Question 1

Distinguish between (a) right  endowments, (b) term endowments and (c) quasi-endowments. Explain how the net assets of each is classified by a private college or university.

Accepted Answer

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Question 2

Public colleges and universities are subject to standards issued by:

Accepted Answer

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Question 3

With respect to private colleges and universities, why are quasi-endowments not classified as permanently restricted net assets while true endowments are?

Accepted Answer

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Question 4

When summer school classes at a university cover parts of two fiscal years, the revenues and expenses are

Accepted Answer

Because accrual accounting is used, the tuition revenue and expenses are split between the two periods that summer school covers.

Question 5

Student scholarships for which no service was required amounted to $1,500. What is the correct journal entry?

Accepted Answer

Since scholarships for which no service was required amounted to $1,500, it should be recorded as a tuition discount in the accounting system. Therefore, the correct journal entry would be to debit Tuition discount account (a contra-revenue account) with $1,500 and to credit Accounts Receivable account with $1,500. Option A, Scholarship Expense account is not appropriate as the scholarship was offered without requiring any service in return. Option B, Loan to student is not appropriate as this would imply that the student has taken a loan instead of receiving a scholarship. Option D, None of the above is not correct as Option C is the correct answer.

Question 6

What is the basis of accounting for a private college or university and what are the principal sources of reporting standards?

Accepted Answer

The answer of What is the basis of accounting for...

Question 7

A government owned college follows whose standards?

Accepted Answer

Government owned colleges are financial entities of the government sector and therefore are required to follow the standards set by GASB (Governmental Accounting Standards Board). FASB (Financial Accounting Standards Board) standards apply to private sector entities, including private colleges and universities. AICPA (American Institute of Certified Public Accountants) standards are generally applicable for audits of both private and government entities, but do not set standards for accounting and financial reporting like GASB does.

Question 8

Private colleges and universities are governed by which of the following?

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Question 9

Identify three types of restrictions placed on temporarily restricted net assets of a private sector college or university and outline the accounting requirements for each type.

Accepted Answer

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Question 10

Uncollectible tuition accounts are recorded as:

Accepted Answer

Uncollectible tuition accounts are not considered bad debts since they do not arise from a credit sale or service. Instead, they are recorded as reductions in revenue since the school did not actually earn the full amount of tuition reported. Discounts are voluntary reductions in price offered to customers, so they are not applicable here.

Question 11

The NACUBO Financial Accounting and Reporting Manual treats estimates of uncollectible accounts for colleges and universities as:

Accepted Answer

The NACUBO Financial Accounting and Reporting Manual considers estimates of uncollectible accounts as a reduction in revenue for colleges and universities, rather than as a bad debt expense.

Question 12

What are the reporting options for the Statement of Financial Position of institutions of higher education as outlined by the NACUBO Financial Accounting and Reporting Manual for Higher Education?

Accepted Answer

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Question 13

Which of the following is an example of a temporarily restricted inflow?

Accepted Answer

A contribution for plant acquisition is an example of a temporarily restricted inflow because it is typically received with restrictions on how the funds can be used and must be spent within a certain time period. Tuition and fees and auxiliary enterprises are typically unrestricted inflows, and a quasi-endowment is a type of permanent fund.

Question 14

How should the income earned by a private college's endowment be classified?

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Question 15

Academic or athletic scholarships that do not require service to the college or university are treated as:

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Question 16

Public universities follow the authoritative standards of _____ and the _____ basis of accounting.

Accepted Answer

Public universities follow the authoritative standards of GASB (Governmental Accounting Standards Board) and use the Accrual basis of accounting.

Question 17

How does a private college or university treat an academic scholarship?

Accepted Answer

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Question 18

Which of the following statements is false?

Accepted Answer

Fixed assets acquired with unrestricted sources may be classified as either temporarily restricted or permanently restricted, but assets acquired with restricted sources must be initially recorded as temporarily restricted. They cannot be reclassified until the restriction has been met or expired.

Question 19

Which of the following is not a split-interest agreement?

Accepted Answer

A research grant program is not a split-interest agreement as it does not involve the sharing of income or assets between multiple parties. The other options (A, B, and C) all involve split-interest agreements where the donor gives some assets to a charity while retaining some level of control or receiving some level of income.

Question 20

Union Seminary uses the fund basis of accounting for internal record keeping. Presented below is the fully adjusted 12/31/09 balance sheet for Union, prepared using funds and account groups. The following are fund descriptions:
• Operating Fund - the fund used for transactions not falling within the definition of other funds. There are no restrictions on these resources.
• Memorial Fund - Used to account for resources donated from outside parties for specific capital additions
• Endowment Fund - Assets received from an outside donor for permanent investment, only the earnings may be expended.
• Scholarship Fund - Cash set aside by the Seminary's governing board for use as scholarships and student aid.
• Fixed Assets Account Group - A record of the Seminary's fixed assets and long-term debt.
Required: Prepare a Statement of Financial Position following the guidelines provided in FASB Statements 116 and 117 for private not-for-profits and assuming Union does not classify plant assets as temporarily restricted.

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Quiz 11: College and University Accounting Private Institutions

Distinguish between (a) right endowments, (b) term endowments and (c) quasi-endowments. Explain how the net assets of each is classified by a private college or university.