ACC 410 WEEK 8 QUIZ 6

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ACC 410 WEEK 8 QUIZ 6

Chapter 13

Colleges and Universities

TRUE/FALSE (CHAPTER 13)

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

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

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

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

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

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

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

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

9. 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.

10. Under GASB Statement No. 39, colleges and universities are required to bring their affiliated medical organizations into their financial reports.
11. Private colleges and universities should account for all grants on the accrual basis as exchange transactions.

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

13. 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.

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

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

MULTIPLE CHOICE (CHAPTER 13)

1. Financial statements for Smith College, a church-supported college, should be prepared according to standards set by
2.  
3.  
4.  
5. Smith may choose any of the above.

2. For a not-for-profit college or university, which of the following categories of net assets is NOT appropriate in its external financial statements?
1. Unrestricted net assets.
2. Temporarily restricted net assets.
3. Permanently restricted net assets.
4. All of the above are appropriate.

3. 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?

1. Unrestricted net assets.
2. Temporarily restricted net assets.
3. Permanently restricted net assets.
4. Either (b) and (c).

4. 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?
5. Unrestricted net assets.
6. Temporarily restricted net assets.
7. Permanently restricted net assets.
8. 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.

5. At the time the foundation receives the donation, the foundation should debit Cash for $1 million and credit what account for $1 million?
6. Unrestricted revenue.
7. Temporarily restricted revenue.
8.  
9. No entry should be made by the foundation.

6. At the time the foundation receives the donation, Lane College should debit Asset $1 million and credit what account for $1 million?
1. Unrestricted revenue.
2. Temporarily restricted revenue.
3.  
4. No entry should be made by Lane College.

7. Bristol 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

500. Debit Investment $500; Credit Unrestricted revenue $500.
501. Debit Investment $500; Credit Temporarily restricted revenue $500.
502. Debit Investment $500; Credit Permanently restricted revenue $500.
503. No entry should be made until the securities are sold.

8. 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?
9. GASB Statements.
10. AICPA accounting and auditing guide, Not-for-Profit Organizations.
11. 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.
12. College textbooks.