Question

The following problem is an example of typical transactions that a not-for-profit college or university might have.  Use the information in the FASB Accounting Standards Codification to help you answer the requirements of the problem.

Beatty College, a not-for-profit college, engaged in the following transactions during its fiscal year ending June 30, 2015.         

Requirements:  Prepare appropriate journal entries, indicating the types of funds (by restrictiveness) in which they would be recorded.

Transactions:

               1. In May 2015 Beatty College collected $100,000,000 in student tuition.  Of this amount              $10,000,000 was applicable to the summer semester, which ran from June1 to August 30, 2015,              and $1,000,000 was applicable to the fall semester that began September, 2015.

               2. Beatty College received a contribution of $1,000,000 in stocks and bonds to establish an       endowed chair in accounting.  Income from the chair endowment must be used to supplement        the salary of a professor accounting.

               3. During 2015, the accounting chair endowment earned interest and dividends of $50,000 all of    which was used to supplement the salary of the chair of the accounting department.  (Note:        a. record the investment earnings and b. record cash paid for the chair’s salary.)  Use the same      $50,000 for both entries.

               4. The fair value of the investment of the accounting chair endowment declined by $80,000.

               5. Using funds restricted for this purpose, the college purchased $150,000 of equipment for the          college athletics department.

               6. Beatty College recorded depreciation of $30,000.

               7. The annual alumni campaign yielded $1,800,000 in pledges.  The college estimated that 2% would be uncollectible.  During the year, Beatty college collected $1,500,000 on the pledges.

Answer 1

(Amts in dollars)$

1) Cash/ Bank A/C. Dr . 100000000

To Student Tuition (income) a/C. 100000000

(Tuition fees received)

Student Tuition a/C . Dr. 10000000

To Student Tuition received in advance (liability) a/C . 10000000

(Being, tuition fees received in advance related to June to aug)

Student Tuition a/C. Dr. 1000000

To Student Tuition received in advance a/C. 1000000

( Being, Student Tuition received in advance related to sept)

2) . Bank/ cash a/ C . Dr . 1000000

To Share capital a/C . 1000000

( Being, contribution received in stocks)

Chair endowment investment a/C. Dr. 1000000

To bank/ cash a/C. 1000000

(Being, received amt invested)

3). Bank/ cash a/ C Dr . 50000

To interest on Chair endowment investment a/C. 50000

(Being, int on investment received in cash or bank)

Salary a/C . Dr . 50000

To Bank/cash a/C. 50000

(Being, chair's salary paid out of income arised from investment a/C )

4). Bank/cash a/C . Dr . 920000

Profit and loss a/C ( loss on sale) . Dr 80000

To Chair endowment investment a/C . 1000000

(Being, loss on sale of investment)

5). Equipment a/C. Dr . 150000

To cash/bank account . 150000

( Being, equipment purchased out of sold investment amount)

6) . Depreciation account. Dr . 30000

To Equipment account. 30000

(Being, depreciation charged)

Profit and loss account . Dr. 30000

To depreciation account. 30000

(Being, depreciation account transferred to p& l account)

7). Bank/ cash account Dr. 1500000

Provision for doubtful debt Dr 36000

Bad debts account . Dr .264000

To debtors account. 1800000

(Being, debtors Bal rec'd after making adjustments)

Profit and loss account Dr . 300000

To Bad debt account . 264000

To provision for doubtful debt account. 36000

( Being, bad debt & provision are transferred)