Chapter 15 – Accounting for Colleges and Universities
Ch. 15, Solutions, Exercise 15-21 (Cont’d)
Debits Credits
5. INFRASTRUCTURE 1,980,000
CASH 1,980,000
(Note that public colleges and universities have a separate capital asset classification for
infrastructure.)
6. RESEARCH EXPENSE 25,000
CASH 25,000
(Note that public colleges and universities often use the same NACUBO expense
7. PROVISION FOR BAD DEBTS 1,670
ALLOWANCE FOR DOUBTFUL ACCOUNTS 1,670
(Note that public colleges and universities typically use a contra-revenue account while
private colleges and universities use an expense account for bad debts)
Chapter 15 – Accounting for Colleges and Universities
15–33
15-22. a. ALLEN UNIVERSITY
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2023
Without Donor
Restrictions
With Donor Restrictions
Total
Revenues and gains:
Student tuition and fees
(net)*
$ 963,750
$ 963,750
Contributions
310,200
637,200
Grants and contracts
324,000
Investment income
50,500
29,500
80,000
Auxiliary Enterprises
153,560
153,560
Gain on sale of investments
70,000
70,000
Unrealized gain on
investments
125,440
53,760
179,200
Other revenue
13,250
13,250
Net assets released from
restrictions
426,850
Total revenues and gains
2,113,550
2,420,960
Expenses and losses:
Educational and general
expenses:
Instruction
1,044,630
1,044,630
Research
571,800
571,800
Academic support
240,560
240,560
Student services
193,000
193,000
Institutional support
203,360
203,360
Total educational and
general expense
2,253,350
2,253,350
Auxiliary enterprises
158,700
158,700
Total expenses and losses
2,412,050
2,412,050
Total change in net assets
(298,500)
307,410
8,910
Net assets, beginning of the
year
3,353,110
4,673,710
Net assets, end of the year
$3,054,610
$4,682,620
Chapter 15 – Accounting for Colleges and Universities
15–34
Ch. 15, Solutions, Exercise 15-22 (Cont’d)
b.
ALLEN UNIVERSITY
STATEMENT OF FINANCIAL POSITION
JUNE 30, 2023
Assets
Cash and cash equivalents
$ 516,600
Tuition and fees receivable (net of doubtful accounts of $75,600)
296,800
Pledges receivable (net of doubtful pledges of $79,000)
144,000
3,200,000
1,537,440
Total assets
$5,694,840
Liabilities and Net Assets
Liabilities:
Accounts payable
103,000
Accrued liabilities
37,500
Deposits held in custody for others
17,570
Deferred revenue
62,150
Bonds payable
Total liabilities
1,012,220
Net Assets:
Without donor restrictions
3,054,610
With donor restrictions
1,628,010
Total net assets
4,682,620
Total liabilities and net assets
$5,694,840
Chapter 15 – Accounting for Colleges and Universities
15–35
Ch. 15, Solutions, Exercise 15-22 (Cont’d)
c.
ALLEN UNIVERSITY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2023
Cash Flows from Operating Activities:
Increase in net assets: $ 8,910
Adjustments to reconcile increase in net assets to net cash
Increase in unearned revenue 6,200
Depreciation 30,070
Gain on sale of investments (70,000)
Unrealized gain on investments (179,200)
Net cash used by operating activities (215,940)
Cash Flows from Investing Activities:
Purchase of equipment (33,000)
Purchases of investments (1,250,000)
Proceeds from sale of investments 1,500,000
Net cash provided by investing activities 217,000
Net decrease in cash and cash equivalents (98,940)
Cash and cash equivalents, beginning of the year 615,540
Cash and cash equivalents, end of the year $ 516,600
General Problem Information: Private university trial balance to FS
Learning Objective: 15-4
Topic: Transactions and Financial Statements for Private Colleges and Universities
Chapter 15 – Accounting for Colleges and Universities
15–36
15-23. a.
The CFI score is comprised of four ratios as described in Illustration 15-7. Illustration 15-8 and 15-9
provide a template for how to calculate the CFI.
**Note the strength factor was less than the floor range of −4. For purposes of calculating the CFI,
strength factors can be no higher than 10 and no lower than −4.
Viability
3.71
.417
8.90
35%
3.12
Total CFI
5.95
b. Based on a CFI score 5.95, Allen University would be considered financially healthy. One
potential area of concern is the large deficit in the current year. If Allen University continues to
suffer deficits in future years, the financial condition will certainly worsen.
c. Financial health is only once aspect of performance. To truly gauge how well a college or
university is performing, nonfinancial performance measures must also be considered.
Ratio Name
Ratio Calculation for Allen University
Primary Reserve
((4,682,620 − 1,000,000 − 1,537,440+792,000) /
2,412,050) = 1.22
Net Operating Revenues
Return on Net Assets
8,910 / 4,673,710 = 0.19%
Viability
792,000) = 3.71
Ratio Name
Ratio
Value
Ratio
Scale
Strength Factor (Ratio
Value / Ratio Scale)
Weighting
Factor
Score
Primary Reserve
1.22
.133
9.17
35%
3.21
Return on Net
Assets
0.19%
2%
0.10
20%
0.02
Chapter 15 – Accounting for Colleges and Universities
Ch. 15, Solutions, Exercise 15-23 (Cont’d)
General Problem Information: Computing the CFI for a Private University
Learning Objective: 15-5
Chapter 15 – Accounting for Colleges and Universities
15–38
15-24. a. WILSON STATE COLLEGE
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
FOR THE YEAR ENDED JUNE 30, 2023
(000s omitted)
Revenues:
Operating revenues:
Student tuition and fees (net of discount & allowances)
$ 22,530
Grants and contracts
18,196
Auxiliary enterprises
14,595
Total operating revenue
55,321
Expenses:
Operating expenses:
Academic support
58,940
Institutional support
26,268
Scholarships and fellowships expenses
7,664
Depreciation expense
5,580
Auxiliary enterprises
12,197
Total operating expenses
110,649
Operating loss
(55,328)
Nonoperating revenues (expenses):
State appropriation
44,894
Investment income
1,745
Interest expense
(378)
Net nonoperating revenues
46,261
Income before other revenues, expenses, gains or losses
Capital appropriations
12,785
Increase in net position
3,718
Net position, beginning of the year
285,662
Net position, end of the year
$289,380
Chapter 15 – Accounting for Colleges and Universities
15–39
Ch. 15, Solutions, Exercise 15-24 (Cont’d)
b. WILSON STATE COLLEGE
STATEMENT OF NET POSITION
AS OF JUNE 30, 2023
(000s omitted)
Assets
Current assets:
Cash and cash equivalents
$ 3,278
Investments
29,387
Due from state
79,626
Inventories
869
Total current assets
114,980
Noncurrent assets:
Cash and cash equivalents-restricted
6,716
Restricted investments
71,883
Nondepreciable capital assets
Total noncurrent assets
323,850
Total assets
438,830
Liabilities and Net Position
Current liabilities:
Accounts payable
2,306
Accrued liabilities
2,039
Unearned revenue
13,789
Compensated absences—current portion
1,538
Total current liabilities
19,672
Noncurrent liabilities:
Compensated absences
37,662
Bonds Payable
92,116
Total noncurrent liabilities
129,778
Total liabilities
149,450
Net position:
Net investment in capital assets
153,135
Restricted for nonexpendable:
Endowment
39,959
Restricted for expendable:
Debt service
1,307
Capital projects
52,272
Unrestricted
42,707
Chapter 15 – Accounting for Colleges and Universities
15–40
Ch. 15, Solutions, Exercise 15-24 (Cont’d)
c. WILSON STATE COLLEGE
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2023
(000s omitted)
Cash Flows from Operating Activities
Cash received for tuition and fees (net)
$ 23,609
Grants and contracts
12,940
Cash received from auxiliary enterprises
Payments to employees
(58,220)
Payments to vendors
Payments for scholarships and fellowships
(7,664)
Net cash used in operating activities
(37,281)
Cash Flows from Noncapital Financing Activities
State appropriations
39,894
Cash Flows from Capital and Related Financing Activities
Capital appropriations
20,540
Purchases of capital assets
(20,634)
Interest paid on capital debt
(2,095)
Net cash used in capital and related financing activities
(2,189)
Cash Flows from Investing Activities
Investment income
1,503
Net increase in cash
1,927
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
Reconciliation of Net Operating Revenues (Expenses) to Net
Cash Used by Operating Activities
Operating loss
$(55,328)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation expense
5,580
Change in assets and liabilities:
Accounts receivable, net
(2,551)
Due from state
14,842
Inventories
Accounts payable and accrued liabilities
1,962
Unearned revenue
(1,763)
Net cash used in operating activities
Chapter 15 – Accounting for Colleges and Universities
15–41
Ch. 15, Solutions, Exercise 15-24 (Cont’d)
General Problem Information: Public university trial balance to FS
Learning Objective: 15-4
Topic: Transactions and Financial Statements for Private Colleges and Universities