Ethan Allen University Is a Private University Following FASB Standards

question 117

Essay

Ethan Allen University is a private university following FASB standards for reporting.The following transactions took place during the year ended June 30,2014.
(1)EAU had received $600,000 in tuition in June 2014 for the summer session that runs from June 16 to August 14,2013 and had deferred $ 390,000 (65%)at June 30,2013.
(2)EAU received in cash tuition of $3,320,000; unrestricted contributions of $320,000; contributions permanently restricted by donor agreement for the endowment of $ 910,000,unrestricted interest income on endowments of $250,000; and auxiliary enterprise revenue of $2,200,000.
(3)Contributions for student scholarships were received in the amount of $425,000.$380,000 was awarded to students during the year.Students receiving these scholarships are required to work 10 hours a week (institutional support).
(4)Expenses amounted to $1,400,000 for instruction,$800,000 for research,$600,000 for public service,$2,000,000 for auxiliary enterprises,$300,000 for student services,and $890,000 for institutional support.Included in these amounts is $460,000 of depreciation.All other expenses ($ 5,530,000)were paid in cash.Plant assets are classified as unrestricted.
(5)EAU received $400,000 in tuition in mid June 2014 for the summer session ending in mid August 2014.(65% relates to the next fiscal year)
(6)At year-end,endowment investments were determined to have a fair value of $14,000 in excess of their recorded amounts.No restrictions apply to this income.
Required:
(a)Prepare journal entries to record these events including closing entries.
(b)Prepare a Statement of Unrestricted Revenues,Expenses and Other Changes in Unrestricted Net Assets.
(c)Prepare a Statement of Activities for the year ending June 30,2014,assuming the June 30,2013 balances in net assets are:
$1,020,000 unrestricted,$30,000 temporarily restricted,and $8,000,000 permanently restricted.

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Definitions:

Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated by dividing total liabilities by total assets.

Total Debt

The sum of all financial obligations a company or individual owes to outside parties, which can include loans, bonds, mortgages, and other forms of debt.

Total Assets

The sum of all resources owned by an individual, company, or institution, valued in monetary terms.

Total Asset Turnover

An activity ratio that measures how efficiently the firm uses all of its assets to generate sales; a high ratio generally reflects good overall management.