51) Which of the following measures may be useful to decision makers evaluating the financial
condition of a college or university?
A) Number of graduates.
B) Composite financial index.
C) Faculty productivity.
D) Graduation rate.
52) Which of the following statements about the Uniform Prudent Management of Institutional
Funds Act (UPMIFA) is correct?
A) It establishes a maximum total return rate for investments.
B) It requires that the spending rate for the return on investments be no more than five percent.
C) It allows institutions to release net assets from restrictions if certain criteria are met.
D) It requires that specific policies concerning solicitation of donations be established.
53) The Academy, a private college, provided tuition waivers of $500,000. Of the amount
$200,000 was for students teaching courses as graduate assistants and $300,000 was simply an
award for scholastic accomplishments. Another $100,000 was given is tuition refunds. What
amount would The Academy record as Tuition and Fees Discounts and Allowances?
A) $600,000.
B) $500,000.
C) $400,000.
D) $300,000.
54) How would a private college or university report its estimate for uncollectible tuition and fees
on its statement of activities?
A) A contra-revenue account titled Provision for Doubtful Accounts.
B) A direct reduction of Tuition and Fees—Unrestricted.
C) An operating expense titled Provision for Doubtful Accounts.
D) An operating expense titled Bad Debt Expense.
55) Which of the following statements concerning the audits of colleges and universities is true?
A) Both public and private colleges and universities are subject to a single audit if they expend
over $750,000 in federal funds in a fiscal year.
B) The nongovernmental nature of public colleges and universities means they are exempt from
the requirements of the single audit, but they are required to have an audit conducted under
generally accepted auditing standards.
C) Public colleges and universities are exempt from the requirements of the single audit, but they
are required to follow the Uniform Guidance to ensure only allowable costs are charged to federal
grants.
D) Both public and private colleges and universities are exempt from the requirements of the
single audit, but they are both required to follow the Uniform Guidance to ensure only allowable
costs are charged to federal grants.
56) The composite financial index (CFI), a measure of financial health for colleges and
universities, includes which of the following ratios?
A) Primary reserve ratio.
B) Net operating revenues ratio.
C) Return on net assets ratio.
D) All of these ratios are included in the CFI.
57) For each of the following definitions, indicate the key term from the list that best matches by
placing the appropriate definition.
A. Term endowments
B. Annuity agreements
C. Collections
D. Pooled life income agreements
E. Spending rate
F. Total return
________1. Agreements to pay the donor the income earned by assets donated to an organization
over the specified beneficiary’s lifetime
________ 2. A comprehensive measure of the rate of investment return, which includes unrealized
and realized gains and losses, as well as interest and dividend income
________ 3. A contribution that must be retained intact until the happening of a specific event or
the passage of a stated period of time
________ 4. The proportion of total return that may prudently be used by an institution for current
purposes
________ 5. Agreement to pay stipulated amounts periodically to the donor of assets by the
recipient organization
58) A private university receives $1,000,000 in the current fiscal year as a grant restricted for a
specific research project and incurs expenses of $400,000 related to the research project during the
current fiscal year. Make all necessary journal entries to record the transactions related to the grant
for the current fiscal year.
Prepare journal entries to record the transactions related to the grant for the current fiscal year. (If
no entry is required for a transaction/event, select “No Journal Entry Required” in the first
account field.)
59) Prepare in general journal form the entries required for each of the following selected
transactions of Northern University, a state-funded public institution engaged only in
business-type activities. Some of these transactions are related and some are not. (If no entry is
required for a transaction/event, select “No Journal Entry Required” in the first account
field.)
1. A generous alumnus donated $300,000 that can only be used for research on diabetes. The full
$300,000 was received in the current fiscal year.
2. During the current fiscal year, expenses of $150,000 were made in cash for diabetes research
(see item 1 above).
3. $2,000,000 in long-term bonds was issued to construct a new parking garage on campus.
4. During the current fiscal year, the parking garage (see item 3 above) was partially completed at
a total cash expenditure of $1,800,000.
5. During the current fiscal year, interest was paid in the amount of $120,000 on the long-term
bonds issued for the parking garage project (see item 3 above).
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60) Manthei University, a private university, has provided the following information concerning
selected transactions. Prepare in general journal form the entries required for each of the
transactions. (If no entry is required for a transaction/event, select “No Journal Entry
Required” in the first account field.)
1. The university was awarded a federal grant in the amount of $1,800,000 to be used for a
specified research project (determined to be a nonexchange transaction). During the year the entire
$1,800,000 was received and expenses for the specified project totaled $1,000,000.
2. Ira Beaker, a renowned chemist and alumnus, donated $7,000,000 to be used for the
construction of new chemistry building to be named Beaker Hall. The gift is to be paid to the
university in equal installments over a two-year period; the sum for the current year was received
in cash.
3. Cash outlays of $2,750,000 were made during the year for construction in progress on the new
chemistry building. Other construction projects completed during the year, also financed by
restricted resources, amounted to $1,500,000 for buildings and $500,000 for improvements other
than buildings. There was no debt financing used for these projects.
4. During the year bonds with a face value of $180,000 were retired.
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No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Answer:
Explanation: No further explanation details are available for this problem.
Difficulty: 3 Hard
Topic: Reporting and Accounting Issues
Learning Objective: 15-03 Discuss accounting and reporting issues for all colleges and
universities, such as accounting for assets, liabilities, and net assets/net position; accounting for
revenues and expenses; and accounting for cash flows.
Bloom’s: Apply
AACSB: Analytical Thinking
AICPA: FN Reporting
61) “Tuition and fees should be recorded as revenues of colleges and universities even though they
must be reported net of tuition refunds, scholarships, and fellowships.” Do you agree or disagree
with this statement? If you disagree, explain how refunds, scholarships, and fellowships should be
recorded.
62) If a private university receives $1,000,000 in the current fiscal year as a grant restricted for a
specific research project and makes expenditures amounting to $400,000 during the current fiscal
year properly chargeable to the grant, how much should be reported as revenues in the current
fiscal year? Explain.
63) Refunds of college or university tuition or fees should be recorded as expenses in the period in
which they are made. Do you agree? Why or why not?