Chapter 19, Problem 19.5P

To determine

Concept Introduction:

Accounting treatment of Public Universities transactions:

GASB Statement No. 35 for public colleges and universities are required to is the guidance for special purpose governments engaged in business-type activities, the day to day activities of public universities are recorded in current funds which consists of self-balancing sub-funds. The restricted current fund accounts for those resources available only for an externally specified purpose. The plant fund account for capital assets and for resources to be used to acquire additional capital assets related to capital assets.

To prepare: Journal entries for the given transactions.

Answer to Problem 19.5P

1. Entry $22,000,000 bond floated at par

	Debit $	Credit $
Cash	22,000,000
Bonds payable		22,000,000

Interest on bond payable

	Debit $	Credit $
Expenses − Interest on bonds	770,000
Interest on bond payable		770,000

2. Entry when construction of computer complex $5,000,000

	Debit $	Credit $
Construction in progress	5,000,000
Contracts payable		5,000,000

Half yearly interest on bonds payment transferred

	Debit $	Credit $
Interest on bonds payable	770,000
Cash		770,000

3. Mandatory transfer of $385,000 has been made

	Debit $	Credit $
Contract payable	3,85000
Cash		3,85000

4. Half yearly interest on bonds payment transferred on 31 December

	Debit $	Credit $
Expenses Interest on bonds	770,000
Interest on bond payable		770,000

5. Construction of complex completed with additional cost of $17,000,000

	Debit $	Credit $
Construction in progress	17,000,000
Contract payable		1,000,000
Cash		16,000,000

6. Cost of complex is transferred

	Debit $	Credit $
Building	22,000,000
Construction in progress		22,000,000

7. Construction of complex completed with additional cost of $17,000,000

	Debit $	Credit $
Bonds payable	2,000,000
Interest on bonds payable	770,000
Contracts payable		2,770,000

8. Payment made for bond principal $2,000,000 and interest $770,000

	Debit $	Credit $
Contract payable	2,770,000
Cash		2,770,000

9. Land and building received appraised at Land $200,000 building $350,000

	Debit $	Credit $
Land	200,000
Building	350,000
Revenue − Unrestricted property contribution		550,000

10. Payment on Mortgage on property $90,000

	Debit $	Credit $
Mortgage payable	90,000
Cash		90,000

Pledge receivable for remodelling the building

	Debit $	Credit $
Contribution receivable	100,000
Revenue − Unrestricted contribution		100,000

Pledge uncollectable

	Debit $	Credit $
Expenses institutional support (provision for uncollectable contribution)	5,000
Allowance for Uncollectable contribution		5,000

11. Donation of $100,000 received for acquisition of first edition

	Debit $	Credit $
Cash	100,000
Revenue − Temporarily restricted contribution		100,000

12. Donation of $100,000 received for acquisition of first edition

	Debit $	Credit $
Library books	160,000
Cash		100,000
Accounts payable		60,000

Explanation of Solution

1. The above entry can be explained receipts form bond floatation received and credited to bond payable accounts and accrued interest has been recognized.
2. Construction begins hence amount recognised as entry for construction in progress account has been recognised.
3. Construction begins mandatory transfer of 3,85000 has been made and interest for December 31 has been recognized
4. Bond interest payable on December 31 has been paid
5. Bond interest payable on December 31 has been paid
6. Bond interest payable on December 31 has been paid
7. Bond redemption has been carried out for $2,000,000 and interest on bonds due on the date has been paid.
8. Bond redemption and Bond interest payable is recognized
9. Property gifted is treated as revenue unrestricted and mortgage has been assumed.
10. Pledges are the promised contributions which are recognized and a provision for uncollectable pledges have been created
11. Temporarily restricted contribution received for acquisition of first addition
12. First addition purchased and payment made on the same was recorded.