Prepare required journal entries to reflect the transactions

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Reference no: EM13168938

Part-1

University loan funds can readily be accounted for within the general framework applicable to not-for-pro?t organizations. Bronxville College, a not-for-pro?t institution, maintains a loan fund of approximately $1 million (including receivables). The funds are invested in stocks and bonds, and all investment income must be added to the balance in the fund. The fund, however, is unrestricted, in as much as it was established by the college itself, not by donors. Prepare journal entries to record the following events and transactions that took place during the year.

1. The college directed an additional $75,000 of donor contributions to the loan fund.

2. The fund made new student loans of$200,000. It estimated that approximately 10% would be uncollectible.

3. It earned interest and dividends of $6,000. In addition, the market value of its investments increased by $3,000.

4. It collected $140,000 in loan repayments, plus an additional $40,000 in interest.

5. It wrote off $20,000 of loans as uncollectible.

Part-2

Is there a sound reason for accounting for contributions to a not-for-pro?t university differently from those to a government university? In January, 2013 Kirkland University receives a pledge of $200,000, to be used exclusively tosupport research in a specialized area of communication disorders. The university's ?scal year ends on July 31. In December 2013 (the following fiscal year), Kirkland receives the pledged contribution of $200,000 and spends $1 50,000 on qualifying research.

1. Prepare all required journal entries to reflect the transactions described. Indicate the type of fund in which the entries should be made.

a. Assume ?rst that Kirkland is a private not-for-pro?t university.

b. Assume instead that Kirkland is a public university and that it elects to report as a special-purpose government that is engaged in only business-type activities.

2. On what grounds, if any, can you justify different accounting principles for the same transaction depending on the type of institution (public or private) or the assumption as to type of public institution?

Reference no: EM13168938

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