Chapter 15, Problem 19EP

a.

To determine

Prepare journal entries to record the transactions for the year ended June 30, 2017.

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Prepare journal entries to record the transactions for the year ended June 30, 2017:

Date	Particulars	Post ref.	Debit	Credit
1	Accounts receivable - Investment and fees		$1,250,000
	Tuition and fees discount and allowances		$250,000
	Revenues - Tuition and fees			$1,500,000
	( To record the tuition revenue)
2	Unearned revenue - Tuition and fees		$25,000
	Revenues - Tuition and fees			$25,000
	( To record the unearned tuition revenue)
3	No entry (Refer note)
4	Cash		$3,000,000
	Revenues - State appropriations			$3,000,000
	(To record the receipt of unrestricted state appropriation)
5	Capital assets		$525,000
	Cash			$525,000
	(To record the purchase of equipment)
6	Cash		$800,000
	Revenues - gifts and grants			$800,000
	(To record the cash receipts from contributions from alumni)
7	Interest expenses		$48,000
	Cash			$48,000
	(To record the cash payment made for interest expense)
8	Revenues - Tuition and fees		$113,000
	Cash			$113,000
	(To record the refund of tuition fees)
	Cash		$1,471,700
	Accounts receivable – Tuition and fees			$1,320,700
	Unearned revenue			$138,000
	Revenues – Investment income			$13,000
	( To record the cash receipts)
9	General expenses		$4,684,000
	Research expenses		$37,000
	Accounts payable			$4,721,000
	(To record the cash payment made for research and general expense)
	Accounts payable (1)		$4,751,000
	Cash			$4,751,000
	(To record the cash payment made to creditors)
	Grant receivable		$37,000
	Revenues - gifts and grants			$37,000
	(To record the grant receivable)
10	Accrued liabilities		$40,000
	Cash			$40,000
	(To record the cash payment made for accrued liabilities)
11	Provision for bad debts		$2,000
	Allowance for doubtful accounts			$2,000
	(To record the allowance for doubtful debts for the year)
	Expenses - depreciation		$90,000
	Accumulated depreciation			$90,000
	(To record the depreciation expense for the year)
	Interest receivable		$1,250
	Revenues - Investment income			$1,250
	(To record the accrued interest from investments)
	Investments		$12,000
	Revenues - changes in fair value  of Investments			$12,000
	(To record the increase in the fair value of investments)
12	Revenues - Tuition and fees		$1,412,000
	Revenues - State appropriations		$3,000,000
	Revenues - Gifts and grants		$837,000
	Revenues - Changes in fair value of Investments		$12,000
	Revenues - Investment income		$14,250
	Tuition and fees discount and allowances			$250,000
	Interest expenses			$48,000
	General expenses			$4,684,000
	Research expenses			$37,000
	Provision for bad debts			$2,000
	Depreciation expenses			$90,000
	Unrestricted net position			$164,250
	(To record the closing of nominal accounts)
	Net position - Unrestricted		$435,000
	Net position—Net investment in capital assets			$435,000
	(To reclassify the net position)
	Net position—Unrestricted		$205,230
	Net position—Restricted			$205,230
	(To reclassify the net position)

Table (1)

Note:

• For journal entry 3: The central government published a notification that states that up to $50,000 could be given to the colleges for developing measures for the performance of students. However, the eligibility requirement is not met and such transactions are not recorded in the journal.

Working note 1:  Determine the cash paid to accounts payable:

$\begin{array}{c}\begin{array}{l}\text{Cash paid to }\\ \text{accounts payable}\end{array}\}=\left(\begin{array}{l}\text{Beginning}\\ \text{ balance}\end{array}\right)+\left(\begin{array}{l}\text{General}\\ \text{expense}\end{array}\right)+\left(\begin{array}{l}\text{Research }\\ \text{expense}\end{array}\right)-\left(\begin{array}{l}\text{Ending }\\ \text{balance}\end{array}\right)\\ =\$105,000+\$4,684,000+\$37,000-\$75,000\\ =\$4,826,000-\$75,000\\ =\$4,751,000\end{array}$

b.

To determine

Prepare a statement of net position for the year ended June 30, 2017.

Explanation of Solution

Prepare a statement of net position for the year ended June 30, 2017:

University SS
Statement of net position
For the year ended June 30, 2019
Assets	Amount	Amount
Cash		$134,700
Accounts receivable (Net of doubtful accounts of $17,000)		$297,300
Interest receivable		$1,250
Grant receivable		$37,000
Investments		$262,000
Capital assets	$2,275,000
Less: Accumulated depreciation	($365,000)	$1,910,000
Total assets		$2,642,250
Liabilities
Accounts payable		$75,000
Unearned revenue		$138,000
Bonds payable		$600,000
Total liabilities		$813,000
Net position
Net Investment in capital assets		$1,310,000
Restricted		$420,230
Unrestricted		$99,020
Total net position		$1,829,250

Table (2)