Chapter 19—Accounting for Not-for-Profit Colleges and
Universities and Health Care Organizations Key
1. With the adoption of GASB statement #35 in 1999, public colleges and universities are required to report
their activities in a manner more like a(n):
2. What is the basis of accounting used in accounting for not-for-profit universities?
3. Which of the following is not an example of one of the major categories of funds for a college or university?
4. Which of the following is not an example of Educational and General Revenue in a college or university?
5. Which of the following is not an example of general and educational expenses recorded by a college or
university?
6. A contribution is a(n)
7. A collection of first editions is donated to the university for its library. Which is the correct credit?
8. Which of the following represents an area where accounting for contributions may differ between public and
private colleges and universities?
9. A contribution is given without donor restrictions. Under which fund group would this be recorded?
10. In a private college, as expenses are made in compliance with donor restrictions on previously made
contributions, what type of journal entry must be made to record the transaction from the aspect of the current,
unrestricted fund?
11. Which of the following receipts should be recorded in the current restricted fund of a public university?
12. Grants that require performance by a private college or university are recorded as:
13. Government grants which are essentially a pass-through of financial aid to students are accounted for as:
14. A federal grant was received for research. Which is the correct credit?
15. Which university fund is most similar to the governmental general fund?
16. How is a government grant accounted for at a public university?
Revenue Expense
17. Where should a university using fund accounting record an alumnus contribution of $10,000 to pay for
scholarships for international study-abroad?
18. Endowment income was restricted to student aid activities. Cash is paid for all activities. Which is the credit
necessary for classification?
19. The loan fund would account for loans
20. Al Alumni donates $5,000,000 to Great University for a new Women’s Studies program. Al wants the
principal to remain intact but the investment earnings can be expended to support the Women’s Studies
Program. This donation would be accounted for in the
21. The quasi-endowment fund of a university would account for funds set aside by
22. Income earned on restricted endowment resources should
23. Westwood College is a small private college while neighboring Bridgetown University is a public
institution. How is each to report its investments?
Westwood Bridgetown
24. Frank Bowers decides to contribute $1,000,000 to his alma mater. Cape University agrees to pay Frank a
fixed amount every month for the next 20 years in exchange for the donation. Frank’s donation would be
accounted for in the
25. Kelsey Nicholas contributes $80,000 to Wagner University requesting that she receive $5,000 annually for
the rest of her life, after which, the university may spend the funds as it sees fit. The journal entry to record this
gift would include:
26. A life income fund is used when:
27. Farley College budgets funds for the maintenance and repair of its buildings. Where would these funds be
accounted for?
28. In which of the plant fund subgroups would you find the following transaction: A bond principal payment is
made on a bond that was issued with the proceeds being designated for construction of a new athletic facility?
29. A public university’s long-term bonds issued to build dormitories would be recorded in the
30. The Great Gap University issues long-term debt to build a bridge over the gap between its two main
campuses. The debt would be accounted for in the
31. Government grants, like Pell Grants, which are essentially pass through financial aid to students are
accounted for as
32. A public college or university would provide which of the following combinations of financial statements to
their users?
33. Which of the following financial statements is required for the annual financial reports of public colleges
and universities?
34. A private not-for-profit college or university would provide which of the following combinations of
financial statements to their users?
35. In the Statement of Cash Flow for a public college or university, endowment contributions are included in
cash flows provided by (used for) ____________ activities.
36. Currently, which organization has jurisdiction over accounting and reporting standards for private colleges
and universities?
37. In the Statement of Cash Flow for a private not-for-profit college, endowment contributions are included in
cash flows provided by (used for) ____________ activities.
38. Which of the following is a category of health care entity?
39. What is the basis of accounting used in accounting for not-for-profit health care organizations?
40. With the adoption of GASB statement #35 in 1999, governmental health care organizations are required to
report their activities in a manner more like a(n):
41. Atlee makes a cash gift to a not-for-profit hospital which is restricted by the donor to buy toys for the
pediatric ward. It should be recorded in the:
42. In a private health care organization, plant replacement and expansion funds account for:
43. Under the Medicare DRG system, hospitals:
44. Under capitation agreements, hospitals:
45. In a health care organization, Other Operating Revenue includes:
46. A hospital’s contractual adjustments:
47. Charity care services provided by a hospital:
48. Which of the following accounts would not typically be found on a health care organization’s operating
statement if that organization prepares it financial statements using functional presentation?
49. Alice makes a cash gift which has no strings attached to a not-for-profit hospital. It is recorded as:
50. Sister Nancy Ann is a registered nurse who works at St. Thomas Hospital, which is run by a religious order
of nuns. Her salary is $10,000 annually, although the other nurses are paid $50,000. The following entry
should be made to record the payment to Sister Nancy Ann:
51. Jordan Phillips volunteers at Sayler Park Nursing Facility, a private not-for-profit nursing home, reading to
patients for ten hours a week. Minimum wage is $7.00 per hour. At the end of the week, the following entry
should be made to record Jordan’s services:
52. Malpractice claims recorded as IBNR claims represent
53. The account, Cash—Limited in Use Under Malpractice Funding Arrangement, would be found in the:
54. At the end of a private not-for-profit hospital’s fiscal year, the account Reclassifications In – Unrestricted –
Satisfaction of Equipment Acquisition Restrictions would be closed to:
55. A private not-for-profit health care organization would provide which of the following combinations of
financial statements to their users?
56. A public or governmental healthcare organization would provide which of the following combinations of
financial statements to their users?
D. Statement of Net Assets; Statement of Functional Expenses; Statement of Cash Flows
57. Southern Coast (private) University received the following pledges during 20X4:
a.
Joy Dance pledges $60,000 to be paid over a three-year period beginning at the end of this year. Southern Coast discounts this contribution
at 10%. The present value is $49,737.
b.
As a result of a pledge drive, $500,000 is pledged to be paid by the end of the accounting year. Ten percent of pledges in the past have
been shown to be uncollectible.
Required:
Make the necessary journal entries to record the pledges.
Revenue—Unrestricted Contributions
49,737
b.
Contributions Receivable
500,000
Provision for Uncollectible Contributions
50,000
Allowance for Uncollectible Contribution
50,000
58. Carlton (private) University received the following pledges during 20X5:
a.
Jane Baker pledges $30,000 to be used for student scholarships.
b.
As a result of a pledge drive, $400,000 is pledged to be paid by the end of the accounting year. Ten percent of pledges in the past have
been shown to be uncollectible. These pledges are unrestricted.
Required:
Make the journal entries necessary to record the pledges.
a.
Contributions Receivable
30,000
Revenues—Temporarily Restricted Contributions
30,000
b.
Contributions Receivable
400,000
Revenues—Unrestricted Contributions
400,000
Provision for Uncollectible Accounts
40,000
Allowance for Uncollectible Accounts
40,000
59. The following selected transactions affected the Current Unrestricted Funds of Tiger State University
(public) during the current fiscal year:
a.
The Board of Control approved a budget estimating $10,000,000 in revenues and expenses of $9,850,000.
b.
Student tuition assessed during the year was $4,000,000, of which $3,700,000 had been collected, with 3% considered uncollectible.
c.
Student aid included $500,000 in cash scholarships and $75,000 in tuition remission.
d.
Salary and wages during the year included $5,500,000 for instruction, $500,000 for academic support, and $700,000 for institutional
support.
e.
A grant received of $10,000 in cash was restricted to use for laser technology research.
Required:
Make the journal entries necessary to record the selected transactions.
a.
Estimated Revenues
10,000,000
Estimated Expenses
9,850,000
Unallocated Balance
150,000
b.
Accounts Receivable
4,000,000
Revenues—Student Tuition and Fees
3,880,000
Allowance for Uncollectible Student Accounts
Receivable
120,000
Cash
3,700,000
Accounts Receivable
3,700,000
c.
575,000
Cash
500,000
Accounts Receivable—Tuition and Fees
75,000
d.
5,500,000
500,000
700,000
Cash
6,700,000
e.
No entry; recorded in Current Restricted Fund.
60. The following selected transactions affected the Current Unrestricted Fund of Franklin State (public)
University during the current fiscal year:
a.
Student tuition and fees billed for the year for $8,000,000, which was used for educational and general purposes. Prior experience shows
$100,000 will be uncollectible.
b.
$7,200,000 of the billings in part (a) were collected.
c.
Unrestricted income from endowment funds amounted to $185,000.
d.
Auxiliary enterprise included $175,000 from student residence halls; $200,000 from cafeterias; and $750,000 from the college store sales.
All amounts have been collected.
e.
$300,000 of Term Endowments funds are now available for unrestricted use.
f.
Operating Expenses are paid as follows: Instruction $300,000; Research $150,000; Academic Support $50,000; Student Services $25,000;
Institutional Support $120,000
g.
University’s student aid committee granted student tuition and fee reductions of $200,000.
h.
Expenses from auxiliary enterprises amounted to $750,000
Required:
Make the journal entries necessary to record the selected transactions.
Accounts Receivable
8,000,000
b.
Cash
7,200,000
Revenue-Unrestricted Endowment Income
185,000
d.
Cash
1,125,000
Expenses-Instruction
300,000
Expenses-Academic Support
50,000
Expenses-Institutional Support
120,000
Accounts Receivable
200,000
h.
Expenses-Sales and Services of Auxiliary Services
750,000
61. Prepare the journal entries to record the following events for Cost (private) University:
a.
A federal grant of $100,000 was received for research.
b.
Expenses for the research project totaled $50,000 to date.
c.
Endowment income of $10,000 is restricted to student aid activities.
d.
Incurred $10,000 of expenses for student aid of which all but $2,000 of expenses are paid.
a.
Cash
100,000
U.S. Government Grants Refundable
100,000
b.
50,000
Cash
50,000
U.S. Government Grants Refundable
50,000
Revenues—Unrestricted Government Grants
and Contracts
50,000
c.
Cash
10,000
Revenues—Temporarily Restricted for
Endowments
10,000
d.
Expenses
10,000
Cash
8,000
Accounts Payable
2,000
Reclassification Out—
Temporarily Restricted—
Satisfaction of Program Restrictions.
10,000
Reclassification In—Unrestricted—
Satisfaction of Program Restriction
10,000
62. The following events involve a loan fund of East York public University:
a.
To establish the Hanson Student Loan Fund, two brothers donated $40,000 cash and securities that cost $80,000. Market value of the
securities at time of donation was $160,000.
b.
The securities were later sold for $189,000. The original agreement stipulated that any gain on the sale or income received from the
securities be added to the loan fund.
c.
Loans of $140,000 were made to students at 6% annual interest.
d.
The board of trustees agreed that loans to students in the amounts of $9,000 were uncollectible. At year end, the board took action to write
off the uncollectible loans outstanding of $9,000.
e.
Collections on Hanson loans amounted to $13,000 plus $450 in interest.
Required:
Prepare journal entries to record the above events.
a.
Cash
40,000
Investments
160,000
Revenues – Temporarily Restricted Contribution
200,000
To record establishment of Hanson Loan Fund.
b.
Cash
189,000
Investments
160,000
Revenues – Temporarily Restricted Net Realized
29,000
To record sale of investments.
c.
Loans Receivable
140,000
Cash
140,000
To record loans made.
Reclassifications Out – Temporarily Restricted –
140,000
Reclassifications In – Unrestricted –
Satisfaction of Program Restrictions
140,000
d.
Expenses – Institutional Support (Loan Write-offs)
9,000
Loans Receivable
9,000
To record uncollectible student loans
made from restricted funds.
e.
Cash
13,450
Loans Receivable
13,000
Revenues – Unrestricted Other Investment Income
450
To record loan repayments and interest.
63. Consider the following transactions for the University of Northland (private):
a.
On January 1st a gift of $100,000 was received from an alumnus. She requested one half be used for student loans and the other as a pure
endowment contribution.
b.
Loans totaling $25,000 are made to students. Collections from other loans made to students total $30,000 plus $3,000 interest.
c.
During the year, investments of $20,000 were sold for $30,000. Any gain is restricted for improvements in classroom instruction.
d.
During the year, interest charges of $5,000 were earned and collected on late student fee payments.
e.
A student loan of $500 is deemed uncollectible.
f.
During the year, operating expenses of $150,000 were recorded. At the end of the year, $25,000 remains unpaid.
Required:
Prepare journal entries necessary to record the transactions.
Cash
100,000
Revenues—Temporarily Restricted Contributions
50,000
Revenues—Permanently Restricted Contributions
50,000
b.
Loans Receivable
25,000
Cash
25,000
Reclassification Out—
Temporarily Restricted—
Satisfaction of Program Restrictions.
25,000
Reclassification In—Unrestricted—
Satisfaction of Program Restriction
25,000
Cash
33,000
Loans Receivable
30,000
Revenues—Unrestricted Interest Income.
3,000
Cash
30,000
Investment
20,000
Revenues – Temporarily Restricted – Net Realized
Gains on Investments-
10,000
d.
Cash
5,000
Interest Income—Unrestricted
5,000
Expenses – Institutional Support – Loan Cancellation/Write Offs
500
Loans Receivable
500
f.
150,000
Cash
125,000
Accounts Payable
25,000
64. The following selected transactions affecting the Annuity and Life Income Funds of Tremper State
University (public) occurred during the current fiscal year.
a.
Upon his death, John Sooner, a local businessman, donates a portfolio of stock with a cost basis of $100,000 and a market value of
$125,000. John’s wife is to receive an annuity of $8,000 per year for life. Her life expectancy is ten years. An estimated rate of return of
8% yields a present value of $53,681 for the annuity.
b.
Dividends of $7,500 are received from Life Income Fund investments.
c.
Annuity fund investments with a book value of $6,000 are sold for $6,500.
d.
The beneficiary of the life income investments described in part (b) are paid.
e.
Interest is recorded on the annuity in part (a) and the first annuity payment to John Sooner’s wife is made.
Required:
Make the journal entries necessary to record the transactions.
125,000
Annuities Payable
53,681
Revenues – Temporarily Restricted Contribution
71,319
b.
Cash-Life Income
7,500
Life Income Payable
7,500
c.
Cash-Annuity
6,500
Investments—Annuity
6,000
d.
Life Income Payable
7,500
Cash—Life Income
7,500
Actuarial Adjustments of Annuities Payable
4,294
Annuities Payable (53,681 x 8%)
4,294
Annuities Payable
8,000
Cash
8,000
65. Records of the items that follow are maintained in a public university’s Plant Fund. Fill in the name or
names of the appropriate plant subgroup funds in which the items are recorded.
Plant Subgroup
Item
Funds
(1)
Plant assets which were acquired with
Unrestricted Current Funds
1.
___________________
(2)
Accumulation of resources to keep
plant in operating condition
2.
___________________
(3)
Accumulation of resources for
acquiring properties
3.
___________________
(4)
Accumulation of resources to
pay interest and principal of
Plant Fund debt
4.
___________________
(5)
Recording of long-term liabilities
related to plant assets
5.
___________________
(6)
Receipt of proceeds from bond
issue floated to cover cost
of construction project
6.
___________________
(7)
Recording of construction in progress
on project mentioned in item 6
7.
___________________
(8)
Two subgroups affected by completion of
construction project mentioned in
item 7
8.
___________________
(9)
Recording of receipt of donated land
9.
___________________
(10)
Two subgroups affected by payment of
mortgage that is a lien on plant
assets
10.
___________________
(1)
Investment in Plant Fund
(2)
Plant Fund for Renewals and Replacement
(3)
Unexpended Plant Fund
(4)
Plant Fund for Retirement of Indebtedness
(5)
Investment in Plant Fund
(6)
Unexpended Plant Fund
(7)
Unexpended Plant Fund
(8)
Transfer from Unexpended Plant Fund to Investment in Plant Fund
(9)
Investment in Plant Fund
(10)
Payment is recorded in Retirement of Indebtedness Plant Fund.
Mortgage reduction is recorded in the Investment in Plant Fund.