Comprehensive Problem. As of July 1, 2011, the trial balance for Korner College was as follows:
During the year ended June 30, 2012, the following transactions occurred:
1. Cash collections included: accounts receivable, $1,200,000; accrued interest receivable, $49,000; contributions receivable, $5,345,000; and for loans to students and faculty, $155,000. Of the contributions, $1,900,000 was for plant acquisition (use for cash flow statement).
2. Cash payments included accounts payable, $520,000; and the current portion of long-term debt, $150,000.
3. Unrestricted revenues included tuition and fees, $21,800,000; unrestricted income on endowment investments, $400,000; other investment income, $300,000; and sales and services of auxiliary enterprises, $14,740,000. A total of $33,690,000 in cash was received, and the following receivables were increased: accounts receivable, $3,500,000; accrued interest receivable, $50,000.
4. Scholarships, for which no services were required, were applied to student accounts in the amount of $2,200,000.
5. Contributions were received in the following amounts: unrestricted, $4,900,000; temporarily restricted, $5,400,000; permanently restricted, $2,000,000. Of that amount, $7,020,000 was received in cash; contributions receivable increased $5,280,000. None of these contributions were restricted to plant acquisition.
6. Accounts receivable were written off in the amount of $50,000, and contributions receivable were written off in the amount of $20,000. Provisions for bad debts were increased by $125,000 for accounts receivable (tuition and fees) and by $30,000 for unrestricted contributions receivable.
7. Expenses, exclusive of depreciation and uncollectible accounts, were as follows: instruction, $18,460,000; research, $1,980,000; public service, $1,910,000; academic support, $990,000; student services, $1,310,000; institutional support, $1,050,000; and auxiliary enterprises, $13,500,000. The college had an uninsured flood loss in the amount of $600,000. Cash was paid in the amount of $39,200,000, and accounts payable increased by $600,000.
8. Depreciation was charged in the amount of $1,500,000. One-third of that amount was charged each to instruction, institutional support, and auxiliary enterprises.
9. Interest income was earned as follows: addition to temporarily restricted net assets, $30,000; addition to permanently restricted net assets, $35,000. Of those amounts, $55,000 was received in cash and $10,000 was accrued at year-end.
10. Research expense was incurred in the amount of $1,700,000; and property, plant, and equipment were acquired in the amount of $1,400,000. Both were paid in cash.
11. Reclassifications were made from temporarily restricted to unrestricted net assets as follows: on the basis of time restrictions, $1,600,000; for program restrictions (research), $1,700,000; and for fixed asset acquisition restrictions, $1,400,000. Korner records fixed assets as increases in unrestricted net assets.
12. Long-term investments, with a carrying value of $1,700,000, were sold for $1,770,000. Of the $70,000 gain, $40,000 was temporarily restricted by donor agreement and $30,000 is required to be added to permanently restricted net assets.
13. Additional investments were purchased in the amount of $3,970,000. Loans were made to students and faculty in the amount of $200,000.
14. In addition to 13 above, the board of trustees decided to purchase $2,000,000 in long-term investments, from unrestricted net assets, to create a quasi-endowment.
15. At year-end, the fair value of investments increased by $530,000. Of that amount, $300,000 increased unrestricted net assets, $30,000 increased temporarily restricted net assets, and $200,000 increased permanently restricted net assets.
16. $150,000 of the long-term debt was reclassified as a current liability.
17. Closing entries were prepared for
(a) Unrestricted net assets,
(b) Temporarily restricted net assets, and
(c) Permanently restricted net assets.
a. Prepare journal entries for each of the above transactions.
b. Prepare a Statement of Unrestricted Revenues, Expenses, and Other Changes in Unrestricted Net Assets for Korner College for the fiscal year ended June 30, 2012.
c. Prepare a Statement of Changes in Net Assets for Korner College for the fiscal year ended June 30, 2012.
d. Prepare a Statement of Financial Position for Korner College as of June 30, 2012.
e. Prepare a Statement of Cash Flows for Korner College for the year ended June 30, 2012. Use the indirectmethod.
This question was answered on: Jul 11, 2017
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