Question

The University of Danville is a private not-for-profit university that starts the current year with $700,000 in net assets: $400,000 without donor restrictions and $300,000 with donor restrictions. The $300,000 is composed of $200,000 with purpose restrictions and $100,000 that must be held permanently.

The following transactions occurred during the year.

1. Charged students $1.2 million for tuition and fees.
2. Received a donation of equity investments that had cost the owner $100,000 but is worth $300,000 currently. According to the terms of the gift, 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.
3. Received a cash donation of $700,000 that must be spent to acquire laboratory equipment.
4. Awarded scholarships to students in the amount of $100,000.
5. Paid salary expenses of $155,000 (teaching), $80,000 (research), $50,000 (administrative), and $40,000 (fundraising).
6. Learned that a tenured faculty member is contributing his services for this year and will not accept his $80,000 salary. His time is 70 percent teaching and 30 percent research.
7. Spent $200,000 of the money in (c) on laboratory equipment. The donor had made no specifications about the recording of the acquisition. The equipment is used 80 percent of the time for research and 20 percent of the time for teaching.
8. Learned that the investments in (b) are worth $345,000 at the end of the year.
9. Received cash dividends of $9,000 on the investments in (b).
10. Computed depreciation expense for the year on the equipment in (g) as $32,000.
11. The school’s board of trustees votes to set aside $100,000 of previously unrestricted cash for the future purchase of library books.
12. Received an unconditional promise of $10,000 halfway through the year. The school expects to collect the money in three years. The $10,000 future payment has a present value of $7,513 based on a reasonable annual interest rate of 10 percent.
13. Received an art object as a gift. It is worth $70,000. For financial reporting, it qualifies as work of art/museum piece. The school prefers not to record such gifts unless required.
14. Paid utilities and other general expenses of $89,000 (teaching), $45,000 (research), $43,000 (fundraising), and $50,000 (administrative).
15. 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.
16. Near the end of the year, the school received a pledge of $40,000 to be collected in two years. It is judged to be conditional and has a present value of $31,200.

Required:

a. Prepare journal entries for each transaction. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars not in millions and round your answers to the nearest whole dollar amount.)

b. Determine the end-of-year balances for net assets without donor restrictions and net assets with donor restrictions by creating a statement of activities for the period. The school has two program services: education and research. It also has two supporting services: fundraising and administration. (Negative amounts should be indicated by a minus sign. Enter your answers in dollars not in millions and round your answers to the nearest whole dollar amount.)

Statement of Activities For the Year Ended December 31, 20XX Net Assets Without Donor Restrictions Net Assets With Donor Restrictions Exchange revenues and gains Tuition Scholarships Unrealized gain on investments Dividend revenues Contribution revenue Cash and other assets Pledges Interest Services Total revenues, gains, and contributions Net assets released from restriction Totals

Answer 1

Statement of activities
Unrestricted Net Assets	Net assets ( Temp Restricted)	Net assets ( Perm Restricted)
Revenues and gains					Total
Unrealized gain on investments				90000	90000
Dividend revenue		9000			9000
Scholarships	-100000
Tuition	1200000	1100000			1100000
Contributions :
Cash and other assets			707513	300000	1007513
Services		80000			80000
					-
Total revenues,gains,and contributions		1189000	707513	390000	2286513
Net assets released from restriction		200000	-200000		-
Totals		1389000	507513	390000	2286513
Operating expens es:
Salaries		399000			399000
Depreciation		32000			32000
Utilities and other expenses		221000			221000
					-
Total expenses		652000			652000
Increas e in net assets		737000	507513	390000	1634513
Net assets - Beginning of year		400000	200000	100000	700000
Net assets - End of year		1137000	707513	490000	2334513

No's	Journal Entry	Debit	Credit
a	Tuition Receivable	12,00,000
	Tuition Revenues		12,00,000
b	Investments	3,00,000
	Contributions · Net Assets (Perm Res)		3,00,000
c.	Cash	7,00,000
	Contributions - Net Assets (Temp Res)		700 000
d	Scholarships - Financial Aid	1,00,000
	Tuition Receivable		1,00,000
e	Salaries Expenses	3,19,000
	Cash		3,19,000
f	Salaries Expenses	80 000
	Contributed Support - Unrestricted Net Assets		80,000
g-1	Equipment	2,00,000
	Cash		200 000
g-2	Net Assets (Temp Res) - Reclassification	200000
	Unrestricted Net Assets • Reclassification		200 000
h	Investments	90000
	Unrealized Gain On Investments-Perm. Res Assets		90 000
i	Cash	9000
	Dividend Revenue - Unrestricted Net Assets		9 000
j	Depreciation Expense	32 000
	Accumulated Depreciation		32000
k	Cash -Internally Restricted	100000
	Cash		100000
I	Pledge Receivable	7513
	Contributions - Temporarily Restricted Net Assets		7 513
m	No Journalentry Required
n	Utilities And Other Expenses	221000
	Cash		221000
o	No Journal Entry Required