Question 1

Private not-for-profit colleges and universities are subject to the same FASB standards as other not-for-profit entities.

Accepted Answer

Private not-for-profit colleges and universities are required to follow the Financial Accounting Standards Board (FASB) standards, just like other not-for-profit entities. This includes the standard for financial statement presentation, revenue recognition, and accounting for contributions, among others.

Question 2

Use the following information for Questions 
Lane College Foundation is governed by a board, some members of which are appointed by the President of Lane College and some of which are elected by the alumni.It was created to solicit and accept donations on behalf of Lane College, a private not-for-profit college.Lane College and its Foundation are deemed to be financially interrelated.All funds collected by the Foundation must be used to support activities of Lane College.The Foundation Board can select which activities of Lane College it supports.Lane Foundation received a $1 million bequest from the estate of a 1940 graduate.
-At the time the Foundation receives the donation, the Foundation should debit Cash for $1 million and credit what account for $1 million?
A)Unrestricted revenue.
B)Temporarily restricted revenue.
C)Liability.
D)No entry should be made by the Foundation.

Accepted Answer

The Foundation should credit Unrestricted revenue because the funds are not restricted by the donor for a specific purpose and can be used at the discretion of the Foundation to support any activities of Lane College.

Question 3

Most colleges and universities classify revenues by source and expenses by function.

Accepted Answer

This is true. The classification of revenues by source and expenses by function is a common accounting practice in higher education institutions, allowing for better tracking and analysis of financial data.

Question 4

Current operating expenses of a public college may be classified by which of the following?
A)Object classes
B)Organizational Units
C)Program functions
D)All of the above
E)Only B & C

Accepted Answer

Current operating expenses of a public college may be classified by object classes, organizational units, and program functions.

Question 5

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 those 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
A)I only
B)I & II only
C)III only
D)II only
E)I, II, & III

Accepted Answer

All three criteria (I, II, and III) must be met for a public university to report affiliated organizations as component units. The university must be entitled to access the resources, the economic resources must be significant to the component, and the economic resources received or held must be almost entirely for the direct benefit of the university.

Question 6

Tuition revenue should be reported net of tuition discounts and scholarships.

Accepted Answer

Tuition revenue should be reported net of tuition discounts and scholarships because these are reductions in the amount that the university or college is actually receiving for tuition. This is in accordance with generally accepted accounting principles (GAAP).

Question 7

Under GASB 39, colleges and universities are required to bring their affiliated medical organizations into their financial reports.

Accepted Answer

Under GASB 39, colleges and universities are required to bring their affiliated medical organizations into their financial reports.

Question 8

Sheridan 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
A)Debit Investment $500; Credit Unrestricted Revenue $500.
B)Debit Investment $500; Credit Temporarily Restricted Revenue $500.
C)Debit Investment $500; Credit Permanently Restricted Revenue $500.
D)No entry should be made until the securities are sold.

Accepted Answer

The change in fair value of the investment should be recognized as unrestricted revenue because the donors did not specify any restrictions on the investment earnings.

Question 9

Use the following information for Questions 
Lane College Foundation is governed by a board, some members of which are appointed by the President of Lane College and some of which are elected by the alumni.It was created to solicit and accept donations on behalf of Lane College, a private not-for-profit college.Lane College and its Foundation are deemed to be financially interrelated.All funds collected by the Foundation must be used to support activities of Lane College.The Foundation Board can select which activities of Lane College it supports.Lane Foundation received a $1 million bequest from the estate of a 1940 graduate.
-At the time the Foundation receives the donation, Lane College should debit Asset $1 million and Credit what account for $1 million?
A)Unrestricted revenue.
B)Temporarily restricted revenue.
C)Liability.
D)No entry should be made by Lane College.

Accepted Answer

The $1 million bequest is a type of donation that is considered temporarily restricted until the Foundation Board designates how it will be used to support Lane College. Therefore, Lane College should credit temporarily restricted revenue for $1 million.

Question 10

In accounting for colleges and universities, related entities should either be disclosed in the Notes to the Financial Statements or reported as component entities, depending on the degree of control and economic interest.

Accepted Answer

This is correct according to the Financial Accounting Standards Board's (FASB) Accounting Standards Codification (ASC) 958.805-15. Related entities may include affiliated foundations, auxiliaries, and other organizations that are related to the college or university. The accounting treatment chosen will depend on the level of control and economic interest the institution has in the related entity.

Question 11

GASB requires that revenues be classified into three categories of restrictiveness based on donor specification.

Accepted Answer

The answer of GASB requires that revenues be classified into...

Question 12

Financial statements for Smith College, a church-supported college, should be prepared according to standards set by
A)AICPA.
B)FASB.
C)GASB.
D)Smith may choose any of the above.

Accepted Answer

The answer of Financial statements for Smith College, a church-supported...

Question 13

Investments of a public college must be reported at fair value.

Accepted Answer

According to the GASB (Governmental Accounting Standards Board) Statement No. 72, investments of a public college must be reported at fair value.

Question 14

Katerah College, a private college, received a $1 million donation.The donor specified that the principal of her gift could never be used for program activities but the earnings on the principal must be used to provide scholarships to academically qualified students in the business school.The $1 million gift would increase which of the following categories of net assets?
A)Unrestricted net assets.
B)Temporarily restricted net assets.
C)Permanently restricted net assets.
D)Either b and c.

Accepted Answer

The donation is stipulated for a specific purpose, which is to provide scholarships to academically qualified students in the business school. Therefore, it falls under the category of permanently restricted net assets. The principal cannot be used for any other purpose, and only the earnings on the principal can be used to provide scholarships.

Question 15

In a public university setting, general administration and sponsored research are examples of revenues classified by source.

Accepted Answer

General administration and sponsored research are examples of functional classifications of expenses, not revenue sources. Revenue classifications typically include tuition and fees, government appropriations, and donations.

Question 16

For a not-for-profit college or university, which of the following categories of net assets is NOT appropriate in its external financial statements?
A)Unrestricted net assets.
B)Temporarily restricted net assets.
C)Permanently restricted net assets.
D)None.All of the above are appropriate.

Accepted Answer

All three categories of net assets (unrestricted, temporarily restricted, and permanently restricted) are appropriate in the external financial statements of a not-for-profit college or university.

Question 17

Long lived assets held by public universities are carried at cost, or fair value if donated.

Accepted Answer

Public universities typically follow the cost model of accounting for long-lived assets, where the assets are initially recorded at cost and then depreciated over time. However, if an asset is donated, it may be recorded at fair value at the time of donation.

Question 18

Government public colleges and universities must adhere to the FASB pronouncements.

Accepted Answer

Government public colleges and universities are not required to adhere to the FASB (Financial Accounting Standards Board) pronouncements. They follow different accounting standards set by the Governmental Accounting Standards Board (GASB).

Question 19

During the current year, Kayla University received a $50,000 gift from an alumna who specified that it must be used to pay travel costs for faculty to attend health care conferences in foreign countries.During the year the university spent $8,000 to support travel to a health care conference in Italy.The $8,000 disbursement will cause a NET decrease in which class of net assets?
A)Unrestricted net assets.
B)Temporarily restricted net assets.
C)Permanently restricted net assets.
D)Cannot be determined.

Accepted Answer

The answer of During the current year, Kayla University received...

Question 20

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?
A)GASB Statements.
B)AICPA accounting and auditing guide, Not-for-Profit Organizations.
C)AICPA accounting and auditing guide, Audits of Colleges and Universities and/or AICPA SOP 74-8, Financial Accounting and Financial Reporting by Colleges and Universities.
D)College textbooks.

Accepted Answer

The answer of An accountant has encountered a perplexing financial...

Quiz 13: Colleges and Universities

Private not-for-profit colleges and universities are subject to the same FASB standards as other not-for-profit entities.

Most colleges and universities classify revenues by source and expenses by function.

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

Tuition revenue should be reported net of tuition discounts and scholarships.

Under GASB 39, colleges and universities are required to bring their affiliated medical organizations into their financial reports.

In accounting for colleges and universities, related entities should either be disclosed in the Notes to the Financial Statements or reported as component entities, depending on the degree of control and economic interest.

GASB requires that revenues be classified into three categories of restrictiveness based on donor specification.

Financial statements for Smith College, a church-supported college, should be prepared according to standards set by

Investments of a public college must be reported at fair value.

In a public university setting, general administration and sponsored research are examples of revenues classified by source.

For a not-for-profit college or university, which of the following categories of net assets is NOT appropriate in its external financial statements?

Long lived assets held by public universities are carried at cost, or fair value if donated.

Government public colleges and universities must adhere to the FASB pronouncements.

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?