19–1
CHAPTER 19
UNDERSTANDING THE ISSUES
1. The measurement focuses used by public
universities under GASB Statement No. 34
are both the flows of financial resources
and the flows of economic resources. Pri-
vate universities use a measurement focus
of economic resources. Both entities use
2. Accounting for contributions for a private
university requires recognizing revenue in
3. In order for the government grant to be a
contribution, the grantor may not receive
contribution can be restricted. It is less
important in public universities where both
contributions and grants are considered re-
stricted revenues.
4. Assets limited as to use are not restricted,
merely board (or internally) designated.
mum revenue to cover costs. Adjustments
are then determined in the contractual
should be accrued when the incidents
occur that give rise to the claims if it can be
Ch. 19—Exercises 19–2
EXERCISES
EXERCISE 19-1
(2) b Recognized in period received. Restriction is released when expenses are incurred.
(4) a Recorded at present value at time promise to give is received.
(6) b Recognized in period received. Restriction released either (1) when asset is placed
in service or (2) over its useful life.
(8) a Recorded at fair value when received.
(10) f Not skilled services. May be footnoted.
(12) b Recognized in period received. Restriction is released when expenses are incurred.
(14) b Recognized in period received. Restriction is released either (1) when asset is
placed in service or (2) over useful life of asset.
EXERCISE 19-2
(1) Public University
(a) Cash ……………………………………………………………………………. 200,000
Exercise 19-2, Concluded
(d) Cash ……………………………………………………………………………. 15,000
Interfund Transfer-In …………………………………………………. 15,000
(2) Private University
(a) Cash ……………………………………………………………………………. 200,000
Revenues—Temporarily Restricted Contributions ………… 200,000
(b) Expenses …………………………………………………………………….. 110,000
Cash ………………………………………………………………………. 110,000
EXERCISE 19-3
(1) Cash ………………………………………………………………………………….. 575,000
Accounts Receivable ……………………………………………………………. 25,000
(2) Cash ………………………………………………………………………………….. 80,000
Accounts Receivable ……………………………………………………………. 20,000
Exercise 19-3, Concluded
(3) Mandatory Transfer for Mortgage Payment ……………………………… 75,000
Cash …………………………………………………………………………….. 75,000
(4) Expenses—Student Aid ………………………………………………………… 35,000
(6) Due from Endowment Fund …………………………………………………… 11,760
EXERCISE 19-4
(2) Loans Receivable ………………………………………………………………… 380,000
Cash …………………………………………………………………………….. 380,000
(3) Cash on Deposit at Credit Union ……………………………………………. 40,000
Cash …………………………………………………………………………….. 40,000
(4) Cash ………………………………………………………………………………….. 20,800
(6) Allowance for Uncollectibles ………………………………………………….. 1,000
Loans Receivable …………………………………………………………… 1,000
EXERCISE 19-5
(1) Cash ………………………………………………………………………………….. 250,000
(2) Cash ………………………………………………………………………………….. 11,250
(3) Temporarily Restricted Net Assets—Mandatory Transfer-Out ……. 10,583
Cash …………………………………………………………………………….. 10,583
(4) Cash ………………………………………………………………………………….. 260,500
EXERCISE 19-6
(1) Investments ………………………………………………………………………… 90,000
(2) Cash ………………………………………………………………………………….. 2,000
(3) Actuarial Adjustment on Annuities Payable ……………………………… 3,407
(4) Actuarial Adjustment on Annuities Payable ……………………………… 3,148
Annuities Payable [($34,068 + $3,407 – $6,000) × 10%] ……… 3,148
Exercise 19-6, Concluded
(5) Annuities Payable ………………………………………………………………… 28,623
(6) Cash ………………………………………………………………………………….. 92,000
Investments …………………………………………………………………… 90,000
Revenues—Temporarily Restricted Gain on the
Sale of Annuity Investments ……………………………………….. 2,000
Temporarily Restricted Net Assets—Mandatory
Transfer-Out ………………………………………………………………….. 85,000
EXERCISE 19-7
(1) Cash ………………………………………………………………………………….. 250,000
Unrestricted Net Assets—Mandatory Transfer-In ………………… 250,000
(2) Cash ………………………………………………………………………………….. 30,000
Revenues—Temporarily Restricted Contributions ……………….. 30,000
(3) Mortgage Liability ………………………………………………………………… 50,000
Cash …………………………………………………………………………….. 50,000
(4) Building ………………………………………………………………………………. 220,000
Exercise 19-7, Concluded
(5) Equipment ………………………………………………………………………….. 25,000
Cash …………………………………………………………………………….. 25,000
(7) Depreciation Expense ………………………………………………………….. 75,000
Allowance for Depreciation ………………………………………………. 75,000
EXERCISE 19-8
(1) Patient service revenues include charges to patients for routine services, nursing services,
and professional services.
(2) a. OO d. PS g. OO j. PS
EXERCISE 19-9
(1) Accounts Receivable ……………………………………………………………. 860,000
(2) Inventory …………………………………………………………………………….. 20,000
(3) Cash ………………………………………………………………………………….. 25,200
Exercise 19-9, Concluded
(4) Charity Services ………………………………………………………………….. 22,000
(5) Contractual Adjustments ………………………………………………………. 108,000
(6) Provision for Bad Debts ………………………………………………………… 26,000
EXERCISE 19-10
(1) Accounts Receivable ……………………………………………………………. 5,000,000
Revenues ………………………………………………………………………. 5,000,000
Contractual Adjustments ………………………………………………………. 2,500,000
Allowance for Contractual Adjustments ……………………………… 2,500,000
Cash ………………………………………………………………………………….. 2,160,000
Contractual Adjustments ………………………………………………………. 340,000
Allowance for Contractual Adjustments …………………………………… 2,500,000
Accounts Receivable ………………………………………………………. 5,000,000
(2) Net patient service revenues = $2,310,000 ($5,000,000 – $2,500,000 – $340,000 +
$250,000 – $100,000)
(4) Assuming the $100,000 payment back to Medicare was in settlement, the revenue account
19–9 Ch. 19—Exercises
EXERCISE 19-11
Recover Rehabilitation Hospital
Statement of Activities
For Year Ended December 31, 2019
Temporarily Permanently
Unrestricted Restricted Restricted Total
Patient service revenues (net of $16,000
contractual adjustments) ………………………………… $ 824,000 $ 824,000
Operating expenses:
Nursing services ……………………………………………. $ 230,000 $ 230,000
Professional fees …………………………………………… 140,000 140,000
General and administrative …………………………….. 250,000 250,000
Depreciation expense ……………………………………. 60,000 60,000
Interest expense ……………………………………………. 13,000 13,000
EXERCISE 19-12
(1) e A designation is not the same as a donor-imposed restriction. The designated assets
stay in the unrestricted net assets category.
(3) c The restricted donation is an increase in temporarily restricted net assets.
(5) a This donated service is recognized as unrestricted revenues and expenses because it
requires specialized skills and would have to be purchased if it were not donated.
(6) d The donated assets are permanently restricted; income will be temporarily restricted.
Ch. 19—Problems 19–10
PROBLEMS
PROBLEM 19-1
(1) b The three financial statements for private universities are the statement of financial
position, the statement of activities, and the statement of cash flows.
(3) a Nonexpendable contributions are permanently restricted.
(5) a Plant funds include unexpended plant funds, plant fund for renewals and replacements,
plant fund for retirement of indebtedness, and investment in plant.
(6) d Only nonexpendable principals are permanently restricted. The term endowment is
(8) b Loans to students, faculty, and staff are accounted for in the loan fund.
(10) d Since Marimount Private College is not the trustee, contribution revenue is recognized
only when income is due (or received).
(1) b Assets – Liabilities = Fund balance.
(3) b Tuition remissions and scholarships are student aid expenditures.
(4) b The rate of pay normally commanded by a paid person performing a given function
(5) a Institutional support expenditures are those of central administration. Scholarships and
Problem 19-2, Concluded
(7) a Endowment income is recognized as unrestricted and temporarily restricted upon re-
ceipt.
(9) c The $300,000 is only a restriction within the current unrestricted fund and is not exter-
nally imposed.
PROBLEM 19-3
(1) Contribution transaction:
Cash ………………………………………………………………………………….. 100,000
(2) Contribution transaction:
(3) Contribution transaction:
(4) Contribution transaction:
Building ………………………………………………………………………………. 1,050,000
(6) Neither contribution nor exchange transaction—not recorded. Contributed service that does
Problem 19-3, Concluded
(8) Exchange transaction:
(9) Neither contribution nor exchange transaction—recorded as an agency transaction.
PROBLEM 19-4
(1) Current Funds
Entry Unrestricted Restricted
Letter Accounts Debit Credit Debit Credit
(a) Cash ………………………………………………………. 3,000,000
Accounts Receivable ……………………………. 362,000
Revenues—Tuition and Fees ………………… 2,500,000
Prepaid Tuition—Tuition and Fees …………. 138,000
(b) Prepaid Tuition—Tuition and Fees ……………… 25,000
Revenues—Tuition and Fees ………………… 25,000
Problem 19-4, Continued
Current Funds
Entry Unrestricted Restricted
Letter Accounts Debit Credit Debit Credit
(f) Cash ………………………………………………………. 31,000
Investments ………………………………………… 25,000
Fund Balance ………………………………………. 6,000
Investments …………………………………………….. 40,000
Cash ………………………………………………….. 40,000
Cash ………………………………………………………. 18,000
Fund Balance ………………………………………. 18,000
(g) Expenditures*—General……………………………. 2,500,000
Accounts Payable ………………………………… 2,500,000
Problem 19-4, Concluded
(2) Tree State University
Statement of Current Funds Revenues, Expenses, and Other Changes
For Fiscal Year Ended July 31, 2019
Current Funds
Unrestricted Restricted Total
Revenues:
Tuition and fees …………………………………………….. $2,517,000 $2,517,000
Governmental appropriations ………………………….. 60,000 60,000
Private gifts and grants ………………………………….. 80,000 80,000
PROBLEM 19-5
Event Fund Journal Entry
(1) Unexpended Cash ……………………………………………………………. 22,385,000
Plant Fund Bonds Payable—7% ………………………………….. 22,000,000
(2) Unexpended Due to Retirement of Indebtedness Plant Fund ….. 385,000
Plant Fund Cash ………………………………………………………… 385,000
To record accrued interest transfer.
19–15 Ch. 19—Problems
Problem 19-5, Continued
Event Fund Journal Entry
(3) Unrestricted Mandatory Transfers for Principal and Interest
Current Fund Payment ……………………………………………… 385,000
Cash ……………………………………………….. 385,000
(4) Plant Fund for Fund Balance—Restricted …………………………. 770,000
(5) Unexpended Construction in Progress …………………………… 17,000,000
Plant Fund Retained Percentage Contract Payable …… 1,000,000
(6) Unexpended Bonds Payable—7% …………………………………. 22,000,000
Plant Fund Construction in Progress ……………………….. 22,000,000
(7) Unrestricted Mandatory Transfers for Principal and Interest
Current Fund Payments ……………………………………………. 2,770,000
Cash ……………………………………………….. 2,770,000