Question

D. The following problem is an example of typical transactions that a not-for-profit college or university might have for student loans.  Use the information in the FASB Accounting Standards Codification to help you answer the requirements of the problem.

Carry University maintains a loan fund of $1,000,000 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 is unrestricted because it was established by the college itself and was not restricted by donors.

Requirements:  Prepare journal entries to record the following events and transactions that occurred during the year.

Transactions:

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

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

               3. Carry University earned interest and dividends on the investments in the fund in the amount              of $6,000.  In addition, the market value of its investments increased by $3,000.

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

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

Answer 1

No	Particulars	Debit $	Credit $
1	Cash	75,000
	Contributions		75,000
2	Student loans receivable	200,000
	Cash		200,000
	Bad Debt expense	20, 000
	Allowance for uncollectable student loans		20,000
3	Cash	6,000
	Investments	3,000
	Investment income		9,000
4	Cash	180,000
	Student loans receivables		140,000
	Interest on student loans		40,000
5	Allowance for uncollectable student loans	20,000
	Student loans receivable		20,000