Question 1

Which of the following is true regarding the investments of private colleges in securities with determinable fair values?
A) Investments are to be carried at the lower of cost or market.
B) Investments are to be carried at fair value or amortized cost, depending upon whether the investments are in equity or debt securities.
C) Investments are to be carried at fair value; unrealized gains and losses are to be reported in the Statement of Activities along with realized gains and losses.
D) None of the above.

Accepted Answer

Private colleges are required to carry their investments in securities with determinable fair values at fair value, and to report unrealized gains and losses in the Statement of Activities along with realized gains and losses. This requirement is consistent with FASB ASC Topic 820, which provides guidance on fair value measurements and disclosures. Option A is incorrect because the lower of cost or market method is not allowed under GAAP for investments in securities with determinable fair values. Option B is incorrect because while the fair value or amortized cost method may be used for certain investments, it depends on the nature of the investment and not whether it is an equity or debt security.

Question 2

Which of the following would not be considered a split-interest agreement,according to the Not-for-Profit Guide?
A) Charitable remainder trusts.
B) Permanent income-sharing agreements.
C) Charitable gift annuities.
D) Pooled (life) income funds.

Accepted Answer

According to the Not-for-Profit Guide, split-interest agreements are arrangements in which the donor or other beneficiary retains an interest in the contributed property while transferring an interest to the charity. Permanent income-sharing agreements do not fit this definition as there is no transfer of interest to a charity. The other options (charitable remainder trusts, charitable gift annuities, and pooled income funds) all involve the donor retaining some interest while transferring some interest to the charity, making them split-interest agreements.

Question 3

Which of the following is true regarding accounting and financial reporting for private colleges and universities?
A) Expenses may be unrestricted or temporarily restricted depending on donor intent.
B) A Statement of Unrestricted Revenues, Expenses and Other Changes in Unrestricted Net Assets and a Statement of Changes in Net Assets may be presented instead of a Statement of Activities.
C) The Statement of Cash Flows must use the direct method.
D) None of the above is true.

Accepted Answer

The answer of Which of the following is true regarding...

Question 4

When a private college or university has a foundation,and that foundation receives contributions specifically directed for the benefit of the college or university,
A) The college or university records no revenue until monies are received from the foundation.
B) The college or university records an increase in net assets and unearned revenue. When the money is received the unearned revenue is reduced and revenue is recorded.
C) The college or university must recognize its interest in the contribution as an asset and revenue at the same time as the foundation.
D) The college or university records receipt of money from the foundation as it would any other contribution of resources.

Accepted Answer

The college or university must recognize its interest in the contribution as an asset and revenue at the same time as the foundation because the contribution is specifically directed for its benefit.

Question 5

According to NACUBO guidelines,what is the correct treatment for recognizing summer school revenues and expenses when a college's fiscal year ends on June 30?
A) Recognize the entire amount of revenues and expenses in the year in which the term is predominantly conducted.
B) Recognize the entire amount of revenues and expenses in the year in which the term began.
C) Recognize expenses in the year in which they were billed and the expenses in the year in which they were incurred.
D) Apportion the revenues and expenses to the two fiscal years, following accrual accounting practices similar to those employed by commercial enterprises.

Accepted Answer

According to NACUBO guidelines, the correct treatment for recognizing summer school revenues and expenses when a college's fiscal year ends on June 30 is to apportion the revenues and expenses to the two fiscal years, following accrual accounting practices similar to those employed by commercial enterprises. This means that revenues and expenses should be recognized based on the percentage of the term that occurred in each fiscal year. This method provides a more accurate representation of the financial performance of the institution and aligns with generally accepted accounting principles (GAAP).

Question 6

In addition to a Statement of Financial Position and a Statement of Activities,a private college or university is required to present:
A) A Statement of Functional Expense.
B) A Statement of Cash Flows.
C) Both (a) and (c).
D) Neither (a) nor (c).

Accepted Answer

A private college or university is required to present a Statement of Cash Flows in addition to a Statement of Financial Position and a Statement of Activities.

Question 7

Which of the following would not be correct with respect to accounting for colleges and universities under the jurisdiction of the FASB?
A) Contributed services should be recognized only when the services create or enhance nonfinancial assets or require specialized skills, are provided by an individual possessing those skills, and would typically be purchased if not provided by donation
B) Multiyear pledges are recorded as restricted revenue and receivable for the gross amount of the pledge when the pledge is made
C) Depreciation is recorded
D) Investments in stock with determinable fair values and all debt securities are reported at market value

Accepted Answer

Multiyear pledges should be recorded as unrestricted support and recognized over the period in which the support is earned. They should not be recorded as restricted revenue and receivable for the gross amount of the pledge when the pledge is made. The other options are all correct accounting practices for colleges and universities under the jurisdiction of the FASB.

Question 8

The three classes of net assets required to be presented by a private college or university are:
A) Permanently Restricted, Temporarily Restricted, and Unrestricted.
B) Reserved, Unreserved, and Undesignated.
C) Invested in Capital Assets net of Related Debt, Restricted, and Unrestricted.
D) Educational and General, and Auxiliary Enterprises.

Accepted Answer

The three classes of net assets required to be presented by a private college or university are Permanently Restricted, Temporarily Restricted, and Unrestricted, as stated in the Financial Accounting Standards Board (FASB) guidelines for not-for-profit entities. These categories are based on the existence or absence of donor-imposed restrictions on the use of the funds.

Question 9

According to the FASB,plant acquired by colleges and universities with either unrestricted or restricted resources are recorded as:
A) restricted
B) unrestricted
C) initially as temporarily restricted and reclassified as unrestricted in accordance with the depreciation schedule
D) either B or C

Accepted Answer

Plant acquired by colleges and universities with unrestricted or restricted resources can be recorded as either unrestricted (Choice B) or initially as temporarily restricted and reclassified as unrestricted in accordance with the depreciation schedule (Choice C). Therefore, the best choice is either B or C, making the answer D.

Question 10

Investment income on Endowments held by private colleges and classified as permanently restricted net assets should be recorded as an increase in:
A) Unrestricted net assets.
B) Temporarily restricted net assets.
C) Permanently restricted net assets.
D) Any of the above, depending on the terms of the trust agreement.

Accepted Answer

The answer of Investment income on Endowments held by private...

Question 11

A donor gave a gift of $40,000 cash to a private college in 2011 with instructions that the funds be expended for psychology research.The funds were expended in 2012.The private college would recognize the $40,000 as:
A) Deferred revenue in 2011 and as revenue in 2012, increasing unrestricted net assets. The expense would be recognized in 2012.
B) Deferred revenue in 2011 and as revenue in 2012, increasing temporarily restricted net assets. The expense would be recognized also in 2012, and the resources would be reclassified from temporarily restricted net assets to unrestricted net assets in 2012.
C) Either (b) or (c), depending upon the policy of the private college.
D) Revenue in 2011 increasing temporarily restricted net assets; recognize the expense in 2012, and reclassify the resources from temporarily restricted net assets to unrestricted net assets in 2012.

Accepted Answer

The college would recognize the gift as revenue in 2011, increasing temporarily restricted net assets, as the funds are restricted for a specific purpose. In 2012, when the funds are expended, the expense is recognized, and the resources are reclassified from temporarily restricted net assets to unrestricted net assets.

Question 12

Which of the following is true of a Statement of Activities prepared for a private college or university?
A) All expenses are shown as unrestricted.
B) Reclassifications from unrestricted to permanently restricted net assets are reported when the governing board designates unrestricted funds for permanent investment in the endowment.
C) Only realized gains or losses on investments are reported.
D) All of the above are true.

Accepted Answer

The answer of Which of the following is true of...

Question 13

Which of the following would not be an example of an unrestricted inflow for a private college or university?
A) Tuition and fees
B) Governmental appropriations
C) Sales and services of auxiliary enterprises
D) Split interest agreements

Accepted Answer

Split interest agreements are forms of restricted inflows in which an individual or donor specifies the conditions under which their contribution may be used. The other options listed are examples of unrestricted inflows, meaning they are not limited in their use by any specific donor or entity.

Question 14

For private colleges and universities,reclassifications of temporarily restricted and unrestricted net assets could be made:
A) For satisfaction of purpose restrictions.
B) When time restrictions expire.
C) If the resources donated for fixed assets have been expended on such assets.
D) all of the above.

Accepted Answer

Reclassifications of temporarily restricted and unrestricted net assets in private colleges and universities can be made for the satisfaction of purpose restrictions, when time restrictions expire, and when resources donated for fixed assets have been expended on such assets. Therefore, all of the above options are correct.

Question 15

Which of the following would not be correct with respect to accounting for colleges and universities under the jurisdiction of the FASB?
A) If both unrestricted and restricted resources are available for a restricted purpose, the GASB requires that the institution recognize the use of unrestricted resources first.
B) Accrual accounting is used. Revenues and expenses are reported at gross amounts and gains and losses are reported net.
C) Expenses are reported by function, either in the statements or in the notes.
D) If an institution decides not to capitalize museum and other inexhaustible collections, note disclosures are required regarding the collections.

Accepted Answer

The statement about recognizing the use of unrestricted resources first is incorrect for institutions under FASB jurisdiction. It is actually a requirement under GASB.

Question 16

If a donor were to contribute money with instructions that the funds be invested for a period of time and then released to be used for any purpose,this would be called a(n):
A) Unrestricted endowment
B) Permanent endowment
C) Term endowment
D) Quasi-endowment

Accepted Answer

If a donor contributes money with instructions that the funds be invested for a period of time and then released to be used for any purpose, this is called a term endowment. This is because the funds are restricted for a specific period of time (the term), after which they can be used for any purpose. An unrestricted endowment would not have any specific instructions attached to it, while a permanent endowment would have the funds restricted permanently. A quasi-endowment refers to funds that were originally unrestricted but have been designated for a specific purpose.

Question 17

The NACUBO Financial Accounting and Reporting Manual treats estimates of uncollectible accounts as:
A) Bad debt expense
B) A reduction in tuition and fee revenue
C) Either bad debt expense or a reduction in tuition and fee revenue as long as the policy is consistently applied
D) None of the above; colleges and universities must use the direct write off method

Accepted Answer

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

Question 18

A private university received $18,000,000 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.The net tuition and fees that would be reported in the Statement of Activities would be:
A) $18,000,000.
B) $16,800,000.
C) $16,600,000.
D) $15,400,000.

Accepted Answer

The net tuition and fees would be the total tuition and fees received minus the amount awarded in graduate assistantships and scholarships. Therefore, the net tuition and fees would be $18,000,000 - $1,200,000 - $1,400,000 = $15,400,000. Therefore, the correct answer is (C) $16,600,000.

Question 19

The FASB has the authority to set accounting standards for all of the following organizations except:
A) Public colleges.
B) Private colleges.
C) For profit proprietary schools.
D) Educational foundations established to support a private college or university.

Accepted Answer

The FASB does not have the authority to set accounting standards for public colleges since they are part of the government sector. However, the FASB does set accounting standards for private colleges, for-profit proprietary schools, and educational foundations established to support private colleges or universities.

Question 20

Which of the following is a required statement for a private college?
A) Statement of Changes in Fund Balance.
B) Statement of Revenues and Expenditures.
C) Budgetary Comparison Statement.
D) None of the above is a required statement.

Accepted Answer

Private colleges are not required to follow specific financial statement reporting requirements. However, they may choose to follow generally accepted accounting principles (GAAP) and prepare financial statements such as the statement of activities, statement of financial position, and statement of cash flows to provide transparency to stakeholders.

Quiz 11: College and University Accounting

Which of the following is true regarding the investments of private colleges in securities with determinable fair values?

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

Which of the following is true regarding accounting and financial reporting for private colleges and universities?

When a private college or university has a foundation,and that foundation receives contributions specifically directed for the benefit of the college or university,

According to NACUBO guidelines,what is the correct treatment for recognizing summer school revenues and expenses when a college's fiscal year ends on June 30?

In addition to a Statement of Financial Position and a Statement of Activities,a private college or university is required to present:

Which of the following would not be correct with respect to accounting for colleges and universities under the jurisdiction of the FASB?

The three classes of net assets required to be presented by a private college or university are:

According to the FASB,plant acquired by colleges and universities with either unrestricted or restricted resources are recorded as:

Investment income on Endowments held by private colleges and classified as permanently restricted net assets should be recorded as an increase in:

A donor gave a gift of $40,000 cash to a private college in 2011 with instructions that the funds be expended for psychology research.The funds were expended in 2012.The private college would recognize the $40,000 as:

Which of the following is true of a Statement of Activities prepared for a private college or university?

Which of the following would not be an example of an unrestricted inflow for a private college or university?

For private colleges and universities,reclassifications of temporarily restricted and unrestricted net assets could be made:

Which of the following would not be correct with respect to accounting for colleges and universities under the jurisdiction of the FASB?

If a donor were to contribute money with instructions that the funds be invested for a period of time and then released to be used for any purpose,this would be called a(n) :

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

The FASB has the authority to set accounting standards for all of the following organizations except:

Which of the following is a required statement for a private college?