Assume That a Private University Collects Tuition and Fees at the Beginning

question 11

Multiple Choice

Assume that a private university collects tuition and fees at the beginning of summer school,in which two weeks are offered in the first fiscal year and the remaining six weeks are offered in the second fiscal year.According to the approach recommended by the National Association of College and University Business Officers (NACUBO) ,the university would:

• A)record the collections as a debit to Cash and a credit to Deferred Revenue for the entire amount of the collections.
• B)record the collections as a debit to Cash and a credit to Restricted current revenue for the entire amount of the collections.
• C)account for the entire tuition and fees as revenue in the first fiscal period.
• D)recognize revenue in the first fiscal period for two-eighths of the tuition and fees and record six-eighths of the collections as a deferred revenue.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs, both variable and fixed, in the cost of a product.

Net Operating Income

Earnings generated from a company's regular business operations, excluding deductions for interest and taxes.

Fixed Manufacturing Overhead

Expenses related to the production process that remain constant regardless of the operational output, including equipment depreciation and facility rent.

Inventories

The range of goods or materials held by a company for the purpose of production, sale, or repair in the ordinary course of business.