Question 1

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

Accepted Answer

GASB requires the direct method, and FASB permits a choice. Private colleges follow standards established by the FASB so either method may be used. Most organizations use the indirect method.

Question 2

In 2014 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 $400,000. Expenses associated with the grant totaled $375,000 in 2015. In the Statement of Activities for 2015,the college should show:

Accepted Answer

Expenses of $375,000 in Unrestricted Net Assets and a decrease in Temporarily Restricted Net Assets of $375,000.

Question 3

A donor made a gift of cash to a private college or university in 2015 with an expressed purpose restriction. All of the funds were expended in 2015. The private college or university must:

Accepted Answer

The answer of A donor made a gift of cash...

Question 4

In 2014,a private college received a grant of $100,000 with purpose restrictions. In 2015 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:

Accepted Answer

The presumption should be that the restricted funds would be used first, as this is the standard practice in accounting for restricted funds. This ensures that the restrictions are followed and that the funds are used for their intended purpose.

Question 5

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

Accepted Answer

Tuition waivers associated with athletic or academic scholarships should be reported as reductions in revenue because they represent a forgone revenue opportunity for the institution.

Question 6

As of December 31,2014,the contribution revenue would be classified as:

Accepted Answer

The question does not provide enough information to determine the exact nature of the contribution revenue, but it does suggest that it may be subject to restriction. The fact that the question asks for the classification of the revenue suggests that it may have been received with specific conditions or requirements attached to it, which would make it temporarily restricted. Without additional information, it is not possible to know whether the revenue could also be classified as permanently restricted or unrestricted.

Question 7

In 2015,a major drug company agreed to give a not-for-profit private college $2,100,000 to perform testing of a new drug. An advance payment of $700,000 was received in 2015. The college was to receive $7,000 per individual test. In 2015,the college completed 100 tests. How much revenue should the college report for 2015?

Accepted Answer

The answer of In 2015,a major drug company agreed to...

Question 8

The following information applies to the next three questions:
A private foundation made a multi-year pledge to a private college on December 31, 2014, the last day of the fiscal year. The pledge was to pay $15,000 per year each year for five years, beginning on December 31, 2015. The discount rate is 6%. The present value of five payments of $15,000 is $63,185. The present value of four payments of $15,000 is $51,977. No purpose or plant restrictions were involved.
-The private college would:

Accepted Answer

The present value of the pledge is $63,185. The first payment of $15,000 is made on December 31, 2015. The present value of the remaining four payments is $51,977. The difference between the present value of the pledge and the present value of the remaining four payments is $11,208. This amount is recognized as contribution revenue in 2015.

Question 9

A private university billed $20,000,000 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. Provision for bad debt was estimated to be $2,000,000.The net tuition and fees that would be reported in the Statement of Activities would be:

Accepted Answer

The net tuition and fees are calculated by subtracting the scholarships and provision for bad debt from the total billed amount. Graduate assistantships are not subtracted because they require services. Therefore, $20,000,000 - $1,400,000 - $2,000,000 = $16,600,000.

Question 10

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

Accepted Answer

Athletic or Academic Scholarships are a reduction in revenue as they are funds that are not being collected as part of tuition or fees. Graduate Assistantships and Work-Study Programs may provide financial support for students, but they are typically considered expenses for the institution rather than reductions in revenue.

Question 11

The NACUBO Financial Accounting and Reporting Manual treats estimates of uncollectible student accounts as:

Accepted Answer

The answer of The NACUBO Financial Accounting and Reporting Manual...

Question 12

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

Accepted Answer

According to NACUBO guidelines, tuition waivers associated with student work study programs are considered expenses and should be reported as such in the financial statements.

Question 13

An alum pledges $9,000 to Greystone College in 2015 on the condition that matching funds are raised. The matching funds are raised in 2016,how much revenue will Greystone College recognize in 2015?

Accepted Answer

Greystone College will recognize $0 in 2015 because the pledge is conditional upon raising matching funds, which did not occur until 2016. Revenue is recognized only when the condition is met.

Question 14

A donor gave a gift of $40,000 cash to a private college in 2014 to support basic psychology research. The funds were expended in 2015. The private college would recognize the $40,000 as:

Accepted Answer

The $40,000 gift is considered temporarily restricted until it is expended for its designated purpose in 2015. Therefore, the college would recognize the $40,000 as revenue in 2014, increasing temporarily restricted net assets. In 2015, the college would recognize the expense and reclassify the resources from temporarily restricted net assets to unrestricted net assets. This is the proper accounting treatment for temporarily restricted contributions.

Question 15

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?

Accepted Answer

The answer of A private college received a $2,000,000 gift...

Question 16

A donor made a cash contribution of $300,000 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:

Accepted Answer

The answer of A donor made a cash contribution of...

Question 17

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

Accepted Answer

Permanent income-sharing agreements are not considered split-interest agreements, as they involve a direct transfer of ownership and control over assets to another individual or organization, rather than a sharing of income or other benefits derived from those assets. The other options listed (charitable remainder trusts, charitable gift annuities, and pooled income funds) all involve split-interest agreements, where the donor retains some level of interest in the donated assets while transferring the remainder to a charitable organization.

Question 18

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

Accepted Answer

Inflows from self-supporting university operations, such as auxiliary enterprises, are typically considered unrestricted funds. This means that they can be used for any lawful purpose at the discretion of the university, without any additional restrictions or limitations on their use. Temporarily restricted and permanently restricted funds are typically subject to more specific rules and limitations, and are less common in auxiliary enterprise operations. Therefore, the best choice is A, unrestricted.

Question 19

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

Accepted Answer

The answer of Under NACUBO guidelines,the current period provision for...

Question 20