited or single, set of programs or services.

Question 16

The implementation guide for GASB Statement 34 provides a distinction by indicating that "general purpose governments are thought to be those that offer more than one type of basic governmental service.

Question 17

According to GASB Statement 34, governmental activities are generally financed through taxes, intergovernmental revenues and other nonexchange revenues.

Question 18

Public institutions of higher education are required to produce a Statement of Cash flows in addition to a Statement of Net Assets and a Statement of Revenues, Expenses and Changes in Net Assets.

Question 19

Special-purpose governments that are engaged in both governmental and business-type activities are permitted to combine the fund and government-wide financial statements.

Question 20

Special-purpose governmental entities that are engaged in a single business activity are not required to prepare government-wide financial statements, but may issue only enterprise fund statements.

Question 21

Most public colleges and universities choose to report as special purpose entities engaged in only business-type activities.

Question 22

Which of the following is true regarding accounting and financial reporting for special-purpose entities?

A) Special-purpose entities that are engaged only in one governmental activity may combine government-wide and governmental fund statements
B) Special-purpose entities that are engaged in fiduciary activities only may prepare the statements required for fiduciary funds only (Statement of Fiduciary Net Assets, Statement of Changes in Fiduciary Net Assets) plus any RSI schedules required
C) Both of the above
D) Neither of the above

Question 23

Special-purpose governments that are engaged in more than one governmental activity are required to use the full reporting model including MD&A, government-wide and fund-basis statements, notes to the financial statements and RSI.

Question 24

According to GASB Statement 33, with respect to public colleges and universities, pledges receivable are recognized as assets and revenues when the pledge is made.

Question 25

GASB categorizes general state appropriation as nonoperating revenue for public colleges and universities.

Question 26

Special-purpose governments that are engaged in more than one governmental activity are permitted to combine the fund and government-wide financial statements.

Question 27

Public colleges and universities are required to report as special purpose entities engaged in both governmental- and business-type activities because they receive tax dollars and charge user fees.

Question 28

Public colleges must depreciate infrastructure and may not use the modified approach.

Question 29

Public colleges who waive fees for graduate assistants must report tuition income net of the fees waived.

Question 30

Special-purpose governments that are engaged in both governmental and business-type activities are required to use the full reporting model including MD&A, government-wide and fund-basis statements, notes to the financial statements and RSI.

Question 31

Special purpose local governments engaged only in fiduciary-type activities are required to prepare all of the following financial reports except:

A) Statement of Fiduciary Net Assets
B) Statement of Cash Flows
C) Statement of Changes in Fiduciary Net Assets
D) MD&A

Question 32

Public colleges and universities account for revenue bonds using the expenditure method.

Question 33

According to GASB Statement 33, with respect to public colleges and universities, pledges receivable are recognized as assets and revenues when eligibility requirements are met.

Question 34

Reimbursement grants require that the appropriate expenditure be made before the revenue can be recognized.

Question 35

Which of the following would not be considered a special-purpose government for financial reporting purposes?

A) A public school system
B) An art museum
C) A public hospital
D) A county board of supervisors

Question 36

Public colleges who waive fees for graduate assistants must report tuition at the gross amount and expense the fees waived.

Question 37

GASB Statement 39 requires most public college foundations to be reported as discretely presented component units in the college's financial reports.

Question 38

Public colleges and universities account for revenue bonds using the accrual method to account for interest and amortization of premiums and discounts.

Question 39

Public colleges must report tuition income net of athletic scholarships.

Question 40

GASB categorizes general state appropriation as operating revenue for public colleges and universities.

Question 41

Which of the following is true regarding the Statement of Cash Flows for a public college?

A) The direct method must be used
B) The statement is in the same format required for state and local governmental enterprise funds
C) Both of the above are true
D) Neither of the above is true

Question 42

Which of the following is true regarding the Statement of Revenues, Expenses and Changes in Net Assets for a public (government-owned) college?

A) The modified accrual basis of accounting is used to determine the net increase or decrease in net assets
B) Auxiliary enterprise activities represent revenues and expenses related to units of the college that provide services to students on a user fee basis
C) Both of the above are true
D) Neither of the above is true

Question 43

Which of the following is true regarding financial reporting of special-purpose entities?

A) Special purpose entities might include park districts, school districts and public colleges and universities
B) Special-purpose entities, in some cases, have more limited reporting requirements than general-purpose entities
C) Both of the above are true
D) Neither of the above is true

Question 44

Which of the following is true regarding the Statement of Revenues, Expenses and Changes in Net Assets for a public college reporting as a special purpose entity engaged in business type activities only?

A) Full accrual accounting is used to measure revenues and expenses
B) Grants are treated as operating revenue and contributions as non-operating revenue
C) Both of the above are true
D) Neither of the above is true

Question 45

Which of the following is true regarding financial reporting of special-purpose entities?

A) Special-purpose entities might be included as component units in a primary government's financial statements
B) Special-purpose entities that engage in more than one governmental activity may prepare statements that combine government-wide and governmental fund statements
C) Both of the above are true
D) Neither of the above is true

Question 46

Which of the following is true regarding the Statement of Revenues, Expenses and Changes in Net Assets for a public college?

A) Tuition revenues are reported net of tuition waivers only when those waivers do not require service on the part of the recipient student
B) Depreciation expense is not recognized
C) Both of the above are true
D) Neither of the above is true

Question 47

Which of the following is true regarding the Statement of Cash Flows for a public college?

A) A reconciliation is required, reconciling operating income in the Statement of Revenues, Expenses and Changes in Net Assets to the cash flows provided (used) by operating activities
B) All purchases of capital assets are reported as outflows in the investing activities section
C) Both of the above are true
D) Neither of the above is true

Question 48

Public colleges and universities that choose to report as special-purpose entities engaged only in business-type activities would have which of the following financial statements?

A) Statement of Net Assets, Statement of Activities
B) Statement of Net Assets, Statement of Revenues, Expenses and Changes in Net Asset.
C) Statement of Net Assets, Statement of Revenues, Expenses and Changes in Net Assets, Statement of Cash Flows
D) None of the above

Question 49

Which of the following is true regarding the Statement of Cash Flows for a public college?

A) Cash received for interest is reported as an increase in cash flows from investing activities
B) Cash paid for interest is reported as a decrease in cash flows from either noncapital or capital and related financing activities
C) Both of the above are true
D) Neither of the above is true

Question 50

Assume a government is a special-purpose government engaged in only one governmental activity. Which financial statements would be required?

A) Government-wide statements only
B) Governmental fund statements only
C) Statements combining the governmental funds and government-wide statements
D) Either government-wide or governmental funds statements, issued separately

Question 51

A public college had tuition and fees for the year ended June 30, 2009 in the amount of $45,000,000. Scholarships, for which no services were required, amounted to $2,500,000. Graduate assistantships, for which services were required, amounted to $2,300,000. The amount to be reported by the college for net tuition and fee revenue would be:

A) $40,200,000
B) $42,700,000
C) $42,500,000
D) $45,000,000

Question 52

Which of the following is true regarding the Statement of Revenues, Expenses and Changes in Net Assets for a public college?

A) All student scholarship allowances should be reported as operating expenses
B) An all-inclusive statement should be prepared, ending with the net assets at year-end
C) Both of the above are true
D) Neither of the above is true

Question 53

Public colleges and universities may choose to report as:

A) Special-purpose entities engaged in governmental and business-type entities
B) Special-purpose entities engaged in business-type activities only
C) Either (a) or (b) depending on the nature of their operations
D) Neither (a) nor (b)

Question 54

Assume a government is a special-purpose entity engaged in fiduciary activities only. Which of the following financial statements would be required?

A) Statement of Fiduciary Net Assets and Statement of Changes in Fiduciary Net Assets
B) Statement of Net Assets and Statement of Activities
C) Statement of Net Assets, Statement of Activities, Statement of Fiduciary Net Assets, Statement of Changes in Fiduciary Net Assets
D) Statement of Fiduciary Net Assets, Statement of Changes in Fiduciary Net Assets and Statement of Cash Flows

Question 55

Which of the following is true regarding the Statement of Cash Flows for a public college?

A) The direct method must be used
B) The statement is in the same format required for state and local governmental enterprise funds
C) Both of the above are true
D) Neither of the above is true

Question 56

A public college had tuition and fees of $20,000,000. Scholarships, for which no services were required, amounted to $2,000,000. Graduate assistantships, for which services were required, amounted to $1,000,000. The amount to be reported by the public college as net tuition and fees would be:

A) $20,000,000
B) $19,000,000
C) $18,000,000
D) $17,000,000

Question 57

Which of the following groups would probably not be considered a component unit of a special-purpose government, for the purposes of applying GASB Statement 39?

A) A university foundation
B) A hospital auxiliary
C) A museum foundation
D) A high school band booster club

Question 58

Assume a government is determined to be a special-purpose government engaged in business-type activities only. Which of the following financial statements would be required?

A) Statement of Net Assets and Statement of Activities
B) Statement of Net Assets, Statement of Revenues, Expenses and Changes in Net Assets, Statement of Cash Flows
C) Statement of Net Assets, Statement of Activities, Statement of Cash Flows
D) Balance Sheet, Statement of Revenues, Expenditures and Changes in und Balances

Question 59

Which of the following would be true regarding the Statement of Net Assets for a public college reporting as a special purpose entity engaged in business type activities only?

A) A classified statement is required, separating current and long-term assets and liabilities
B) The two net asset categories are restricted and unrestricted
C) Both of the above are true
D) Neither of the above is true

Question 60

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

A) Public colleges and universities may choose to report in the same manner as private colleges and universities, using FASB standards
B) Public colleges and universities may choose to report as special-purpose entities engaged in both governmental and business-type activities
C) Both of the above
D) Both of the above

Question 61

GASB requires that educational institutions who engage in business-type activities and issue debt account for the debt by:

A) Recording the debt service as an expenditure as it becomes due
B) Recording the interest as an expense when it is due and payable
C) Recording the principal net of any premium or discount when the debt is issued and expense the interest as it is paid
D) Recording the interest expense on the accrual basis, including amortizing the premium or discount, if applicable

Question 62

Which of the following statements is true regarding public colleges and universities choosing to report as special-purpose entities engaged in business-type activities only?

A) Endowments would be reported in the Statement of Net Assets as Net Assets Restricted-Nonexpendable
B) Capital appropriations from state governments are shown, in the Statement of Revenues, Expenses and Changes in Net Assets, as a category separate from revenues
C) Both of the above
D) Neither of the above

Question 63

Which of the following statements is true of a Special-purpose government?

A) Special-purpose governments that are engaged in more than one governmental-type activities can combine the fund and government-wide financial statements.
B) Special-purpose governments engaged in only one governmental-type activity only have to prepare fund-basis financial statements.
C) GASB Statement 35 indicates that public higher education institutions may choose to report as business-type activities.
D) GASB Statement 39 applies only to public educational institutions.

Question 64

What is the journal entry on June 1 for Northern?
A. $\begin{array}{lcc}\text {Cash and Cash Equivalents } & 2,400,000& \\\text { Operating Revenues-Student Tuition and Fees } & &2,400,000\end{array}$

B. $\begin{array}{lcc}\text {Cash and Cash Equivalents } & 2,400,000& \\\text { Deferred revenue } & &2,400,000\end{array}$


C. $\begin{array}{lcc}\text { Cash and Cash Equivalents } & 800,000 \\\text { Cash and Cash Equivalents, Reserved } & 1,600,000 & \\\text { Operating Revenues-Student Tuition and Fees } && 800,000 \\\text { Deferred Revenues-Student Tuition and Fees } & &1,600,000\end{array}$

D. $\begin{array}{lc}\text { Cash and Cash Equivalents } & 2,400,000 \\\text { Operating Revenues-Student Tuition and Fees } && 800,000 \\\text { Deferred Revenues-Student Tuition and Fees } && 1,600,000\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 65

What is the journal entry to record the scholarship allowances?

$\begin{array}{lccc}\text { A. Scholarships and Fellowships Expense } & 1,200,000 & \\\quad \text { Accounts Receivable } & & 1,200,000 \\\end{array}$

$\begin{array}{lccc}\text { B. Operating Revenue Deduction -Scholarship } \\\text { Allowances }& 1,200,000 & \\\quad \text { Accounts Receivable } && 1,200,000 \\\end{array}$


$\begin{array}{lccc}\text { C. Operating Revenue Deduction -Scholarship } \\\text { Allowances }& 900,000 & \\\quad \text { Deferred Revenues } & & 900,000 \\& \\\end{array}$

D. Not recorded because it was deducted from tuition revenue before revenue it was recorded

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 66

Fees waived by the an educational institution in return for services to be provided are accounted for:

A) As a reduction in tuition revenue by directly reducing the revenue account or a contra-revenue account
B) As an adjustment to tuition revenue in the government-wide statements
C) As included in tuition revenue and expensed
D) By deducting the waived fee from tuition revenue before it is recorded

Question 67

Northern University received state appropriations as follows:
$\begin{array}{lcc}\text { Unrestricted general purposes } & 1,000,000 \\\text {Capital outlay, set aside for specific projects } && 750,000\end{array}$ What is the journal entry to record this event?
A. $\begin{array}{lcc}\text { Cash and Cash Equivalents } & 1,750,000 \\\text { Nonoperating Revenues - State Appropriations } && 1,000,000 \\\text {Capital Appropriations } && 750,000\end{array}$

B. $\begin{array}{lcc}\text { Cash and Cash Equivalents } & 1,750,000 \\\text { Nonoperating Revenues - State Appropriations } && 1,000,000 \\\text { Nonoperating Revenues-Capital Appropriations } && 750,000\end{array}$

C. $\begin{array}{lcc}\text { Cash and Cash Equivalents } & 1,000,000 & \\\text { Restricted Cash and Cash Equivalents } & 750,000 & \\\quad \text { Nonoperating Revenues - State Appropriations } && 1,000,000 \\\text { Capital Appropriations } && 750,000\end{array}$

D. $\begin{array}{lcc}\text { Cash and Cash Equivalents } & 1,000,000 \\\text { Restricted Cash and Cash Equivalents } & 750,000 & \\\quad \text { Operating Revenues - State Appropriations } && 1,000,000 \\\text { Operating Revenues - Capital Appropriations } && 750,000\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 68

Public colleges and universities follow __________ guidelines while private colleges and universities follow ________ guidelines

A) GAO, FASB
B) FASB, GAO
C) FASB, GASB
D) GASB, FASB

Question 69

GASB Statement 39 applies to all of the following except:

A) General governments
B) Booster clubs
C) Museums
D) Health care entities

Question 70

What are the required parts of the annual financial report for special-purpose local governments engaged only in business-type activities?

Question 71

According to the National Association of College and Business Officers, scholarship discounts and allowances paid by institutional funds:

A) Are included in tuition revenue and recorded as an expense
B) Are not included in tuition revenue but are included as an "other source"
C) Are reported as a reduction of revenue by directly reducing the revenue account or a contra- revenue account
D) Are reported as an adjustment to tuition revenue in the government-wide statements

Question 72

Northern University operates a bookstore. The bookstore had revenues in the amount of $2,650,000. What is the journal entry to record this event?
A.
$\begin{array}{lccc} \text {Cash and Cash Equivalents}&2,650,000\\ \text {Operating Revenues - Auxiliary Enterprises}&& 2,650,000\\\end{array}$

B.
$\begin{array}{lccc} \text {Cash }&2,650,000\\ \text {Operating Revenues - Restricted }&& 2,650,000\\\end{array}$

C.
$\begin{array}{lccc} \text {Cash and Cash Equivalents}&2,650,000\\ \text {Due to General Fund}&& 2,650,000\\\end{array}$


D.
$\begin{array}{lccc} \text {Cash}&2,650,000\\ \text {Due to Auxiliary Enterprise Fund}&& 2,650,000\\\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 73

With respect to public colleges and universities, expenses are reported by:

A) Function
B) Object classification
C) Department
D) Academic vs. non academic components

Question 74

Which of the following is true?

A) Public educational institutions are to report tuition income net of scholarships while fees waived for graduate assistants are included in income and the fees waived are expensed
B) Scholarship allowances for which no services are required are expensed
C) Fees waived for graduate assistantships for which services are required are deducted directly from tuition revenue
D) Revenues for summer sessions are recorded in deferred revenues and recorded as revenue when the semester ends

Question 75

When is this revenue reportable on the financial statements for Northern?

A) Fiscal year ended June 30, 2009
B) Fiscal year ended June 30, 2010
C) Pro-rated between the two fiscal years based on the number of summer school days in each reporting period
D) Half in 2009 and half in 2010

Question 76

What are the required parts of the annual financial reports for special-purpose governments that manage one or more retirement plans?

Question 77

What is the journal entry to record the graduate assistantships?

$\begin{array}{lccc} \text { A. Scholarships and Fellowships Expense } & 900,000 & \\\quad \text { Accounts receivable } & & 900,000 \\\end{array}$

$\begin{array}{lccc} \text { B. Operating Revenue Deduction -Scholarship } & & \\\quad \text { Allowances } & 900,000 & \\\quad \text { Accounts Receivable } & &900,000 \\\end{array}$

$\begin{array}{lccc} \text { C. Operating Revenue Deduction -Scholarship } & & \\\quad \text { Allowances } & 900,000 & \\\quad \text { Deferred Revenues } && 900,000 \\\end{array}$
D.Not recorded because it was deducted from tuition revenue before revenue it was recorded

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 78

Northern University received $2,000,000 from donors for endowments. The principal may not be expended. One half of the income is to be used for research and the other half is to be used for scholarships.
What is the journal entry to record this event?
A.
$\begin{array}{ll}\text { Restricted Cash and Cash Equivalents } & 2,000,000 \\\text { Research Endowment } && 1,000,000 \\\text { Scholarship Endowment } && 1,000,000\end{array}$
B.
$\begin{array}{ll}\text {Restricted Cash and Cash Equivalents}&2,000,000 \\\text {Permanent Endowment Fund}&&2,000,000\\\end{array}$

C.
$\begin{array}{lll}\text { Restricted Cash and Cash Equivalents}&2,000,000 \\\text { Additions to Permanent Endowments}\\\text { Income Restricted for Research}&& 1,000,000 \\\text { Additions to Permanent Endowments}\\\text { Income Restricted for Scholarships}&& 1,000,000 \\\end{array}$

D.
$\begin{array}{lll}\text { Cash - Restricted for Research } & 1,000,000 & \\\text { Cash - Restricted for Scholarships } & 1,000,000 & \\\quad \text { Research Endowment } & & 1,000,000 \\\quad\text { Scholarship Endowment } & & 1,000,000\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 79

The following grants and contracts were awarded to Northern University: Federal grants and contracts: $5,000,000
State grants and contracts: $2,125,000
All the money was collected by the University when the awards were made.
Restrictions on the money is as follows: $\begin{array} { l l l } \text { Federal: } & \text { Research } & 3,000,000 \\& \text { Scholarships } & 2,000,000 \\\text { State: } & \text { Research } & 1,125,000 \\& \text { Scholarships } & 1,000,000\end{array}$ What is the journal entry to record this event?
A. $\begin{array}{ll}\text { Cash and Cash Equivalents } & 7,125,000 \\\text { Operating Revenues - Research } && 4,125,000 \\\text { Operating Revenues - Scholarships \& Fellowships } && 3,000,000\end{array}$

B. $\begin{array}{lrr}\text { Cash and Cash Equivalents } & 5,000,000 & \\\text { Restricted Cash and Cash Equivalents } & 2,125,000 & \\\text { Operating Revenues - Research } & & 4,125,000 \\\text { Operating Revenues - Scholarships \& Fellowships } & &3,000,000\end{array}$

C.
$\begin{array}{ll}\text { Restricted Cash and Cash Equivalents}&7,125,000 \\\text { Operating Revenues - Restricted - Federal Grants}&&5,000,000\\\text { Operating Revenues - Restricted - State Grants}&& 3,000,000\\\end{array}$

D.
$\begin{array}{ll}\text { Restricted Cash and Cash Equivalents} & 7,125,000\\\text { Operating Revenues - Restricted - Federal Grants}\\\text { And Contracts - Research }& & 3,000,000 \\\text { Operating Revenues - Restricted - Federal Grants } & \\\text { And Contracts - Scholarships and Fellowships } && 2,000,000 \\\text { Operating Revenues - Restricted - State Grants } & \\\text { And Contracts - Research } && 1,125,000 \\\text { Operating Revenues - Restricted - Federal Grants } & \\\text { And Contracts - Scholarships and Fellowships } && 1,000,000\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 80

What is the journal entry to record tuition revenue? $\begin{array} { l c c } \text { A) Accounts receivable } & 25,000,000 & \\\text { Operating Revenue-Student Tuition \& Fees } & & 25,000,000 \\\end{array}$
$\begin{array}{lccc}\text { B) Accounts Receivable } & 23,800,000 & \\\quad \text { Operating Revenue-Student Tuition \& Fees } & & 23,800,000 \\\end{array}$
$\begin{array}{lccc}\text { C) Accounts Receivable } & 24,100,000 & \\\quad \text { Operating Revenue-Student Tuition \& Fees } & & 24,100,000 \\\end{array}$
$\begin{array}{lccc}\text { D) Accounts Receivable } & 22,900,000 & \\ \text { Operating Revenue-Student Tuition \& Fees } && 22,900,000\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D