Soft Bound Version for Advanced Accounting 13th Edition
Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
Publisher: McGraw Hill Education
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Chapter 18, Problem 42P

The University of Danville is a private not-for-profit university that starts the current year with $700,000 in net assets: $400,000 unrestricted. $200,000 temporarily restricted, and $100,000 permanently restricted. The following transactions occur during the year.

  Prepare journal entries for each transaction. Then determine the end-of-year balances for unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets by creating a statement of activities.

  a.    Charged students $1.2 million in tuition.

  b.    Received a donation of investments that had cost the owner $100,000 but was worth $300,000 at the time of the gift. According to the gift’s terms, the university must hold the investments forever but can spend the dividends for any purpose. Any changes in the value of these securities must be held forever and cannot be spent.

  c.    Received a cash donation of $700,000 that must be used to acquire laboratory equipment.

  d.    Gave scholarships in the amount of $100,000 to students.

  e.    Paid salary expenses of $310,000 in cash.

  f.    Learned that a tenured faculty member is contributing his services in teaching for this year and will not accept his $80,000 salary.

  g.    Spent $200,000 of the money in (c) on laboratory equipment (no time restriction is assumed on this equipment).

  h.    Learned that at the end of the year, the investments in (b) are worth $330,000.

  i.    Received dividends of $9,000 cash on the investments in (b).

  j.    Computed depreciation expense for the period of $32,000.

  k.    The school’s board of trustees decides to set aside $100,000 of previously unrestricted cash for the future purchase of library books.

  l.    Received an unconditional promise of $10,000, which the school fully expects to collect in three years although its present value is only $7,000. The school assumes that the money cannot be used until the school receives it.

  m.    Received an art object as a gift that is worth $70,000 and that qualifies as a work of art. The school prefers not to record this gift.

  n.    Paid utilities and other general expenses of $212,000.

  o.    Received free services from alumni who come to campus each week and put books on the shelves in the library. Over the course of the year, the school would have paid $103,000 to have this work done.

a.

Expert Solution
Check Mark
To determine

Record general entries and prepare a statement of activity for university D, a private not-for-profit entity.

Explanation of Solution

General entries for university D:

Date

Account Title and ExplanationPost Ref.

Debit

   ($)

Credit

    ($)

  
a.Tuition receivable 1,200,000
 Unrestricted net assets- tuition revenue 1,200,000
 (To record the tuition fee charged to students) 
  
b.Investment 300,000
 Permanently restricted net assets – contribution 300,000
 (To record the donated investment at its fair value) 
  
c.Cash 700,000
 Temporarily restricted net assets- contribution 700,000
 (To record the cash donated for buying equipments) 
  
d.Financial aid – scholarship 100,000
 Tuition receivable 100,000
 (To record the scholarship given to students) 
  
e.Salary expense 310,000
 Cash 310,000
 (To record the cash expenses of salary) 
  
f.Salary expense 80,000
 Unrestricted net assets – service donated 80,000
 (To record the service donated by the faculty member) 
  
g.Equipment 200,000
 Cash 200,000
 (To record the purchase of equipments) 
  
 Temporarily restricted net assets – reclassification 200,000
 Unrestricted net assets - reclassification 200,000
 (To record the reclassification of assets) 
  
h.Investment 30,000
 Permanently restricted net assets – unrealized gain on investment 30,000
 (To record the gain on the investment at the end of the year) 
  
i.Cash 9,000
 Unrestricted net assets – dividend revenue 9,000
 (To record the dividend received on investment) 
  
j.Depreciation expense 32,000
 Accumulated depreciation 32,000
 (To record the depreciation expense for the period) 
  
k.Cash – internally restricted 100,000
 Cash 100,000
 (To record the cash restricted by the trustees) 
  
l.Pledge receivable 7,000
 Temporarily restricted net assets –contribution 7,000
 (To record the present value of pledge received) 
  
m.No entry as entity prefer not to record it 
  
 General expenses – utilities 212,000
 Cash 212,000
n.(To record the general expenses) 
  
o.No entry as the service cannot sold if not donated 
  


Table: (1)

b.

Expert Solution
Check Mark
To determine

Prepare a statement of activates in the book of university D.

Explanation of Solution

Statement of activities of university D:

Statement of activities
ParticularUnrestricted  net assetsTemporarily restricted net assetsPermanently restricted net assets
Public support:   
Contributions - cash $700,000 
Contribution-pledge $7,000 
Contribution - service$80,000  
Contribution - investment  $300,000
Total public support$80,000$707,000$300,000
    
 Revenue:   
Tuition fee (after adjusting scholarship)$1,100,000  
Unrealized gain on investment  $30,000
Dividend income$9,000  
Total revenue$1,109,000 $                                    -  $30,000
    
Net assets realized from restriction$200,000($200,000) 
    
Total public support and revenue$1,389,000$507,000$330,000
     
Expenses:    
Salaries$390,000  
Depreciation$32,000  
general expense - utilities$212,000  
    
Total expense$634,000 -
    
Increase in net assets$755,000$507,000$330,000
    
Net assets- beginning of the year$400,000$200,000$100,000
    
Net assets- closing of the year$1,155,000$707,000$430,000


Table: (2)

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The University of Danville is a private not-for-profit university that starts the current year with $700,000 in net assets: $400,000 unrestricted, $200,000 temporarily restricted, and $100,000 permanently restricted. The following transactions occur during the year. Prepare journal entries for each transaction. Then determine the end-of-year balances for unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets by creating a statement of activities. Charged students $1.2 million in tuition. Received a donation of investments that had cost the owner $100,000 but was worth $300,000 at the time of the gift. According to the gift’s terms, the university must hold the investments forever but can spend the dividends for any purpose. Any changes in the value of these securities must be held forever and cannot be spent. Received a cash donation of $700,000 that must be used to acquire laboratory equipment. Gave scholarships in the amount of $100,000 to…
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Soft Bound Version for Advanced Accounting 13th Edition

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