Question 1

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 2

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 the GASB (Governmental Accounting Standards Board) instead, which sets accounting standards for state and local governments, including public colleges and universities.

Question 3

Private colleges that receive federal grants are required to apply government accounting standards set by the GASB.

Accepted Answer

Private colleges that receive federal grants are generally required to follow the accounting standards set by the Financial Accounting Standards Board (FASB), not the Governmental Accounting Standards Board (GASB), which applies to government entities.

Question 4

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

Smith College, as a private, church-supported college, should follow the standards set by the Financial Accounting Standards Board (FASB) for its financial statements.

Question 5

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 6

The single largest source of revenues for not-for-profit universities is tuition and fees.

Accepted Answer

Tuition and fees are often the primary sources of revenue for not-for-profit universities. Other sources may include grants, donations, and government funding.

Question 7

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

Question 8

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

Accepted Answer

This is true. Most colleges and universities use the classification of revenues by source and expenses by function in their financial reporting. This allows for a more accurate analysis of financial performance and helps to identify areas of financial strengths and weaknesses.

Question 9

Investments of a public college must be reported at amortized cost.

Accepted Answer

Public colleges, like other public entities, typically follow governmental accounting standards, which may require investments to be reported at fair value rather than amortized cost. The specific reporting requirements can depend on the nature of the investment and applicable accounting standards.

Question 10

Private colleges and universities should account for all grants on the accrual basis as exchange transactions.

Accepted Answer

Private colleges and universities should account for grants based on the substance of the transaction, which can be either as exchange transactions or as non-exchange transactions (contributions), depending on the terms and conditions of the grants.

Question 11

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 classified as not-for-profit organizations and are therefore subject to the same Financial Accounting Standards Board (FASB) standards as other not-for-profit entities.

Question 12

Dormitories and bookstores are examples of auxiliary enterprises (business-type activities)engaged in by both private and public universities.

Accepted Answer

Both private and public universities engage in auxiliary enterprises such as dormitories and bookstores to generate revenue outside of traditional tuition and government funding sources.

Question 13

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 considered reductions in the amount of revenue earned.

Question 14

During the current year, Luis 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.
Use the following information for Questions 5 and 6.
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.The foundation 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.

Accepted Answer

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

Question 15

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 donation is received without any donor-imposed restrictions, making it available for general use.

Question 16

Under GASB Statement No.39, colleges and universities are required to bring their affiliated medical organizations into their financial reports.

Accepted Answer

GASB Statement No. 39 requires colleges and universities to include the financial information of their affiliated medical organizations in their financial reports.

Question 17

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

Accepted Answer

GASB (Governmental Accounting Standards Board) does not require revenues to be classified by donor restrictiveness; this is a requirement under FASB (Financial Accounting Standards Board) for non-profit organizations.

Question 18

When a semester starts and ends in different fiscal years, FASB standards require not-for-profit colleges to apportion tuition and fees between the two years.

Accepted Answer

The answer of When a semester starts and ends in...

Question 19

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

Related entities should be disclosed in the Notes to the Financial Statements or reported as component entities depending on the degree of control and economic interest.

Question 20

Landon 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 donor has specified that the principal of her gift can never be used for program activities, so it is permanently restricted. The earnings on the principal can only be used for scholarships in the business school, so it is also permanently restricted. Therefore, the gift increases the permanently restricted net assets of the college.

Quiz 13: Colleges and Universities