Concept explainers
Concept Introduction:
Accounting treatment of Various transactions Private Universities:
As per GASB Statement No 33, FASB No 116, Exchange transactions are treated as reciprocal transfers in which each party receives and sacrifices approximately equal value, are not considered restricted. government grants, which are required to pass as financial aid to students, are accounted as agency transactions.
Contributions are treated as unconditional transfers of cash or other assets to an entity.
To prepare: The

Answer to Problem 19.7.1P
- Entry floated at par a $20,000,000, 8% serial bond issued on July 1
- Entry Interest payments are made on December 31.
- Entry construction of the building is completed at an additional cost of $18,000,000. Payment is made for $16,000,000.
- Entry for the first bond serial payment of $2,000,000 plus interest is paid.
- Entry a gift of land and a building was received, appraised at $200,000 and $350,000, respectively.
- Entry Pledges with a present value of $200,000 to be paid over the next five years were received.
- Entry donation of $500,000 of stock was made
- Entry dividends of $10,000 on the stock in item
- Entry
Depreciation on the building received $25,000
Debit $ | Credit $ | |
Cash | 20,000,000 | |
Bonds payable | 20,000,000 |
Interest on bond payable
Debit $ | Credit $ | |
Expenses − Interest on bonds | 1,600,000 | |
Interest on bond payable | 1,600,000 |
Contribution specifically for new building construction
Debit $ | Credit $ | |
Cash | 5,000,000 | |
Revenue - Temporarily restricted contribution | 5,000,000 |
b. Payments for construction to date total $7,000,000.
Debit $ | Credit $ | |
Construction in progress | 7,000,000 | |
Contracts payable | 7,000,000 |
Debit $ | Credit $ | |
Interest on bond payable | 800,000 | |
Cash | 800,000 |
Debit $ | Credit $ |
Construction in progress | 18,000,000 | |
Contract payable | 7,000,000 | |
Contract payable | 2,000,000 | |
Cash | 23,000,000 |
Debit $ | Credit $ | |
Bonds Payable | 2,000,000 | |
Interest on bond payable | 800,000 | |
Cash | 2,800,000 |
Debit $ | Credit $ | |
Land | 200,000 | |
Building | 350,000 | |
Revenue - Unrestricted Property Contributions | 550,000 |
Mortgage payable
Debit $ | Credit $ | |
Mortgage payable | 90,000 | |
Cash | 90,000 |
Debit $ | Credit $ | |
Contribution receivable | 200,000 | |
Revenue - Temporarily restricted contribution | 200,000 |
It is estimated that $20,000 of the pledges will not be collected.
Debit $ | Credit $ | |
Expenses - Institutional support (Allowance for Uncollectible contributions) | 20,000 | |
Allowance for Uncollectible contributions | 20,000 |
Debit $ | Credit $ | |
Contributions Receivable | 500,000 | |
Revenue - Temporarily restricted contributions | 500,000 |
Debit $ | Credit $ | |
Cash | 10,000 | |
Revenue - Unrestricted Investment income | 10,000 |
Debit $ | Credit $ | |
Expenses - Operation and maintenance | 25,000 | |
| 25,000 |
Closing Entry Unrestricted net assets
Debit $ | Credit $ | |
Revenue - Unrestricted property contribution | 550,000 | |
Revenue - Unrestricted Investment income | 10,000 | |
Expenses operation and Maintenance of plant | 25,000 | |
Unrestricted Net Assets | 535,000 |
Closing entry Temporarily restricted Net assets
Debit $ | Credit $ | |
Revenue - Temporarily restricted contribution | 200,000 | |
Revenue - Temporarily restricted contribution | 500,000 | |
Temporarily restricted Net Assets | 700,000 |
Explanation of Solution
- The above entry can be explained receipts form bond floatation received and credited to bond payable accounts and accrued interest has been recognized.
- The above entry can be explained as payment made during construction is transferred to construction in progress account
- The above entry can be explained as half yearly interest due on bonds has been paid
- The above entry can be explained as once construction is completed contract payable account and construction in progress account has to be settled by making payment but based on the agreement only 16,000,000 has been paid remaining 2,000,000 is due which will remain in contract payable account till cleared.
- The above entry as recognition of first bond serial payment of $2,000,000 plus interest is paid
- The above entry land and building donated has to be recognised as unrestricted property contributions and mortgage payment agreed has to be recognised.
- The above entry can be explained receivable for building renovation and uncollectible contribution allowance has to be created.
- The above entry can be explained donation from is recognized.
- The above entry can be explained receipts of donation on donated stock has been received and recognized.
- The above entry can be explained receipts form bond floatation received and credited to bond payable accounts and accrued interest has been recognized.
A contribution for building construction received and credited to Contribution Temporarily restricted.
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Chapter 19 Solutions
ADVANCED ACCOUNTING
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- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
