Question 1

Cactus College,a small private college,received a research grant from NACUBO to study whether service efforts and accomplishments measures improve institutional performance.In accordance with FASB standards the grant would be reported as an increase in:

Accepted Answer

B

Question 2

If a private university used the National Association of Colleges and University Business Officers (NACUBO)chart of accounts for reporting expenses,it must disclose expenses by program and support function in the notes.

Accepted Answer

To comply with the FASB requirement that at a minimum the functional classifications of program and support be reported, private colleges and universities using the NACUBO chart of accounts would disclose the functional classifications in the notes.

Question 3

A receipt of a $500,000 gift by a private college that is stipulated by the donor to be used to endow a "chaired" professorship in accounting would be recorded as an increase in temporarily restricted net assets.

Accepted Answer

The term endow indicates that the corpus of the gift is to remain intact in perpetuity, so this gift would increase permanently restricted net assets in a private college.

Question 4

Which of the following statements is true regarding generally accepted accounting principles (GAAP)for colleges and universities?

Accepted Answer

The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for public colleges and universities.

Question 5

Tuition refunds are recorded by debiting Tuition and Fees-Unrestricted.

Accepted Answer

Standards require that actual refunds of tuition or fees be recorded by debiting the revenue account Tuition and Fees-Unrestricted.

Question 6

Nongovernmental (private)colleges and universities should follow FASB standards; governmental (public)colleges and universities should follow GASB standards.

Accepted Answer

Since its formation GASB has been responsible for setting financial reporting standards for government colleges and universities. FASB has responsibility for all others.

Question 7

Public colleges and universities that use business-type reporting must present segment information in the notes to the financial statements.

Accepted Answer

GASB standards require reporting on segments for colleges and universities engaged in business-type transactions.

Question 8

Revenues and expenses of both public business-type and private colleges and universities are accounted for on the accrual basis.

Accepted Answer

Under GASB standards public colleges and universities engaged only in business-type activities use accrual accounting. Private colleges and universities following FASB standards also use accrual accounting.

Question 9

Contributions or grants restricted by an external donor for a particular operating purpose would be reported as increases to restricted fund balances by a public college or university engaged only in business-type activities and as an addition to temporarily restricted net assets by a private college or university.

Accepted Answer

Public colleges and university would report a gift restricted by a donor as revenue-gifts, which would be closed to net position-restricted at fiscal year-end. Restrictions are placed on net position, not fund balances.

Question 10

What type of college or university must report expenses by functional classification?

Accepted Answer

The answer of What type of college or university must...

Question 11

Assets set aside for an endowment by a university governing board would be reported as unrestricted.

Accepted Answer

For assets to be reported as restricted the restriction on the assets' use must be imposed by an external party.

Question 12

A private college would record a federal grant received to test a medical device that the federal government intends to patent as Contributions-Temporarily Restricted.

Accepted Answer

In this transaction the federal government is expecting to retain the benefit of the testing (a patent on the device); therefore, this would be recorded as an exchange transaction with a credit to a revenue account.

Question 13

Which of the following receipts may properly be accounted for as an increase in unrestricted net assets by a private college?

Accepted Answer

Student tuition and fees are typically unrestricted funds that can be used for any purpose necessary to further the college's mission. Options B, C, and D are accounted for differently. Option B would be accounted for as a restricted gift for the specific purpose of constructing a new building. Option C would be accounted for as a restricted grant for the specific purpose of genetic research. Option D would likely be accounted for as a gift that creates a permanently restricted endowment, meaning the income generated from the assets would be restricted to a specific purpose or use.

Question 14

A statement of cash flows is required by GAAP for both private colleges and universities and public colleges and universities engaged in business-type activities.

Accepted Answer

Private colleges and universities are subject to FASB jurisdiction and required to provide a statement of cash flows using the direct or indirect method. Under GASB standards public colleges and universities engaged in business-type activities are required to present a statement of cash flows using the direct method only.

Question 15

Private colleges and universities report term endowments as permanently restricted net assets until the term has expired.

Accepted Answer

Term endowments are reported as temporarily restricted net assets.

Question 16

Earnings on a private college's endowment investments may increase unrestricted or temporarily restricted net assets,or both.

Accepted Answer

The stipulations of the donor of endowment assets control the disposition of endowment revenue.

Question 17

GASB accounting and reporting standards applicable to public colleges and universities

Accepted Answer

GASB accounting and reporting standards applicable to public colleges and universities differ in some significant ways from FASB standards applicable to private colleges and universities, as they are tailored to meet the unique needs and characteristics of public institutions. This includes differences in financial statement presentation, recognition and measurement of expenses and revenues, and reporting requirements for certain activities such as endowments and capital assets.

Question 18

A private college would report which of the following assets differently than a public college?

Accepted Answer

Private colleges typically have more intangible assets, such as endowments or donor-restricted funds, that are not typically found in public colleges.

Question 19

Under GASB standards,public colleges and universities are considered general purpose governments.

Accepted Answer

Public colleges and universities are considered special purpose governments, and most are expected to be engaged in business-type activities only.

Question 20

An annuity agreement requires that a college pay the donor (or other designated individual)a fixed dollar amount at specified time intervals.

Accepted Answer

By definition an annuity involves a fixed amount, payable at specific intervals. The specified time interval for an annuity agreement is generally the life of the donor or designee.

Quiz 15: Accounting for Colleges and Universities