Question

Following is the trial balance for Prentiss College, a privately funded college, as of January 1, 2018 (in thousands):

             

	Dr	Cr
Cash	$900
Receivables	250
Investments	4,000
Buildings and equipment, net	15,500
Accrued liabilities		$800
Long-term debt		10,000
Unrestricted net assets		4,000
Temporarily restricted net assets		2,000
Permanently restricted net assets	_____	3,850
Total	$20,650	$20,650

Events for 2018 are as follows (in thousands):

             

1. Tuition and fees are $7,000, of which $2,000 is waived for graduate teaching assistantships and $1,000 is covered by scholarships. $3,950 is collected in cash. All tuition and fees relate to 2018.

2. Operating expenses for salaries, utilities, research programs, etc. are $8,500, all paid in cash. Accrued liabilities of $650 were paid in cash. Depreciation on the buildings and equipment is $200.

3. An unrestricted state appropriation of $3,000 is received in cash.

4. Cash donations and gifts for equipment replacement are as follows:

             

Restricted to equipment replacement	$500
Restricted to research projects	300

5. $900 of donor-restricted cash is spent to replace equipment. $100 of donor-restricted cash is spent for research projects (included in Item 2 above).

6. $175 is spent to service the long-term debt ($100 for interest, and $75 for principal; the interest is not included in Item 2 above).

7. Investment income, received in cash, is $2,000, of which $300 is donor-restricted to research programs. Donor-restricted cash used for research programs is $250, included in Item 2 above. Investments have a fair value of $4,200 at year-end. Unrealized gains and losses are unrestricted.

Required:        

a. Prepare journal entries to record the transaction. Indicate whether each entry would affect unrestricted, temporarily restricted, or permanent restricted net assets.

b. Present Prentiss College’s statement of activities for 2018.

c. Present Prentiss College’s statement of financial position as of December 31, 2018.

Answer 1

Journal entries in the books of Prentiss College
Sr No	Particulars	Debit	Credit
1	Cash	$     3,950
	Teaching Assistantship	$     2,000
	Scholarship	$     1,000
	Receivables	$          50
	Tuition Fees		$     7,000
2	Operating expenses	$     8,150
	Cash		$     8,150
3	Accrued liabilities	$        650
	Cash		$        650
4	Depreciation	$        200
	Building & Equipment		$        200
5	Cash	$     3,000
	Unrestricted Net Assets		$     3,000
6	Cash	$        800
	Permanently Restricted Net Assets		$        500
	Temporarily Restricted Net Assets		$        300
7	Permanently Restricted Net Assets	$        900
	Cash		$        900
8	Temporarily Restricted Net Assets	$        100
	Cash		$        100
9	Interest	$        100
	Long Term Debt	$          75
	Cash		$        175
10	Temporarily Restricted Net Assets	$        250
	Cash		$        250
11	Cash	$     2,000
	Income from investments		$     1,700
	Temporarily Restricted Net Assets		$        300
12	Investment	$        200
	Investment Revaluation		$        200

Statement of activities of Prentiss College for the year ending on 31 Dec 2018
Income	Amount	Expenses	Amount
Tution fees	$      7,000	Teaching assistantship	$      2,000
Investment revaluation	$         200	Operating expenses	$      8,150
Income from investment	$      1,700	Depreciation	$         200
		Interest	$         100
Deficit	$      1,550
Total	$    10,450	Total	$    10,450
Financial position of Prentiss College as at 31 Dec 2018
Liabilities	Amount	Assets	Amount
Permanently Restricted Net Assets	$      3,450	Building & Equipment net	$    15,300
Temporarily Restricted Net Assets	$      2,250	Investments	$      4,200
Unrestricted Net Assets (after adjusting deficit)	$      4,450	Receivables	$         300
Long term debt	$      9,925	Cash	$         425
Accrued liabilities	$         150
Total	$    20,225	Total	$    20,225